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Top ways to increase your savings and cut your expenses

Top ways to increase your savings and cut your expenses

Is the key to saving a home deposit as simple as giving up smashed avo toast for breakfast? Well not quite, but spending less does make a difference.

On top of a budget, a savings plan and strategies such as a high-interest savings account, an effective way to save is to reduce or eliminate expenses.

Start by understanding your spend

It can be easy to lose track of how you’re spending money, especially due to cashless payments and credit cards.

Find savings in the essentials

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Rules of investment

Rules of investment

When you’re trying to secure finance for an investment property, it’s important to keep a few simple rules in mind to make sure you get the best deal possible and will be able to afford the repayments, come what may.

If you’re thinking about purchasing an investment property, it’s important to manage the risks adequately. For example, you shouldn’t rely on rental returns as a guaranteed income to meet loan repayments, as there are times when a property may be vacant or hard to fill immediately and some months the rental return on a property may be diminished by maintenance costs.

“A finance broker will help a borrower find the right product, so that he or she can afford the repayments,” said one helpful adviser. “The adviser will add a two per cent rate hike onto the rate the borrower will be looking to take, to make sure they can still make repayments if, or when, mortgage rates go up.”

With access to property data and trend analysis, a finance broker can pull property reports for you, detailing how the area has performed in the past as an investment, the average median house price or rate of return and how much the property values have increased over the past five or six years. These are details that investors generally can’t access.

Even better, if you meet a local finance broker in the area where you want to invest, he or she will know that particular market and be able to provide a lot of detailed information from working there every day.

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Who are the different parties involved in purchasing property?

Who are the different parties involved in purchasing property?

Purchasing a property is a thrilling yet nerve-wracking experience, which is why it can be handy to surround yourself with a network of support and expertise. Here are the different parties who may be involved in your home-buying process and how you can use this valuable knowledge base to answer your questions.

Real estate agentUnless you’re working with a private vendor, meeting a real estate agent is inevitable when it comes to purchasing a property. Hired by the vendor, or seller, their role is to market and communicate about the property, advise on preparing it for sale and negotiate with potential buyers.

Insurance companiesRisk management is vital in such a high-value purchase and long-term financial commitment. Insurance, including mortgage protection and property insurance, will help you avoid being hit with a major financial burden should anything not go according to plan. Many finance brokers can deal with insurance as well or will recommend an insurance broker who can. Finance brokerBrokers act as a liaison between you and the lender. They will find out about your finances and your property goals, and search for and negotiate a loan product that matches your needs. Not only will they do the legwork and ensure your loan is processed as smoothly as possible, but they are there to guide you throughout the entire process. LendersIf you need money to make your purchase, you will need a lender, whether it’s a major bank, a second-tier or non-major, or a specialist lender for more difficult funding proposals.

ConveyancerThe legal aspect of a property purchase is taken care by a licensed and qualified conveyancer. If they are a solicitor, they can also provide legal advice. Their role is to prepare the documents to ensure that transfer of ownership of the property has met the legal requirements in your state or territory.

ValuerKnowing the value of a property is a vital factor in a loan application, so a valuer can play a huge role in the home-buying process. A lender will often engage an impartial valuer to ensure that the buyer and the lender will know what loan amount may be warranted. The value is based on the property and location, as well as the current market.

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Refinancing traps you need to avoid

Refinancing traps you need to avoid

Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.

Honeymoon rates are just thatDon’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount.

Don’t be fooled by the interest rateFinding a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments.

Be aware of the feesOne of the main purposes of refinancing is to lighten the financial burden, however, that doesn’t mean that it’s not going to cost you. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee, and mortgage insurance. You may also be subject to stamp duty depending on what state your property is located in. While these cannot be avoided, you have to ensure that the costs involved are not higher than the savings, to make the process worthwhile.

While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better. Contact us!

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How to negotiate with your property price

How to negotiate with your property price

Negotiating the best property price isn't a matter of swindling a seller. It’s about doing your homework, knowing what you want, knowing the market and making sensible offers.

When you are buying property, getting the best price can mean the difference between being able to afford it and having to settle for second best. And, of course, a purchaser is often negotiating with a seasoned professional, so any time spent brushing up on negotiating skills is well spent.

But we’re getting ahead of ourselves. For a first-class property price negotiation, the homework starts well before you even let the agent know you are interested.

The first thing to do is get a good understanding of your requirements and circumstances. Aside from the location and type of house you are looking for, this understanding involves finance, of course. 

