02 May 2018
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
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
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.
23 Apr 2018
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.
18 Apr 2018
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.
09 Apr 2018
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.
09 Apr 2018
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.
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.
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.