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REFINANCING YOUR HOME LOAN

Source: AFG

As time marches on, situations change. Perhaps you’ve changed jobs? Or there’s a new addition to the family? Maybe you would just like a better rate? Maybe it’s the advent of school fees, or perhaps the kids have flown the coop? Or maybe that leaking shower or tired kitchen has just reached the end of its life. A shift in circumstances may mean it is time to revisit your home finances.

For many, the idea of refinancing a mortgage can be daunting. Fees, fixed versus variable interest rates and monthly charges all need to be considered. The right refinanced loan could help you pay off your mortgage faster and for less, clear unhealthy debt or help you upgrade and add value your home, all of which are steps in the right direction.

Common questions for those thinking of refinancing

Can I get a mortgage where I pay less than I’m paying now?

With lenders adjusting their rates outside of the reserve bank now is a great time to shop around check that you have the right loan for your needs, and a consultant is a great starting point. It will depend what interest rate you’re currently paying, what type of home loan you have (e.g. fixed, variable, interest only, line of credit) and what features you want in your loan.

Speak to a consultant who can quickly explain your options.

Can I consolidate credit card or other debts into a home loan?

This is one of the reasons many people refinance.  The advantage is that you pay a much lower interest rate on a mortgage than for most other forms of debt – e.g. credit cards, overdraft facilities, personal loans etc.

Providing you have sufficient equity in your property, you may be able to consolidate all your debt on a home loan. If you take this option though it is important to make sure you maintain your repayments at their current level or you could end up paying more over a longer period of time.

Speak to a consultant who can quickly explain your options.

How much money can I borrow?

We’re all unique when it comes to our finances and borrowing needs. Get an estimate on how much you could by contacting a consultant who can help with calculations based on your circumstances.

How do I choose the loan that’s right for me?

There are hundreds of different home loans available, so contact a consultant who can recommend the right loan(s) for you.

How often do I make home loan repayments – weekly, fortnightly or monthly?

Most lenders offer flexible repayment options to suit your pay cycle. Aim for weekly or fortnightly repayments, instead of monthly, as you will make more payments in a year, which will shave dollars and time off your loan.

What fees/costs are involved in switching mortgages?

Penalty fees could apply if you’re paying off your current mortgage early, especially if you’re exiting a fixed home loan.  But these may be offset by repayment savings when you switch home loans.  Contact a consultant to discuss which fees would apply in your circumstances.

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WHAT IS LENDERS MORTGAGE INSURANCE (LMI)?

Lenders Mortgage Insurance (LMI) protects the lender in the event that you default on your loan. It is paid as a once-off insurance premium or fee when your loan is advanced. It does not affect your interest rate.
LMI is only applicable if your loan poses a relatively high risk to the lender—usually because you are borrowing a high percentage of the property value.

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WHAT IS CREDIT SCORING?

Whenever you apply for credit—whether it’s a home loan or a mobile phone contract—your application is given a credit score. The score represents your risk of non-payment to the lender credit, and it is usually assessed by a computer.

Credit scores are influenced by a wide range of factors which don’t always reflect your true credit worthiness. A mortgage consultant may be able to help with credit scoring issues.

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WHAT ARE GENUINE SAVINGS?

What is considered “Genuine Savings” and why do most banks require it even if you have a good income?

In response to the increase in first home buyers applying with no deposit or savings, most Australian lenders now require mandatory genuine savings for most home loans.
We work with several lenders that don’t require genuine savings, but most do, and most work somewhere within these guidelines.

  • 80% of property value: Genuine savings not required.
  • 85% of property value: Genuine savings not required by most lenders.
  • 90% of property value: Genuine savings required by most lenders
  • 95% of property value: Genuine savings required by almost all lenders
  • 100% of the property value: Guarantor loans required for buyers without genuine savings.

To learn more, please enquire online or call us on 0476 111 000 to speak with one of our specialist mortgage consultants.

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TOP AUCTION TECHNIQUES

Buying a home at auction can cut your purchase price dramatically. But many beginners fail to realize how these auctions work. To maximize your chance of success, you need to understand the auction process.

The Auction Process

Always do your research before the auction. Know what the house is worth in good condition, know what it needs, and figure out your budget before you start. Above all, do not get swept up in the excitement of the moment. Keep a cool head and stick to your plan.

Pest and building inspections should always be carried out before the auction. The inspection will expose any structural issues or other problems that will affect the value of the house. Surprises are common after a property auction. Avoid them with an inspection.

If you’re the high bidder, you’ll need to put down a deposit immediately after the auction. Unless you’ve negotiated otherwise, this is typically 10 percent of the purchase price. You can eliminate any problems during this phase by getting pre-approved for a mortgage. (A mortgage consultant can help you with the pre-approval process.) Also remember to bring a picture ID and register with the auction when you arrive.

