Mortgage Brokers and the Application Process
What is the advantage of using a mortgage broker?
We also empower our clients by educating them and helping them to overcome any fear from the home loan application process. We can walk you through the process step-by-step, liaising with your solicitor and real estate agent to make settlement less stressful for you. We then offer ongoing support and an alternative to the banks’ call centres when you need advice following settlement.
Once your loan has settled, our role continues – we provide regular reviews to make sure your loan meets your needs (which can often change) and will keep you updated on interest rate changes.
The best part is that all this is done at no charge for our clients.
Why is there no fee to use a mortgage broker? How do you get paid?
The assurance we give to our clients is that commission payments will never taint our lender selection – and our adherence to this policy is just one reason why our clients keep coming back to us, and are happy to refer their family and friends.
What can I do to strengthen my home loan application?
Some clients unknowingly have unpaid defaults, so it may be worth obtaining a copy of your own credit report online from www.veda.com.au. We can then address any credit-related issues with a lender and be proactive to have these addressed or even removed from your credit record.
Should I get pre approval?
By securing a pre-approval, you remove some of the stress when you do purchase your property, as you’ll have already gone through the process of applying for a loan.
How long does it take to get approval?
Costs to Consider
What costs should I factor in when purchasing a property?
- Stamp Duty: this is the most significant cost, and varies between state and territory governments. It is calculated based on your purchase price and depends on whether you are buying an owner occupied property or an investment property.
- Legal/conveyancing fees: you can expect to pay around $1,000 – $2,000, based on the amount of work involved for your conveyancer. These fees cover all the legal fees associated with your property purchase, including title searches.
- Building and pest inspection report: your conveyancer will usually arrange these inspections on your behalf during your cooling off period. Your Contract of Sale should be subject to the building and pest inspections, so if there are any problems identified you have the option to withdraw from the purchase without any significant financial penalties. A building report will cost about $1,000 and the pest report about $500. You will pay for these as part of your total invoice at settlement to your conveyancer, in addition to their conveyancing fees.
- Lender costs: most lenders charge legal fees to help cover the costs of their legal work and settlement charges. We will let you know upfront about any bank fees you need to be aware of.
- Mortgage Insurance costs: if you borrow more than 80% of the purchase price of the property, you’ll also need to pay Lender Mortgage Insurance.
- Insurance: when you sign a Contract of Sale, we encourage you to take out building insurance as this is a lender requirement.
- Disbursements: at settlement, you will need funds for the vendors’ prepaid bills such as council and water rates and strata if applicable. Your conveyancer will advise you of these costs prior to settlement.
- Moving costs: don’t forget to factor in the cost of a removalist if you plan on using one.
How much do I need to save for a deposit?
We work with clients who have small deposits and put together options for them to consider such as:
- Family Guarantees
- Servicing Guarantees
- Using rent as genuine savings.
How much money will I need to set aside for stamp duty?
Am I eligible for the First Home Owner Grant?
If you’re purchasing the property with others, they must also meet criteria to qualify for the FHOG.
What is Lenders Mortgage Insurance?
With LMI, lenders may allow you to capitalise this onto your loan amount to a certain limit. It may also enable you to borrow at an interest rate that is comparable to a borrower who has a larger deposit.
What does Lenders Mortgage Insurance protect?
LMI should not be mistaken for Mortgage Protection Insurance, which covers a mortgage in the event of death, sickness, unemployment or disability.
Managing Your Loan
What is a "Comparison Rate"?
- government charges (for example stamp duty or mortgage registration fees) as these charges will be the same regardless of which lender or loan product the customer chooses;
- fees and charges which cannot be calculated at the time that the Comparison Rate is determined; and
- fees and charges which may or may not be charged, because they depend on some event which may or may not occur (such as fees for early termination or redraw).
What is the difference between fixed and variable rate loans?
Fixed rate loans are exactly that – the interest rate is fixed for the term chosen. Typically fixed rate loans are more inflexible than variable rate loans where additional loan repayments are limited, offset facilities may not be available, and break costs/penalties can apply for paying out or closing a fixed rate before the duration of the fixed term.
What is a Self Managed Superannuation Fund (SMSF)?
Clients with a SMSF can borrow money to invest in property and there are stringent regulations attached to SMSF lending. All members of the SMSF must be trustees of the SMSF and be fully involved in the decision making processes the fund undertakes.
What is an "Interest Only" loan?
Most banks offer an interest only loan for 5 years before they require principal and interest repayments for the next 25 years. Interest only loans are common with investors who have a portfolio of properties to enable them to afford to service a greater amount of debt and to assist with cash flow.
What is an "Offset Account"?
This $20,000 is not paid down into the loan as it is sitting in a transaction account. Clients can choose to pay down their loan or access the funds in their offset for personal use. It’s also beneficial to have your salary paid into your offset account.
This is a common feature with variable rate loans, however a small number of lenders offer offset accounts on fixed rate loans.
What is the difference between positive and negative gearing?
Some clients choose negative gearing to take advantage of possible tax benefits (because their taxable income is reduced by the amount of the loss), while other clients opt for positive gearing for cash flow purposes.
The strategy you choose is determined largely by the property selected, your loan structure and, ultimately, your financial goals. It’s worth discussing the tax implications of either positive or negative gearing with an accountant and a financial planner.
How often should I make my home loan repayments - weekly, fortnightly, or monthly?
Most lenders offer flexible repayment options to suit your pay cycle. However, if your repayments are Interest Only, then you will be making monthly repayments.
To discuss how you can structure your home loan to enable accelerated repayments, please get in touch with us. We would be happy to help you.
Can I consolidate credit card or other debts into a home loan?
What's the difference between an "owner-occupies home loan" and an "investment loan"?
As investment loan can be set to Interest Only, which helps investors repay only the interest – which assists with cash flow.
Investment loans typically attract a higher interest rate and there are fees and features which will vary between owner-occupied and investment loans.
Can I use equity in my home as a deposit for an investment property?
Government Grants and Schemes
Yes, you can if you’re eligible. For example, an eligible first home buyer can apply for and qualify for the First Home Owners Grant (FHOG), the First Home Loan Deposit Scheme (FHLDS), and the HomeBuilder grant. Since each state has its own Stamp Duty, eligibility criteria, and timelines, getting these three to align properly becomes challenging.
For example, if you have a spot in the FHLDS, you have three (3) to find and purchase a home.
Looking for a Sydney Mortgage Broker and Investment Specialist?
Call Aaron on 02 4267 2652 for an obligation-free consultation