How Safe is a Bridging Loan?
April 16, 2008 by Josie Kay · Leave a Comment
Q. How safe is a bridging loan? I have found a property that I would to purchase. I have two other properties that I have on the market now. With the way interest rates are at the moment are bridging loans taboo?
Josie’s Answer: Personally I would not feel comfortable with a bridging loan regardless of whether interest rates are going up and down.
I have heard some horror stories whereby real estate agents have given vendors the impression that their property will sell within a short period of time, only to find that there were no buyers around.
As a result, they are placed under immense financial pressure to pay off, in effect, two home loans. The only way they can relieve the financial burden is to have a fire sale, in other words they were left with no option but to drastically reduce the price of their property.
Of course, I am not familiar with your entire financial situation. If the new property you are purchasing is a great buy a quality investment and if you are financially comfortable, then you may be in a position to easily service both loans. Read more
Currency fluctuations and investing
April 1, 2008 by admin · Leave a Comment
Q. I have some money invested in international shares. How does the fluctuations in the $A affect my return?
Josie’s Answer - Once a decision has been made to invest in a security of another country, it automatically involves an investment in that currency.
An investment in an American share will mean that the return will be affected by any movement in the US Dollar relative to the Australian dollar. If the US Dollar strengthens, then the value of an investment in a US share will also strengthen.
So depreciation of the Australian dollar adds value to an overseas investment, and an appreciation of the A$ means that it will detract from returns. If you are invested in a managed fund (and you probably are through your super), some fund managers have the option to employ hedging strategies or active management of currency.
Hedging is a tool employed as insurance, to protect a portfolio from future exchange rate variations. If you fund states it is ‘unhedged’ it means that it will benefit from a depreciating $A, but the return will reduce by an appreciating $A. Read more
.