Aside from meaning that when you do eventually make an offer it will be taken seriously by the seller or their agent, having finance sorted out means that you can be sure of what your stamp duty and associated costs are, and exactly what price range you can consider.

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Guaranteeing your child’s loan

Guaranteeing your child’s loan

Rising house prices are making it increasingly difficult to enter the market. Parents who guarantee their children’s loans can help, but it is important to understand how this can impact the parents’ retirement or investment plans.

Being a guarantor generally means using the equity in your own property as security for your child’s home loan. It can help a first-home buyer to secure finance for a property they can afford but may not have a large enough deposit for, and to avoid the added cost of lenders mortgage insurance.

The risks You may want to help your child but it’s important you don’t go into the transaction blindly. The main risk of guaranteeing the loan is that, depending on the structure of the guarantee, you could be liable should your child default on the payments, either by taking over the repayment schedule or handing over a full repayment. If you can’t make the payments, the lender may sell the home used as security. If this is still not enough, the lender may also require you to sell assets to meet outstanding debt.

Another major risk is a bad credit rating if default occurs. Plus, if you need to borrow money for another purpose, your property cannot be used. If you want to buy an investment property, you can’t use the equity in your home because it’s already tied up in the child’s loan.

Minimising the riskThere are ways to minimise the risks. The most common is using a monetary gift or private loan. It involves borrowing money against your property in your name, and then gifting it to your child. Another way to avoid the risk is to buy the property jointly with your child. This means your name is on the title and you have a certain percentage entitlement. When it comes to guaranteeing a loan, it’s always sensible to speak to a professional. You should also consider asking a legal professional to draw up a formal loan document outlining all conditions of the loan, interest rate and expected repayments.

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The home loan approval process

The home loan approval process

Following the lodgement of a home loan application, hopeful borrowers are often keen to know what will happen next and how long it will take for them to receive the verdict. The bad news is that there is no one-size-fits-all answer. The good news, however, is that a solid application is the key to keeping the approval time short.

Before offering conditional approval, your potential lender will need to make an assessment of your application and conduct a valuation of the property. Of course, having a valuation that is acceptable to the lender done in advance will expedite the process.The amount of time it takes for you to receive a response to your home loan application can vary. An answer is usually received between two days to two weeks, depending on a range of factors.

“For a reasonably straightforward application, it’s 48 hours to a final approval. But, depending on how complex the circumstances are, it can take longer than that,” explains the finance broker.

“With valuations, the intention is to support an application rather than to make or break it,” the broker says. “There are a few things that can result in an application not being approved based on valuation, like zoning, property size, or if the condition of the property is poor enough that major repairs would be required before it could realise its market value.”

The lender will also assess your capacity to repay the loan amount you have requested. This is where all of the information about your salary and liabilities come into consideration, and where accurate and complete information is essential.“The credit review by the lender can include a bit of to-and-fro between the customer, the broker and the lender due to the lender’s request for further information as that credit review takes place,” the broker says.

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The perfect property at an affordable price - it’s not a myth

The perfect property at an affordable price - it’s not a myth

So you’ve found your dream home, but it’s in need of a little TLC. While others may see this as a deterrent, this is actually a great opportunity to nab the house of your dreams at a price tag that’s within your means. Here’s how to tactfully negotiate the price without ruining your chances of securing the property.

• Never enter a negotiation empty-handed Whether it’s hiring inspectors for a building and pest report, or obtaining quotes from tradespeople, obtaining facts and figures will give you ammunition when requesting a price reduction.

“Even if it costs you extra, it’s worth getting all the information before making your offer. People often underestimate how much repairs will cost,” says the real estate agent.

• Separate your emotionsThe most tactful way to negotiate is to eliminate all emotions, advises the real estate agent. “Try to separate yourself from the outcome and present your side logically. The owner is under no obligation to accept what you offer, no matter how well you present your points. So if things don’t go your way, being negative won’t do you any favours.”

• Remember this is someone else’s houseNegotiation is a two-way street, so in order to come to an agreement, concessions will have to be made on both sides. “Try to understand what is important to the owner,” advises the real estate agent. “What can you offer to counteract the price reduction you’re after? Perhaps a longer settlement period so they can find a new home? It’s little enticements like this that can often be much more valuable than a couple of extra dollars.”

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How to select a business loan

How to select a business loan

There are different types of business loans to suit different stages of a business lifecycle and different business needs, and selecting the right one can speed up the application process and minimise costs.