Once they begin, property auctions move quickly. They can be intimidating. Consider legally appointing someone to bid for you if you’re not comfortable with the pressure and bidding practices.

Key Tips for Buying At Auction

Auctions can be overwhelming for first-time buyers, but these tips can improve your chance of success:
• Study the market values in the area surrounding the property. Knowing current prices in the neighbourhood could keep you from overpaying, or it could reveal a hidden gem.
• Stay calm and stick to a pre-agreed bidding limit. You’ll avoid bidding too high, and you’ll appear calm and confident before other bidders.
• Attend a few auctions before you bid on a property. Familiarise yourself with the atmosphere and process so you’re comfortable when it comes time to bid.
• Enlist the support of your family and friends on auction day to keep you calm and focussed.
• Even if you don’t win your property, stay positive – there are plenty more opportunities out there.
• Talk to a mortgage consultant beforehand. They know a lot about home valuations and the buying process.

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TOP 3 INVESTMENT PROPERTY TIPS

Investment properties can provide a road to early retirement. Here’s a fairly typical scenario:

A married couple begins investing in rental properties in their late 30’s. Each home they rent brings in $500 to $700 in net profit per month. By the time the couple hits 45, they own several properties which earn close to $3,000 per month after expenses. Rather than spending this money, they reinvest it in other types of low- and high-yield investments. The combined property and investment income virtually ensure that they can retire completely before the age of 55.
The above scenario sounds ideal, but there are risks involved. You can avoid most of them by asking yourself three fundamental questions:

1. If something goes wrong with the property, will I have the money to fix it?

Even after a careful inspection, you might discover problems. A roof leak could cost thousands of dollars to repair. Make sure you have the extra money to cover unexpected costs.

2. Will I be able to find good tenants?

Making money on a rental property depends on finding tenants who pay their rent each month and don’t damage the property. Don’t assume that you’ll always be able to find them. Keep enough cash on hand to deal with tenant issues and to cover the mortgage if the home has to sit empty for several months.

3. How important is it to balance rental income against capital growth?

Sooner or later, you’ll probably want to sell your rental property and re-invest the gains. While beginner investors tend to think only in terms of rental income, more experienced investors consider the appreciation of the home over the long-term. Buying a lesser house in an area where demand is high could actually earn you more.

Live the Dream, Not the Nightmare

Smart real estate investments can put you on the road to early retirement and a great life. But hasty investments can turn the dream into a nightmare. Balance the risks of investing against the rewards, and be sure to follow the three tips above before making your first property investment. To learn more, take a look at our guide to property investment.

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THE LOAN APPLICATION PROCESS

Applying for a home loan typically entails four phases:

Initial Conversation

This is the first contact you’ll have with your mortgage consultant. We’ll discuss your situation, your needs, objectives and goals, and then determine if you’re likely to qualify for a loan. At this point, you’ll decide whether to use us as your mortgage consultant.

Returning your application and documents

If you decide to use us, we’ll ask you to complete a customer information form. We’ll also ask for supporting documents such as your ID, pay slips and bank statements. The process will go faster if you can provide these up front, all at once.

Initial assessment

After we have your application and supporting documents, we’ll do a preliminary assessment of your situation. This is a very detailed process where we identify..
• any possible problems from a lending point of view
• your borrowing capacity
• which lenders can help
• which loans offer the best fit at the lowest interest rates

Loan recommendation

After the preliminary assessment, we’ll recommend two or three loans that fit your needs and ask you to pick the one that works best for you.

Lodge the loan to the Lender

Once you’ve chosen your loan, we’ll prepare your application for the lender. We’ll ask you to provide any final documents and sign the lender’s privacy form. Then we’ll prepare the application and highlight the strengths that make it most appealing to that particular lender. When everything is assembled and ready, we’ll submit (or “lodge”) the application.

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IS IT POSSIBLE TO BUY AN INVESTMENT PROPERTY WITH NO DEPOSIT?

No-Deposit Investment Loans

Yes, but it isn’t as easy as it used to be. A family pledge loan is usually the best way.
• You don’t need a deposit.
• You can borrow the full purchase price and costs.
• You don’t need to pay an LMI premium.
• You can qualify for exceptional interest rate discounts.
• You can buy property on your schedule, to capitalize on market conditions
With a family pledge loan, the bank accepts a limited guarantee from your parents or relatives, which is secured by a property they own. Given this additional security, most banks are usually happy to lend the full amount.
Download our free document (included in the email to you)

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FREE PROPERTY VALUATIONS

Upfront Property Valuation Report

A valuation report is an assessment of the property to determine its value. The report helps you negotiate the right price and helps the bank decide how much to lend.

