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Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

2. Research potential properties and loans

Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

While some lenders will offer loans if you have saved less than the usual 20 per cent deposit, being able to show a record of good saving habits will aid in getting your loan approved.

Then, when you talk to your local Licensed & MFAA Approved Finance Broker about applying for pre-approval on the right type of loan, ask for their help to work out what you can afford in terms of repayments.

 3. Factor in other costs involved

Depending on the property, there can be a number of additional costs, so ask your finance broker what other payments you will face. This can include, but isn’t limited to, stamp duty, loan establishment fees, legal and conveyance services, utilities, property insurance, maintenance and lenders mortgage insurance .

 4. Think about your future

Just because your current situation allows you to get a home loan, that doesn’t automatically guarantee that you will still be able to service it in five years’ time. Is there a possibility your role at work will change? Are you considering going back to study and reducing your working hours?

 5. Get professional help

With so many things to consider, getting professional help is highly recommended. There are many experts in the industry and it is in your interest to use them for tasks such as property checks, pest checks and any other legal queries. Going it alone can prove costly. Avoid nasty surprises down the track by getting the right people to do the appropriate checks for you from the beginning.

02 May 2018

Q&A: pest inspections

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Pest inspections are an essential part of the home-buying process. Mortgage and Finance Help spoke to Justin Hammerschmidt, an Inspector at Sydney PrePurchase, about what pest inspectors are looking for and how to interpret their reports.

Q What pest inspections need to be carried out prior to purchase?

A pest inspection, officially known as a ‘Timber Pest Inspection’ should be carried out prior to purchase. It will detail any timber pest activity such as termites, timber borers and wood decay.

These pests can cause significant structural damage to the timber elements in buildings such as wall, floor and roof framing. They can also cause serious safety hazards such as collapsing balconies and unsafe decks.

This type of damage is often difficult to locate, requiring the skill of a trained timber pest inspector. It is important to understand that other pests such as cockroaches, rodents and spiders are not covered by this inspection, as they are not capable of causing structural damage to buildings.

Q When should pest inspections be done?

A pre-purchase inspection should be carried out as soon as possible in the buying process. This will give the buyer time to consider the findings of the report and make a decision about whether to proceed with buying the property, renegotiate or adjust an offer based on the findings, or walk away from the sale.

Due to the competitive nature of the property market, a common practice is to exchange contracts and have the inspection carried out during the cooling-off period. The problem with this practice is that the buyer has no leverage to renegotiate if something significant is found during the inspection and, if they pull out of the sale, could forfeit their deposit.

Q What should consumers be looking for when they choose a pest inspector?

Pest inspectors should be licensed pest controllers and/or building consultants with the appropriate industry training and accreditation.

The inspector should also be covered by professional indemnity insurance to cover the consumer against professional negligence, and public liability insurance in case of damage or injury.

It is important to understand that the inspector’s insurance is not a ‘blanket cover’ for the house, so separate building and contents insurance is essential.

Q When the reports come back, what should prospective purchasers consider?

The report should have a summary section at the front, which will itemise any potential problems. This should be read in conjunction with a building report for the property. To save time and money, a combined building and pest inspection is strongly recommended.

The most important considerations are structural termite damage and safety hazards. Does the report refer to termite activity in the grounds only or does it refer to structural damage in the building? If the damage is in the building, where is it and what is the extent of the damage? Is the damage only on the floor frames, which can be easily repaired? Or is it likely that the damage continues up into the walls and into the roof?

It is important to understand that termite damage is often concealed inside walls or where access is not possible. The inspector should be able to articulate to the buyer the extent of possible damage without overly exaggerating the risk or being deliberately vague.

The biggest red flag for a property buyer is the likelihood of extensive concealed structural termite damage. This damage is impossible to quantify without dismantling the building.

Q Can termite activity be remedied down the track fairly simply, or are properties with pest problems best avoided?

The mention of termite activity in a pest report is not necessarily a reason to panic and pull out of the sale. Termites can be treated. If a property has a history of termite activity, a treatment may already be in place. The report will detail past treatments and make recommendations for the future.

If damage is located in the building it is often localised activity that has not caused significant structural damage. Even where structural damage exists, repairs can be carried out. Typical structural repairs for moderate damage may only cost $5000 to $10,000. This is less than the cost of re-furbishing a leaking bathroom, a problem that is far more common in old and new properties alike.

