If you are planning to live or work overseas, there are a number of things you need to think about before you move. If you are already living abroad then you will know firsthand how much a move in the exchange rates can affect you.

As an example, the current weakness of the Pound has proven extremely beneficial for those moving into the UK, however those moving out of the UK have seen a noticeable and negative impact on how far their Sterling will take them. In October 2007 a €500,000 property in Europe would have cost a UK citizen around £348,000. 2 years later, the same priced property will cost you £463,000- an increase of £115,000. This outlines the true extent to which people living or moving abroad can be affected by volatility in the currency markets.

Regardless of this, people still need to make overseas payments and it is therefore crucial that they secure the best possible exchange rate for their transaction. Many people assume their bank to be the best place to exchange currency, unaware that the banks usually offer fairly uncompetitive exchange rates, slower transfer speeds, increased transfer charges and limited access to the various foreign exchange products available.

By using a specialist currency broker you can significantly improve the financial efficiency of your overseas payments, and gain access to products that may be hugely beneficial to you.

Benefits of Brokers

• Usually save clients between 0.5% and 4% on the amount they transact
• Faster international payments (same day in many cases)
• No commission and no bank receiving charges
• Bespoke and professional service with a dedicated broker
• Free rate and market watch service
• Access to products that the banks may not offer

Foreign exchange products available

Spot contracts
If you already have the funds in place, you could arrange a spot transaction. This is simply the exchange of one currency for another at the current market price where the settlement happens within two working days. A broker should be able to get you a significantly better exchange rate for this transaction.

Forward contracts
A forward contract allows you to fix a rate now for a date in the future (up to 2 years ahead). This means the rate is fixed regardless of exchange rate moves, thereby protecting you if the exchange rate moves against you.

Currency options
A currency option, like a forward contract, allows you to exchange one currency for another on a future date, thereby protecting you from negative movements in the exchange rate. However, with an option, if the rate moves in your favour you can still take advantage of this. There are very few brokers that can offer currency options to clients as it requires additional FSA authorisation. One such broker is World First.

Regular Payments
If you will be exchanging a set amount of funds on a regular basis for mortgage payments or pension transfers, you can set up a regular payment order which will automatically transfer the funds on a regular basis.

It is worth noting that most of the above transactions cannot be made through the bank, and you would need to talk to a specialist currency broker to see what would be best for your specific needs. Using a broker will also allow you to receive commercial exchange rates, free market updates and a personal service with professional market knowledge.

Elisabeth Dobson of foreign exchange broker World First warns, “don’t leave your foreign exchange transactions to the last minute. It could leave you exposed to the prevailing exchange rate and you may not have adequate funds to move overseas.

With some of World First’s products you can protect yourself against negative exchange rate fluctuations. The options above are becoming more and more popular especially given the recent volatility and unpredictability of the currency markets. Forward planning will ensure your emigration can go ahead as planned”.

If you would like to speak to a dedicated foreign exchange expert about your individual requirements, please contact World First on +44 (0)207 801 9080. Alternatively you can view their website at www.worldfirst.com

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What’s a reverse mortgage?

Normally younger people need to borrow money to buy a house. Reverse mortgage is exactly the opposite - it’s a loan that people over 60 get against the value of their paid off house. There are no repayments with a reverse mortgage - this loan needs to be repaid at once when people sell their house, move to a retirement village / a nursing home or pass away. Instead of reducing the interest and the principle amount by making a repayment, the debt on a reverse mortgage keeps on growing.

The amount a person is allowed to borrow is nowhere near a 100% of their property - it floats between 15 and 35 percent, depending on their age. The younger the borrower is, the less they are allowed to borrow.

The good

Reverse mortgage gives you instant access to money. Imagine a pensioner with bad spending habits, who has credit card debt (or whatever else debt for that matter) and is living on a fixed income. There are many people out there who fit this description, and they would be facing difficulties when asked to repay the debt at once. One solution for that problem is to borrow money against the value of their house.

You can choose whether you want the reverse mortgage to complement your income (by receiving monthly payments) or to get a one-off amount and “have a party”, go on a holiday, buy a car, treat yourself to something you always wanted, but never could afford.

The bad

A person with a reverse mortgage is “spending their kids’ inheritance”. Personally I don’t think there’s anything wrong with it, but many people from my parent’s generation make a big deal of leaving inheritance to the children.

Also, anyone who’s got a reverse mortgage first and then decided to move to a retirement village may find out that they don’t have enough money left in their house. This is especially likely to happen during a period when the property prices weren’t going up.