Finance for a start-upFor a start-up company with no trading business or cash flow, it can be quite difficult to secure a business loan. An alternative is to take out an investment loan against the equity of your home or property.

“A lot of the banks don’t have much of an appetite for start-ups, so an investment loan would be a good alternative for anyone wanting to fund a new venture,” advises the finance broker. “It provides flexibility and you’re more likely to secure approval.”

Finance for quick cash flow Similar to a line of credit, a business overdraft can be drawn down to a certain limit, but is specifically a commercial loan that is priced accordingly - and more favourably for the business. A great option for those unspecified cash flow requirements that go with owning a business, it provides the flexibility of accessing funds without much prescription.

“There are a lot of unknowns that arise in business that even the best business plans can’t cater for,” says the finance broker. “This type of financing takes care of those unforeseen things.”

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How to pay off your mortgage faster

How to pay off your mortgage faster

When was the last time you looked closely at your loan, the progress you are making on paying it off and how it compares to others in the market? Analysing your mortgage could mean savings for you, as well as the opportunity to pay it off more quickly, invest in other assets or reach financial freedom sooner.

Make smaller payments, more oftenTo cut the size of your payments, make more of them. This could even see you pay off your loan faster, and therefore pay less interest overall. If you pay your mortgage monthly, consider changing to fortnightly repayments. For example, if your mortgage equates to $2400 a month, cut this in half and pay $1200 each fortnight. As well as having more manageable payments to make, by the end of the year you will have paid off $31,200 rather than $28,800.

Pay just a little bit extraA minimum repayment is just that – for most loans there is no reason you can’t pay more, whether here and there or regularly. By rounding up to a full number or contributing an extra $100 or even $10, you’ll significantly reduce your mortgage. It may also be worth considering putting all bonuses, tax returns and gifts into your mortgage.

Don't decrease repayments when interest rates fallEven if your repayments are lowered when fees and interest rates decrease, it doesn’t mean that’s all you have to pay and, by keeping your repayments at the same level when interest rates are lower, you will pay down more of the principle with each payment and make speedy progress on your loan.

Offset itIf you can, use an offset account. A mortgage offset account is linked to your loan and the interest payable on the loan from month to month is calculated by deducting what is in your offset account from your current loan. For example, if your mortgage is $500,000 and your offset account has $10,000 in it, you will only pay interest on the remaining $490,000. An offset account will save interest while still giving you access to your savings. It also means investors can preserve the tax deductibility of the mortgage.

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How to speed up your home loan approval

How to speed up your home loan approval

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique, so the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is fairly straightforward in terms of employment, asset and liability position,” says finance broker. “Also, if a valuation wasn’t required due to a low LVR and both parties were happy with the contract price.”

If you’re not prepared, it could take up to a month. The most common reason for a delay is a lender’s turnaround time to assessment, especially when some lenders have competitive offerings and experience larger application volumes, but a lack of preparation can cause this delay to snowball. “When there are such delays and then a lender must organise a valuation or request further information, this can lead to a lengthy process time,” the broker says.

A good finance broker will help you take all the necessary steps to ensure fast home loan approval, but there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all informationTo avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker, and convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.Skip the valuation queue

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Investing in a holiday house?

Investing in a holiday house?

Before you take the leap into a holiday-home investment, it is essential that you consider all angles. This means taking your heart out of the equation and giving thought to rental returns - which means location really is king.

When deciding whether or not to buy a holiday house or unit as an investment, you would be best served to consider location first. In fact, location has a great deal to do with the success of your investment property if you will be renting it as a holiday destination. You need to make sure that your property location matches up with market demand. Things to consider are travel time and expense, rent rates, local attractions and activities.

Deciding whether the investment holiday property you want will be as lucrative as you think often requires the advice of an expert, particularly for investors who aren’t as familiar with the area as residents may be, so investors would be well served to seek advice instead of taking a gamble.Contact us now!

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Financing a Very Small Property

Financing a Very Small Property

Marie Owens, having purchased a 36 square metre apartment seven years ago, was recently ready to upgrade and visited her finance broker. To pay the deposit and related expenses on the new, larger property, she needed to release equity in her current apartment.

“She wanted to keep the one-bedroom unit as an investment property for tax purposes, to reduce the marginal tax she pays,” says her finance broker. “We needed to release some equity in the current unit, which will be used as a deposit to purchase her next home.”