If in doubt, a short telephone conversation with the inspector can help to explain the situation and put things into context.

A property is likely to be the biggest purchase you’ll ever make, so it’s important to get the best advice on every aspect of it. MFAA Approved Finance Brokers are industry experts who can help you get the best value over the life of your home loan. Contact Us here for more information.

01 May 2018

First meeting with a broker

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If you’re looking for a home loan but are inexperienced with finance brokers, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer. There are lots of brokers around and there is a lot to learn. But there are many steps you can take to be confident that your appointment will be a success.

A good starting point is to familiarise yourself with the expectations of the first appointment between brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

The other preparation you can make to maximise the success of your appointment is to research your broker. Many brokers provide content on their web pages and social media. This can give you a good indication of their knowledge and expertise and highlight topics to discuss with them. You can also determine if they specialise in any types of loans that match your needs, where they are located and their panel of lenders. Finally, you should investigate their qualifications. Although brokers are only required to obtain Certificate 4 qualifications, it could be argued that the better brokers hold Diploma qualifications. Finding a diploma-qualified broker will help ensure you receive the best credit advice.

Brokers can also be accredited, with accredited brokers held to higher standards. By verifying they are accredited with the Mortgage & Finance Association of Australia (MFAA) you can approach the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

Unsure about whether to lock down your interest rate for a period with a fixed rate home loan, or take your chances with a variable rate home loan? 
It’s a decision everyone faces – from first-home buyers right through to investors – at various points in a loan’s life. 
The choice can cause anxiety and confusion for some people because there’s no one-size-fits-all answer as to which option is better, and it can be hard to predict interest rate movements. Whether to go fixed or variable will depend on your unique circumstances. 
That’s one of the many reasons why many buyers turn to a mortgage broker. Brokers have tried-and-true methods designed to help you understand how different loan types and interest rate changes can impact your plans and priorities.
So how would a broker help you pick between fixed or variable?
The answer to this question may depend on your requirements and objectives which you should establish up front.
“One of the first questions is, what’s more important to you: the stability of knowing your repayments are going to stay the same? Or the flexibility to make unlimited repayments with no penalty?” 
“If you want to have a loan that is fully flexible where you can make unlimited extra repayments with no penalty, a fixed rate may not be the most suitable option because you are usually limited with the extra repayments you can make.”
If extra features like redraw facilities and offset accounts are important to you, that may also weigh into your choice.
“If somebody wants an offset account, there’s just a handful of lenders that have a 100 per cent offset account linked to a fixed rate home loan. It’s about finding out what their goals are, what their needs are.”
Your decision needs to work for you
Fixed rate loans provide confidence that rate changes won’t affect you – but that works both ways. You won’t pay more if rates rise but you won’t benefit if rates drop. Certainty may be your highest priority if you have a fixed budget.
Variable rate home loans come with less certainty but generally more freedom to pay off your loan faster. Being open to the changes in interest rates often allows you to access loans with more flexible and attractive features.
Variable rate loans may make it easier if you’re thinking about selling your home soon, or want to switch loans if you find a better deal, because fixed-rate home loans often have penalty fees for those wanting to get out early.
Best of both worlds?
Splitting your home loan usually gives you some of the benefits of both a fixed and a variable loan, which may make it an attractive third option to consider. There’s usually no limit on how you split your loan, provided that the relevant lender offers this option.
“(One of) the reasons to split is to hedge your bets a bit. It gives you peace of mind that a certain portion of your loan is not going to have any variation, as well as the variable component where you can make unlimited extra repayments”.
As you can see, there are a lot of things to consider. It is always recommended you read any loan product’s fine-print carefully if making financial product decisions yourself, or find a reputable, accredited and trustworthy mortgage broker to help you navigate the experience.

 

 

Saving for a home? If you haven’t met with a finance broker yet, you’re doing it wrong. Here’s why.

When saving a deposit to buy a home, many people have a goal amount in mind that they need to save before they meet with a finance broker who will help them secure the finance.

If this is you, you’re doing it wrong. From day one, when you first think ‘I could maybe buy a house if I worked hard and saved a lot’, you’re ready to have a finance broker on your side.