All lenders need an assessment before they can approve a home loan. With most of our lenders, we’re able to order this valuation before you apply for the loan, and with some it is provided free of charge.

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5 BASIC TIPS FOR FIRST HOME BUYERS

Buying your first home can be exciting, but it can also be stressful and overwhelming. These five tips will help build your knowledge and confidence.

1. Do The Groundwork

Before you start looking at houses, make sure you cover a few basics.

  • Take a hard look at your finances and determine what you can afford. Set a budget that you can manage without overextending yourself and stick to it. You might have to pass on a wonderful house, but you’ll lead a better life.
  • Learn about the government grants and incentives that can help with your first home purchase.
  • Get pre-approved for a home loan.

2. Develop a Routine

Buying a house is work. It takes time and persistence. Establish a routine that enables you to get it done. You might want to set aside time in the evenings after work for your online research online and save the weekends for looking at houses. The schedule is up to you. Just make sure you have one.

3. Get Savvy

Learn as much as you can about the buying process, and make sure you understand the terminology. If you’re unclear on a term or a practice, search online until you understand it completely. This small investment of time will help you avoid big mistakes.

4. Hire an Inspector

When you find a home you like, don’t let your heart overwhelm your head. Hire a qualified inspector and have the home inspected, inside and out. You’ll spot any potential problems (e.g. pest infestations, structural problems, electrical issues) that could impact the price of the house.

5. Work with a Mortgage Consultant

When buying your first home, it’s easy to make mistakes. Consider working with a qualified mortgage consultant to help with the process and the paperwork. A good consultant will save you time, money and—quite possibly—a great deal of heartache.

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BUYING A PROPERTY? 4 QUESTIONS YOU MUST ANSWER

Are you dreaming of buying your first property or looking to upgrade/downgrade into a new one? Here are 5 questions that can help you plan out how to buy a property in Australia.

1) What type of property do you need and where will you live?

Choosing a property to live in isn’t a choice you should make hastily and it’s all about “location, location, location” as the media would like to have us believe. Before you make your choice, consider the following:

Are there any infrastructure projects going on around where you want to buy?

Have a good look in and around where you want to buy your residential property. Infrastructure projects such as transport (extension of rails, bus transit roads, etc.) or job creation projects (mining, airports, etc.) in the area can lead to higher property prices.

Do you want to value the property yourself or get an upfront property valuation report?

A valuation report is an assessment of the property you want to buy to determine its value. Generally, your mortgage consultant can get you an upfront property valuation report within 3 to 4 working days. You can also value the property yourself but note that many banks and lenders won’t use the valuation.

Have you considered the type of the residential property you’re buying?

A lender’s decision is affected by whether or not a property can be readily sold. For example, many lenders are conservative when it comes to flood-zoned or bushfire affected properties.

Is the postcode of the location of the property on the bank’s restricted list?

Almost all major Australian banks and lenders have their own location guide or a postcode list they use to determine the maximum loan amount and lending policy for each area. The ‘restricted list’ includes high risk locations, e.g. high density areas or inner city suburbs. However, this may vary from lender to lender.

Has the residential property been inspected?

Ask your solicitor regarding this. You can negotiate a better price for the property if any significant problems like plumbing or floorboard issues pop up. Once you’ve got an idea of where you’d like to live and what type of property best suits your needs and lifestyle, what next? Well, no matter whether you’re buying directly from a vendor or you’re attending an auction, you shouldn’t put a deposit down until you’ve secured a reliable pre-approval on your home loan. For auctions specifically, you’ll have more confidence as a bidder and you’ll also have set a bidding limit depending on how much you’re approved to borrow.

2) Have you contacted a mortgage consultant?

Although not entirely necessary, this is one option without which you could have a tougher time in buying a home. Unless you’re buying the property with cash, there are many reasons why  organising a mortgage consultant is helpful in long-run.  Not only do consultants teach you how to buy, they also have a number of lenders to choose from and tend to have strong lender relationships to get you a great home loan deal. You can take advantage of their wealth of knowledge and experience and the best part is that their services are completely free in most cases!

In addition to a good consultant, Tom Uhlich recommends that first home buyers look for a qualified conveyancer.  A conveyancer or solicitor is a licensed professional who looks into the legal side of things when it comes to buying a home, including the contract of sale and ensuring that there’s good title on the property.

If you don’t know any good conveyancers, we have a list of recommended conveyancers that can help you buy the residential property you have your eyes on.

Do you want help planning to buy a property?

Not only can we help you plan to buy a residential property, we can also guide you through the entire home loan process up to settlement and even support you beyond this with regular mortgage check ups.

 

3) Have you worked out your expenses for purchasing a property?