When Marie initially bought the unit, she could borrow up to 80 per cent of the value of a 36 square metre property. But her lender changed its policy, and will now only finance up to 60 per cent of the value of any property that is under 40 square metres.

“Since the things have got a lot tighter,” explains her finance broker. After extensive research, he could find only one lender who would finance a property of that size at an 80 per cent loan to valuation ratio (LVR).

“I used an accredited mortgage finance broker group to ask my peers, and I found one lender who would work with 80 per cent LVR on the small property. I usually like to put forward three lenders and products, but there was only one this time,” says Marie’s finance broker. “The application’s been lodged and it’s all underway, so we’re going to release the equity from her unit now.”

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What comes first: the property or the loan?

What comes first: the property or the loan?

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.

Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.

But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.

“First and foremost you need to determine if you’re eligible to borrow money from a lender,” says the finance broker. “Your ability to repay the loan will need to be assessed – you don’t what to find out after you’ve made an offer that your credit history or deposit is not up to scratch.”

Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.

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Where there’s a will, a Credit Adviser can find a way

Where there’s a will, a Credit Adviser can find a way

There are many paths to successfully financing a property purchase. Recently, an expert finance broker helped a young couple, who had nearly given up hope, realize their dream.

If at first you don’t succeed, ask more questions. That’s the motto of finance broker, who doesn’t let a history of refusals stand in the way of securing the right loan.

Recently, Jim and Jenny Stewart, who were keen to buy their first home but had had their loan application rejected twice already, were referred to him.

“They didn’t think they had a chance of getting the amount they wanted, and I wasn’t sure I could get them approval either, but I started asking questions,” says the finance broker.

“It’s not enough to gather only the information required to submit an application; it’s important finance brokers know what borrowers’ plans for the future are, whether they plan to renovate or rebuild, for example, and what their background is.”

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Three things you need to ask your partner before you apply for a home loan together

Three things you need to ask your partner before you apply for a home loan together

Before you apply for a home loan with your partner, there are a few discussions that you need to have that go a little beyond what you may know already.

You’ve found someone you want to spend your life with (or a significant chunk of it, at least) – the hard part is over, right? Wrong. You know each other well enough to know whether or not you each blow the budget every month, but you probably don’t know each other’s complete credit history. So, before you buy a property together, there are plenty of discussions you need to have. Here are three of them.

Have they defaulted on any payments?

He or she might be relatively debt free now, but has this always been the case? One bad mark on a credit file, such as a late car payment or a default on a credit card, will change the approach you need to take when applying for finance.

It doesn’t mean you can’t secure finance, but it may mean you need to apply to a specialist lender for an alt-doc loan. Your finance broker can help you find the right lender and craft an application to avoid the heartbreak of continual rejection.

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Property can be a challenge

Property can be a challenge

A home is the biggest purchase most people will make, so it’s never simple. Throw in renovations and investment properties, and you’re certainly in need of expert advice.

If you have a really great credit adviser, he or she will be prepared to work with you over the long term to find the right property and lock in finance for the purchase.

Justin Myers, recalls working with one client over three years, from obtaining initial pre-approval for a loan and helping the client successfully bid on a property, to arranging a construction loan for renovations and then helping unlock equity for property investment.

In cases such as these, a bank branch’s loan officer just might not cut it.

“When the client contacted me, he was dissatisfied with the experience he had had dealing directly with banks, who were focused on selling him a loan at the lowest rate, rather than setting up a loan that really met his needs,” says Justin.

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What to look for at an open house

What to look for at an open house

There’s an old saying that you should never judge a book by its cover, and this is true for houses – after all, who would buy one having never seen more than the front door? Open inspections are opportunities to really flick through the pages, and here’s how to take full advantage.

Use your sensesSniff, peer, listen and feel as much as you can. Your nose might pick up a mouldy or musty smell that may mean damp. You might spy small or hidden cracks that could mean structural issues. That clattering sound when water is running? That can be a sign of serious plumbing problems.

Don’t be distracted by the beautiful blingAnyone can invest money in pretty cushions and lamps to set off the house. Or bake some cookies just as the open inspection starts so the house smells cosy and homey. But when buying property, you’re buying the sausage not the sizzle, so look past the perfectly presented and lit lounge room to the size, shape and placement in the floorplan of the actual room, and imagine how you will use it.

Look upThat means checking the roof on the way in and looking at the ceilings in the rooms. Damp and leakage issues are costly and notoriously hard to fix. And once the rot sets in, it’s there to stay.