A finance broker’s knowledge of the loan and property market will help you work out how much you will be able to borrow, which determines the size of the deposit you will need to save.

They will also be able to help you develop a realistic timeline to save your deposit and find ways to pay down debts faster and provide creative solutions that will help reach your goals sooner.

You may also be pleasantly surprised to find that you are closer to your goal than you thought. The tools in a finance broker’s belt that can help you realise your dreams more quickly and efficiently include lender’s mortgage insurance, specialist lending products, land loans and investment loans.

More importantly than just being allowed to provide these products, a licenced finance broker can help you work out whether they suit your situation and goals. For example, while buying land now to build on later lowers the cost of your initial investment and can be an opportunity to take advantage of a dip in land prices, there is no point in it if you will not be able to secure construction finance down the track.

So, speak to an expert now. Find a licenced finance broker who can help you take the first steps to owning your home.

www.glenavonfinance.com.au

 

 

Sometimes, getting a deal over the line in time requires a conversation with an industry expert.

Late last year, Martin Jones was seeking finance to purchase a share in an investment property with two other investors, and simultaneously trying to secure finance for an investment property he was purchasing on behalf of his wife Sandra.

The financial institution he was dealing with was frustrating him and jeopardising his plans; with settlement fast approaching, the valuation was taking too long to be finalised and Martin didn’t feel that he was being informed of progress.

On Christmas Eve, Martin contacted his local MFAA Approved finance broker looking for help, hoping to find a solution by the time settlement came around on 10 January.

He needed a fast solution.

In Martin and Sandra’s first meeting with their finance broker, after talking through the problems they had encountered with the bank, it came out that their owner-occupied property was unencumbered.

With that knowledge, the finance broker was able to recommend that they use a cash out loan to finance the purchase of both investment properties, which would speed up the process considerably – a very handy development so close to Christmas time.

The finance broker processed the application, and the valuation was completed on 27 December, with the loan approved and documentation sent out the next day.

Martin, on his finance broker’s advice, was able to hand deliver the signed documentation to the lenders’ solicitor, meaning that the loan was settled on time, and Martin was able to purchase both investment properties.

*Names have been changed to protect the clients’ privacy.

Contact a Licenced finance broker who has the industry knowledge to overcome your mortgage hurdles. If you don’t have your own broker contact us here.

 

 


Reducing the life of your loan isn’t difficult; there are many simple things you can do to cut years off your mortgage. Here are some tips that will help you be mortgage-free sooner than planned.
Small extra repayments
One of the most obvious ways to pay off your home loan quicker is to make extra repayments. Depositing lump sums, such as a tax return or work bonus, will always be beneficial, however it doesn’t always take large amounts or windfalls to make a substantial difference – planning for regular, small cash injections can have a great impact over the life of a loan.
“Let’s say we give an extra $50 a fortnight on a $500,000 loan, that saves you $32,000 of interest over the life of the loan which in turn will save you just over two years,” explains the finance broker. “That’s only $25 a week.”
Switch your payment intervals
If you find that you don’t have the discipline to make extra repayments, then simply switching your payment structure can also help save years off your mortgage, as well as simplifying your finances if you are paid fortnightly.
“Because there are 12 months in a year but 13 four-week cycles, by switching your payment intervals from monthly to fortnightly, you are essentially paying off an extra month per year,” says the finance broker.
Make sure you have the right type of loan
Ensuring your loan allows extra repayments without penalty will let you to make the most of bonuses or funnel small extra payments to reduce the loan principle more quickly, saving on interest immediately, while an offset account will use your savings or living expenses to reduce your principal, while still allowing you to access these funds from a transaction account.
“I’ve set the mortgage on my investment as interest-only but I make the principle and interest payment equivalent by putting surplus rental income into an offset account,” says the finance broker. “Because interest is calculated daily but charged monthly, any money sitting in the account will help reduce the loan.”
Although you may have to pay extra fees for the offset or redraw account, these may well be lower amounts than the interest saved. Talking to a finance broker is the easiest way to work out whether this option is financially sound.
Paying off your home loan faster isn’t difficult; however, it does require financial discipline and expertise in ensuring the right loan features are in place. Contact us so we can match you to your perfect loan.