People who are getting payments from Centrelink that are subjects to income test may lose their eligibility, because they’ve got the money of the reverse mortgage sitting in their bank account.

The ugly

If there’s no unconditional guarantee of ‘no negative equity’ in your contract - you’re in trouble. This guarantee is to make sure you never owe more than your house’ worth. Otherwise they may come and take it away and you will still owe money, which is exactly the opposite of enjoyable retirement.

Not many people know that anyone with a reverse mortgage has to pay for regular property valuations. At present they cost anywhere between $400 and $1000, a considerable amount that you can expect to be paying every three years.

Not many people know that a person with a reverse mortgage enters a contract with an obligation to do regular maintenance to the house and to get a building insurance, which otherwise are a completely voluntary things.

Any couple that doesn’t own the house jointly should know that reverse mortgage will be in one name only - so that when the home owner moves to a nursing home or dies, the house must be sold to repay the mortgage and the other partner can potentially be left homeless.

Do you have any experience with reverse mortgages? Are there more traps we need to know about?

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Life Tips in a failing Marriage

9. If you gave up your job to rear babies years ago, now is the time to put as much cash into your nest egg as possible, and assume the worst is going to happen. If it doesn’t, then that is a bonus.

10. Keep a diary, they make Affidavits very easy.

11. Find a solicitor who has a lot of experience in Family Law. The best way to start is to ask at your local Magistrates Court. Make an appointment with the Chamber Registrar and ask his/her for advice on who to choose. They have years of experience to draw on and will know far more about your situation than you realise merely from the fact that you are there. If you are far too nervous to do this, get in touch with the Women’s Domestic Violence Court Assistance Scheme (WDVCAS). (Even if domestic violence is not present in your relationship, this wonderful group of volunteers can supply you with more information than you will ever need). .

12. NEVER listen to what I call ‘pub talk’. Legal advice from friends and relatives may lift your spirits, but it may not always be the law. ALWAYS stay within in the boundaries of the law in everything you do. If you are unsure of anything, no matter how small you may think it is, run it by your solicitor first.

13. Try to stay in the family home for as long as possible. If you have to, move into a spare room and put a keyed lock on the door. Your partner may try to make this as unbearable for you as possible. It is important that you ignore them. Ear plugs help! Draw the line in the sand and if your partner becomes abusive in any way, call the Police and ask for an AVO (Apprehended Violence Order).

14. GET YOUR PROPERTY SETTLEMENT STARTED ASAP. This can take years in some circumstances but can be achieved in 12 - 18 months. Whatever happens, NEVER settle for less because your partner is harassing you to do so. At this point your partner may try to cut off your finances to force you into an early settlement. This is why you will need a nest egg.

15. Go to Centrelink and explain your circumstances. Take with you all the documentation you can get your hands on i.e., birth certificates, marriage certificates, bank account statements, tax returns, medicare cards etc. They will even give you counselling if you want it.

16. BE FRUGAL.

17. Start looking for a job. Mission Australia is fantastic and will help you organise a CV and even cover new work wear.

18. The Child Support Agency can do nothing if your ex quits his job or moves overseas. You have to be proactive with the CSA, as they do not automatically chase payers unless you ask them to. Treat any CSA payments as a bonus and NEVER bank on them.

19. You may have to live with rellies after settlement, or even rent, but try and buy a new property as soon as you can after settlement. You’ll be able to cut a good deal as you’ll be a cash buyer. Be prepared to down-size and/or move out of area - a townhouse is perfect if you have children.

20. Make a new Will.

Take the reins of your life and move forward . . . onwards and upwards!!!!

And now, my dear readers, I’d love to hear from you - what tips do you have on managing property in a failing marriage?

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Here are Rachel’s best tips for married women - and I say, whatever state your marriage is in, these are very important matters to think about. Many women effectively pass the reins of their life and property ownership in the hands of someone else, which leaves them vulnerable and exposed to financial difficulties in case something goes wrong.

The first part - Life Tips in a Marriage - will open your eyes to things that need to be done to keep you safe, whatever happens. The second part - Life Tips in a Failing Marriage - will help you go through the tough times, if and when they come.

Life Tips in a Marriage

1. ALWAYS ensure the marital home is in joint names. If hubby is against this, ask why, but do not take no for an answer.

2. ALWAYS be involved in your joint financial affairs. Know exactly what bills, loans and mortgages you both have and keep an eye on joint credit card debt. Hubby’s debt becomes yours and vice versa.

3. NEVER agree to allow the drawing down of extra mortgage payments without both signatures, and never let this be accessed via internet banking.