Just in case you didn’t know, there are a few expenses other than the interest on your home loan when it comes to purchasing real estate.\

These ‘extra costs’ will usually need to be paid upfront:

Lender’s fees: Be sure to find out the costs involved with your mortgage before you sign up with a lender because they won’t be the same for all lenders.
Property valuation fees: Property valuation fees will vary from lender to lender. Generally, they won’t exceed $300 and in some cases, you may get the valuation done free of cost. You can also get an independent valuation done for a more detailed report but it will cost you anywhere from $50 to $300 in most cases.
Stamp duty: This is a tax charged by state governments on the purchase price of a property. It will vary from state to state but on average it costs about 3% to 5% of the property value.
Registration of transfer fees: These fees cover the registration of your property ownership with the relevant state office and will vary from state to state.
Inspection costs: Depending on whether you have building and pest inspections undertaken and the extent to which they’re required, these costs will vary.
Legal fees / conveyancing fees: You can ask your solicitor or conveyancer about the fees they’ll charge you to manage the conveyancing costs required for your new property.
Lenders Mortgage Insurance (LMI): When borrowing over 80% of the property value, most lenders will charge you what is known as LMI to ensure that they’re covered if you default on your mortgage repayments. The cost of LMI will vary depending on your lender and their requirements. There are even ways to avoid this cost completely.
Council rates: You’ll need to pay rates to your local council. These vary from council to council and state to state.

4) Have you prepared yourself to apply for a home loan?

Apply for a home loan, get approved, get the money and buy your home. Now if it were only that simple! Australian banks and lenders reject hundreds of applications all the time because the applicants either weren’t actually ready to take out a mortgage or they didn’t seem ready to the credit department.

Before you apply for a home loan, make sure you’ve got the following sorted out:

Home loan documents: When assessing a home loan application, banks tend to be very particular about the documents provided. You’ll need to provide income evidence like payslips, tax returns or a letter from your employer.
In some cases, you may also need an accountant’s letter, gift letter or any other documents depending on your situation and your deposit.
Good credit history: Most banks hesitate to finance bad credit applicants. Have you been paying your bills and debts on time for at least 6 months and do you have any black marks on your credit file due to defaults? Just one missed payment on an electricity or water bill can see your application declined.
Tom said that around 15-20% of the first home buyers that he’s assisted had a bad credit history.
If you’re in a similar situation or if you can’t provide all of the traditional documents for a home loan application, then a specialist lender may be able to help you.
Genuine savings: In most cases, you’ll need at least 5% in so-called genuine savings when borrowing more than 80% of the property value. Most banks typically consider genuine savings as money that you’ve saved over a period of time, usually at least three months. In addition, you’ll need to have a good income.
If you don’t have a deposit at all then you can borrow the full costs of buying a home without a deposit by taking out a guarantor home loan.

Ready to buy your dream home?

Call us on 07 3303 0111 or 0476 111 000 0r tom@bossmoney.com.au or complete our free assessment form and one of our specialist mortgage consultants can help you qualify for the right home loan for your needs as well as provide resources and guidance on the entire home buying process.


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WHY DO BANKS GIVE LAWYERS, ENGINEERS & ACCOUNTANTS SPECIAL TREATMENT?

Not many lawyers, engineers or accountants know this but Australian lenders have a bit of a love affair with you guys.
That make you feel strange, what we’re saying is that banks are willing to offer massive discounts on your home loan because they consider these professionals to be low risk borrowers with good incomes.

As former graduates, you know that getting a full-time job in your industry is pretty tough so if you’re working in your dream job right now, don’t you feel like you should be rewarded for your many years of study?

What home loan discounts can you get?

Well, for one, lenders are willing to lend you more than 80% of the property value without charging Lenders Mortgage Insurance (LMI), a one off free usually charged when borrowing more than 80%.
If you have a good asset position and are able to borrow less than 80%, then banks can actually offer you discounted interest rates that are way below the bank standard variable rate instead.
These offers aren’t generally advertised by banks so it’s best to speak to a mortgage consultant about these discounts.

How much can you save

LMI can amount to more than $20,000 for a million dollar property, so you could actually save thousands of dollars that you could use to go on a holiday, buy a new suit or, I don’t know, buy shares if you’re really boring.

What do you need to do?

As long as you’re a qualified, and you’re a member of an approved associations, you should be in with a good chance to qualify for reduced interest rates and waived LMI.
Some lenders don’t require evidence of your membership however they will require a copy of your degree or evidence that you’re currently practicing.

Not sure if you qualify?

Get in touch with one of our mortgage consultants and we can tell if you do!
Call 07 3303 0111, 0476 111 000 or complete our free assessment form today!

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