 

 

 

 

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 straightforward in terms of employment, asset and liability position,” says an MFAA accredited finance broker. “Also, if a valuation wasn’t required due to a low Loan to Valuation Ratio (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 information

To 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

Not all applications require a valuation, depending on the property and lending institution, and forgoing this step can save a considerable amount of time. You can also save time by having a valuation completed prior to your application, if it’s accepted by your chosen lender – but check with your broker first.

To ensure your application avoids any unnecessary delays, speak to your finance broker or Contact Us for more information.

When selling one property and purchasing another, the funds from the sale may not be available in time to use for the purchase deposit.  There are typically two options in this scenario: a bridging loan and a deposit bond.

Bridging loan

A bridging loan is a short term home loan designed to allow you to initiate the purchase of a property before you have sold your previous one.

Loan terms are often between six and 12 months and bridging loans generally have a higher interest rate than traditional home loans.

This can be a great option but carries some risk. It’s important to know that you will be able to make the repayments even in a worst-case scenario where your old house doesn’t sell as quickly as you’d hoped or where property values may change unexpectedly.

It’s important to talk to a broker and ensure that you have the capacity to service the loan for the period of time required.

Deposit bond

A deposit bond is a tool that, upon agreement with a vendor, can replace the requirement of a cash deposit when purchasing a property.

This can be a relatively cheap method of initiating the purchase of a property usually without the need to liquidate your other assets.  The cost of a bond can vary depending on transaction complexity and the term being sought.  In a simple transaction, it is likely to be approximately 1.3% of the amount of the deposit.  For example, for a deposit guarantee to the value of 10% of a property price for an individual purchasing an established property in NSW and repaying that guarantee within 6 months on a $50k deposit for a property purchase of $500k, the fee will be about $650.*

A deposit bond is issued by an insurer to the vendor of the property for either the full or partial deposit required.  At settlement, the purchaser must pay the full purchase price including the amount of deposit.  At this point, the deposit bond becomes void.

If the purchaser fails to complete the purchase of the property, the vendor can give the deposit bond to the insurer who will provide them the entire value of the deposit bond.

The insurer will then seek reimbursement of the deposit bond from the purchaser.

Deposit bonds are generally a fair bit cheaper than a short-term loan, but it’s important to talk to a mortgage broker to compare the two, taking into account your requirements and objectives and your financial situation.

Make sure you speak to your Finance Broker or Contact Us discuss which option is right for you.

*this is an estimate

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.

Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Or download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND.

Find savings in the essentials

Some costs can’t be avoided – but many everyday expenses can be reduced. For example, you could:

  • Move in with your parents/relatives, or move into a cheaper rental or share house (short-term discomfort can pay off in the long term).
  • Implement tactics like meal planning, making grocery lists and buying in bulk to save money on food. Set aside a budget for eating out/take-away and stick to it.
  • Shop around to reduce your regular bills – you may get better value if you switch, or tell current providers you intend to switch. Seek discounts for taking out multiple policies with one insurer.
  • Use the car less: take public transport; carpool with colleagues; or try walking or riding. You’ll be amazed at how quickly it all adds up to savings.

Make sure you’re paying off debts or credit cards completely each month or as much as possible, to avoid the added expense of paying interest.

Reduce common overspending

If you spend excessively on things like buying clothes, going out or expensive hobbies, it may be unrealistic to cut the expense entirely. Set a weekly or monthly limit and reduce that limit over time.

A survey of more than 1000 Australians showed that 73 per cent have a problem with overspending. In particular, people tend to go overboard when Christmas rolls around.

To reduce gift expenses, be like Santa: make a list (and a budget). Buy only planned items within your allocated budget – then stop! Ask your family for support; it’s easier to put a cap on gift values if everyone else does too.

Another common way Aussies overspend is on holidays. CommBank research has shown that a third of holidaymakers spent more on their trip than planned. Do your research and set a daily budget.

Costs that could be eliminated

Look for opportunities to eliminate costs. Cancel unused services. Update your internet or mobile plans if you’re always paying for excess data.

Ask yourself: are you really using that gym membership? Are you getting value from your subscriptions? Remember, every wasted dollar is money you could be spending on your own home.


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