4. Try to keep a finger in the employment pie, no matter how small it is. Try working from home when the babies are little.

5. NEVER let anyone access your superannuation fund, even if it is ‘just to look’. Keep it password protected.

6. Build a small nest egg for a rainy day that can only be accessed by you. Be open and honest about it. Call it what you want, but it’s your insurance policy. If you don’t have an income and you are a full time Mum, this nest egg is an absolute necessity.

7. Always be involved in compiling taxation returns, yours and your partners, ESPECIALLY if he is self employed. Never let yourself be used as a Partner or Director in hubby’s own business unless you really are drawing a salary of your own and have your own bank account to put it in.

8. If you have a car, make sure it is registered in your name.

To be continued - coming up next Life Tips in a Failing Marriage, stay tuned.

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Joint tenancy

Joint tenancy means all the tenants own equal shares of the property. As a direct consequence of this it’s impossible to divide the ownership, for example, seventy-thirty - which is not good in a situation where 2 owners haven’t invested equal amounts of money into the property.

Another interesting thing to know about joint tenancy is what happens to the property when one of the tenants dies. His or her share automatically passes to the other tenant, or if there is more than one, is shared equally between them all.

Co-ownership agreement

This document is a must-have for any kind of joint tenancy. It should list all the potential problems, all the disputes that may arise between the owners and ways to settle them. To give you an idea of a dispute, it could be that one owner wants to refinance and the other one doesn’t, or one owner defaults under the finance and the others get affected by it.

How to choose

The main reason to choose tenancy in common over a joint tenancy would be control. If you want a complete control over your share of the property - go for tenancy in common. If you want to make sure that your share passes on your heirs when you pass away - choose tenancy in common. And remember that you need a valid will that specifies who you’d like to have it.

Another consideration is financial risk. If you are exposed to a greater financial risk than your partner (and you are buying a house together), consider making your share smaller in case your creditors go after your house.

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Let’s think about this for a moment - we have a house with more than one owner, and in case the owners decide they want to go their separate ways, how do they split the house? Fifty-fifty? Sixty-Forty? Seventy-Thirty?

Even in cases when there are 2 owners and they are a married couple, things aren’t simple. I have the same amount of patience for legal matters as the next girl, but these things need to be read once, remembered and acted upon correctly - or your financial future and that of your loved ones can suffer.

As someone who isn’t qualified to dispense legal advice, I will just bring the issues up and then leave it up to you to think about them and decide that you’re either not interested because it’s not going to happen to you anyway - or to be better safe than sorry and ask your solicitor or conveyancer.

Let’s begin with the benefits of co-owning a house, or reasons to do this in the first place.
Buying a house with a friend (or even friends) allows you to pool money together to put a deposit down, your borrowing capacity grows, you pay only a share of purchasing costs (building / pest inspection, legal fees, stamp duty), you can split the costs of owning (council rates, maintenance costs, etc).

And now let’s talk about the ways of co-owning. Basically there are 2 ways of owning a property together with someone else: tenancy in common and joint tenancy. These boring legal terms may sound similar but there are differences and if you’re not careful, these differences can cost you a lot of money.

Tenancy in common

Tenancy in common allows you to specify the proportion of the house that you own. For example, if 3 friends buy a house together and each brings a different amount of money to the table, this can be translated into them owning a different share of a house.

This is best demonstrated by an example:
Andrew, Ian and Casey bought a house together. Andrew contributed 50K, Ian contributed 100K and Casey contributed 150K. We will note in the transfer of land that Andrew’s share is 1/6, Ian’s share is 2/6 and Casey’s share is 3/6. This way transfer of land notes a fair share for every co-owner.

A good thing about tenancy in common is that each tenant has a total control over their share if property. They can sell it, they can get a loan against it, transfer it to anyone, etc.

In my next post I will explain about joint tenancy, and then compare the two and their consequences for the co-owners. Stay tuned!

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A while ago I was asked 4 questions about what frugal looks like to me. Whether you see yourself as a frugal person or not, the first question - “What does frugality mean to you?” might trigger all kinds of interesting thoughts in your mind, as it did in mine.

If you’re interested to learn something new about frugality - or about me, Chris Lang, head over to Almost Frugal - a very interesting blog that I’ve been following for a long time. You’ll get a chance to find out what is the most typical frugal thing that I do, and what is it that I do and most of you, probably, don’t

Actually, for those of you who are interested, we can play the same game here - but apply it to the property market. Anyone who is willing to put his hand up will get 4 questions from me, and I will have a chance to learn about my readers and what frugality means to them.