That kitchen and bathroom advice It’s true what they say. If these two rooms aren’t how you would like them to be, are you prepared to live with it or spend the money required to transform them? Bathroom renovations will be upwards of $10,000, and probably a lot more.

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Refinancing a business

Refinancing a business

Does your business need refinancing or restructuring? As this tale of a business with urgent liquidity problems shows, having a credit adviser managing the project can be the key to success.

When a cotton grower in central Australia lost his financier during a period of aggressive expansion, he was facing a liquidity crisis and approached a mortgage broker who approved equipment and commercial credit to help restructuring the business and securing a new backer.

“His current financier was shutting down its operations across the state. Not only had he lost his account manager, he’d also lost his whole direct line of resources to his business, right at a critical time,” explains the finance adviser.

“It was quite a complex business. It had multiple entities with multiple assets and private investors, and had a lot of moving parts in addition to the expansion plans. So there was a lot of due diligence and lot of work in terms of understanding the client’s current business structure and requirements, and creating the structure that would be required going forward to satisfy all parties, including new banks.”

Before putting the business out to tender, the credit adviser and his client worked on creating cost efficiencies and were able to turn a critical situation into a foundation for growth.

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Purchasing property in Australia on a 457 visa

Purchasing property in Australia on a 457 visa

Most people on a 457 visa have a misconception that they are unable to purchase property in Australia while they are on a temporary visa but this is just not the case. A 457 visa holder or other temporary visa holders can easily purchase property although they do need to seek Foreign Investment Review Board (FIRB) approval. The FIRB policies have changed a few times over the past five years but at present people can apply for approval as long as the property is a residential property and they intend to live in the property. If the purchase is for investment then it needs to be a brand new property. The approval is on the property and not the applicant, so an approval is required for each property you are looking at purchasing.

457 Visa Mortgages and Bank policies

Prior to setting up CBM  Mortgages I worked for one of Australia's leading banks and created their home loan policies for temporary visa holders, specifically their 457 visa home loan policy which many brokers use today. My job was to make it easier for someone migrating to Australia purchase property. Previously the banks looked at potential mortgage applicants as citizens or non citizens and unfortunately temporary visa holders specifically on a 457 visa were unable to access the same policies as Australians and were treated the same as someone living overseas. After producing a report it was demonstrated that selected visa types are for highly skilled individuals that have moved to Australia to work and many to start a new life. It was shown that although these 457 visa holders do not hold citizenship, their occupations are on the Australian department of immigrations skilled occupation list (SOL) and they generally command a high salary and are quite a safe bet when purchasing property. If they were to lose their job then they it should not be too hard for them to find new employment due to their occupation. Also due to them not receiving any First home Owners benefits (FHOG) unless they purchase with an Australian permanent resident or citizen, the chances of them leaving and walking away from a property they have had to make a considerable contribution is slim. The policy for these applicants was introduced and 457 visa mortgage applicants could go as high as a 97% lending to value ratio (LVR) on selected properties if approved by the banks credit department. This was lowered to a 90% LVR at the start of the GFC when the bank pulled back many of it's credit policies. 

So presently applicants can purchase a property with a 10% deposit plus money for their costs (stamp duty and lenders mortgage insurance premium). This is still a great opportunity for temporary visa holders as nearly all banks require at least a 20% deposit plus costs. Applicants would still need to be approved by the banks credit department and they normally like to see a minimum of 6 months with their current employer and a minimum of 12 months left on their visa. Each application is assessed on a case by case basis though and looked at on it's merits.

Current 457 visa approval levels and forecasts

At present the Department of immigration are approving just over 30,000 new 457 visa applications per year with the department of immigration forecasting this to rise to 52,000 in 2016. After calculating the 457 visa holders returning home this leaves a net migration of  approximately 22,000 for 2012 with forecasts up to approximately 26,000 in 2016. The 457 visa is normally between 3 months and 4 years with the majority being 4 years. If the applicant still qualifies then these ncould be extended for a further 4 years. Unconfirmed sources estimate there to be as many as 100,000 457 visa holders currently in Australia. This means there are many people in Australia currently on a 457 visa and potentially looking to extend their stay in Australia and purchase property in Australia. 

                                                                                                                               

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Steveoverseas
Great article, was full of information I was looking for and really informative with the data. Once I save up a bit more I will de... Read More
Friday, 11 January 2013 06:17
Neil
Thank you for this information Craig, it's info I have been searching for. I have been in Australia only for a few months on the 4... Read More
Sunday, 13 January 2013 03:55
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