So let’s do this. Who want’s to go first?

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I just was reminded about how important this rule is by an article in News.com.au

They are warning people looking to invest in property about how crucial it is for them to understand what exactly they are looking at, but I recon anybody who is looking for a house needs to learn how to read the stats, before making the big decision - to buy or not to buy.

So what is the basic mistake people make in their interpretation of statistics? Comparing apples with pears. This would include comparing houses with units or houses with apartments, comparing 2-bedroom houses with 3 bedroom houses, etc.

Many people don’t know the difference between the median house price and the average house price. This is why, when seeing a median price in some suburb drop, people immediately think “It’s bargain hunting time” - when in reality this could have been caused by many cheaper (or perhaps smaller) houses being sold over the same period of time, or even units.

If the median price was calculated using all the prices, of houses as well as of units - people who are not statistics-savvy won’t suspect that the drop was caused by a shift of attention towards units. Which is a very likely scenario, by the way - as prices of houses rise and become less affordable, people begin buying units, because those are still in their price-range.

Also, different researchers calculate things differently, which is why you can see different figures referring to the same periods of time. According to News.com.au the difference in median house prices coming from different sources can be up to $50,000 - a huge deviation, if you ask me.

The closer to the inner city your target suburb is, the more confusing statistics can get, because in the inner city we have a mix of different housing styles - apartments of all sorts (studio, one-bedroom, two-bedroom, three-bedroom), units, houses (two-bedroom, three-bedroom, you name it). This is again a situation where you’d want to compare apples with apples.

So what is your take-away from this post? First, knowledge is power and if you know how the stats are calculated, you can use them safely, and second - question everything, and see if you can come up with a logical explanation of how this happened.

Have you ever been mislead by property statistics?

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The ones to blame here are the laws of physics and tradesmen who are unaware of them. As you may know, those halogen downlights in your ceiling tend to get quite hot. If the insulation is covering the back parts of the halogen lights, temperature rise is accelerated and that is likely to cause the insulation material (which is commonly wool) to go on fire.

This has been the explanation for some 30 house fires in NSW, that happened days after a brand new insulation was fitted. These people simply wanted to improve their homes taking advantage of the recently announced government rebate and as a result were almost left homeless.

The worst part is that even smoke alarms weren’t a big help as they weren’t triggered right away. This could be because of the fact that the fire is above them, not below.

Firemen are urging people to climb up and make sure that the downlights are not being smothered by the insulation. I know that we shouldn’t have to - but hey, better safe than sorry!

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First let me explain what negative equity is, and then you will understand why you should never ever get stuck with it. One’s house becomes a negative equity when they owe the bank more than house is worth. Any house with a mortgage worth more than the house itself becomes a negative equity.

Why is this a dangerous situation to be in? Well, imagine that you need to sell that house and move elsewhere. You’ll sell it and won’t be able to pay off the mortgage, so you will have no place to live and will still owe the bank money. Not a good place to be.

But how can that situation happen in the first place? I mean banks are not stupid, and they lend you money against your house’s value. They send a trained professional to do property evaluation, to be sure your house is worth more than they lend you.

Here is one scenario: imagine a bubble when houses are way too overpriced. Does that sound familiar? Does it remind you of our current property market? Anyway, when property valuers perform the evaluation, they take into account the features of the house, but they never operate in vacuum - they also take into account prices on property in the neighborhood. This means that when other houses in the same street went up in price for no good reason, other than craziness of people who overpay - the house you’re buying went up in price, too.

So the bank feels it’s safe to lend you the 300K for you to buy a house and you begin to pay off your mortgage. You’re not in a hurry because you’ve got the next 20 years to do it. And then the bubble bursts. Just like it did in the US.

And houses decline in value. And the house you’ve bought isn’t worth 300K any more, it has lost 15% of its value. Or, more accurately, it was overpriced 15% when you bought it and now, after correction has occurred, it’s back to its realistic price. Which still is 15% less than you owe the bank. Which means that if you’ll sell it and every cent you get for it goes to the bank, you will still owe 45,000. Which is about the annual wages worth for many people I know.

This story shouldn’t scare people who have a lot of confidence in their jobs. If loss of income isn’t likely to make you sell the house in then next 2 years, don’t worry about negative equity. If you’re positive there is no reason in the world why you would want to sell and move in the next couple of years - go for it, buy if you want to. If you’re not borrowing 80+ percent of your house, you will survive the fall.

Otherwise… consider yourself warned.

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