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Mortgage Tips

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What you can borrow or what you should borrow?

Posted on 9 August, 2017 at 2:25

The amount you can borrow and the amount you should borrow are sometimes two very different things. Before you apply for a home loan, it makes sense to realistically assess your financial situation. Here’s how to do it.


Understand your borrowing capacity


Generally speaking, your borrowing capacity – what you can borrow – depends on a number of factors, including:


• your income

• your monthly expenses

• your existing debts

• how much deposit you have saved

• current interest rate

• type of loan

• whether it’s a principal, or principal and interest loan

• the term of the loan

• estimated repayments.


However, knowing the difference between what you can borrow and what you should borrow is very important. As a general rule, it’s not a good idea to allocate more than 30% of your monthly household income to repaying your home loan.


Build a budget


To fully understand what your realistic borrowing limit might be, first of all create a budget – and stick to it. Once you understand exactly what’s coming in and going out you can properly assess how much you can afford to repay – and therefore what you should borrow.


If you don’t feel comfortable drawing up the budget yourself, it’s wise to seek help. A financial planner can assist you in preparing a budget.

Expenses to include in your budget include, but are not limited to:


• council rates

• body corporate fees (if applicable)

• insurance costs

• maintenance costs

• utility bills

• estimated groceries

• medical bills and health fund payments

• school fees

• phone and internet costs

• petrol and transport payments

• entertainment, travel and clothing

• other loans or credit card debts.


Future proof your figures


Remember to leave a bit of wiggle room in your budget in case circumstances change. People can lose their jobs or get sick, or interest rates can rise, which could impact your ability to honour your repayments.


It’s also important to think about some other things that may happen: Is your income likely to increase within the next few years? Are you likely to have children and lose an income? Do you plan to retire shortly? These are all questions that only you can answer, and they will all have an impact on how much you should borrow.


Remember, lenders tell you how much you can borrow, but you know your personal circumstances better than anyone else – it’s up to you to decide how much you should borrow. If you need support and advice, contacting Brad at Finance Street may be helpful during the decision-making process.

Why you need to know your interest rate

Posted on 9 August, 2017 at 2:05

Interest rates are a big factor in each repayment and the total cost over the life of a loan, so staying on top of your current rate as well as the interest trends across the market is essential.


By staying on top of interest rates, borrowers can make informed decisions about choosing a first-time home loan or getting a better rate by refinancing.


Interest rate percentages are based on a number of factors: the Reserve Bank, the cost of money on overseas markets and the general state of the economy. Interest rates don’t appear to move by much when looked at as a simple number, sometimes only a fraction of a per cent (referred to as a basis point, which is equal to 0.01%), but each basis point makes a significant difference to the total cost of a loan and makes a big difference when you’re working to pay down your mortgage.


When you first lock in a home loan, you will choose a fixed or variable interest rate. A fixed rate does not change over a set period of time, and your payments will be predictable each pay cycle. On the other hand, a variable rate is attached to the market interest rate and will move up and down with the market.


Interest rate calculators are very useful to help you compare rates across fixed and variable loans, and translate the rates into an impact on monthly repayments, loan length and the total cost of a loan.


The best way to keep on top of those movements is to stay in contact with your finance broker. Brad at Finance Street will be able to help you shop around to find the best deal for refinancing when the time is right for you.

How much can you afford to borrow with your first home loan?

Posted on 9 August, 2017 at 1:50

Understanding how much borrowing capacity you have when buying your first home is an essential step for all newcomers to home ownership.


The question of “How much can I borrow?” rears its ugly head for all new home buyers. As daunting as it can be, understanding your borrowing power is important – and essential – for those ready to get their foot in the door with their first home purchase.


Owning property in Australia is a dream for many young professionals and families. Aside from the financial benefits of owning a home, being able to call a slice of land your own is one of life’s most coveted accomplishments.


Financial Factors


Before you start looking for a property – either to live in or as an investment – take a look at your finances from all angles and ask yourself a few important questions:


Do I have enough money to pay for a deposit?

Can I afford to make monthly repayments?

Is my repayment/credit history positive?

Have I assessed my household budget?

Am I planning to start a family soon?


Understanding where you stand financially and what financial loads may be coming your way in the near future can give you a clearer picture of how large or small your borrowing capacity should realistically be.


Figures that figure


How much you can comfortably afford to borrow comes down to two factors:


The size of your deposit


Most lenders require a minimum of 10 per cent of the total property cost.


How much you can afford in mortgage repayments


If you’re currently renting a property, your weekly or monthly rental amount is a good indication of the starting figure for your mortgage repayments. This is the bare minimum, however. You will need to add other expenditures to this figure, such as rates, taxes, lenders mortgage insurance (if applicable), among others.


New buyers may also want to consider single or joint income amounts. As a general rule, your mortgage repayments (along with other short and long-term expenses) shouldn’t cost more than 35 per cent of your gross income.


Help wanted!


Many people choose the help of a mortgage broker when shopping around for their first home loan, and for good reason. Using a mortgage broker to seal the deal can give you greater choice, peace of mind and clarity, especially for those just starting out in the property market.


Mortgage brokers have a wealth of knowledge to steer you in the right direction in terms of what you can realistically afford versus what you think you can afford.


There are many home loan calculators that can also help buyers get a sense of their borrowing capacity. These online calculators factor in your loan type, loan length and interest rates to calculate a general repayment figure. Your broker will be able to walk you through these calculations to ensure you’re aiming for the right figures.


Doing your due diligence from the very start will pay big dividends when it comes to home ownership in Australia. Putting your expenses under the microscope may be intimidating at first, but it will ensure your home loan works as hard for you as you did for it.


Speak to Brad at Finance Street today to seek out more information on home loan borrowing.

How redraw works and why it's a handy loan feature

Posted on 9 August, 2017 at 1:25

It’s one of the less glamorous home loan features, but the redraw facility deserves a second look. Here’s why:


The redraw facility explained


A redraw facility lets you make additional repayments to reduce your variable rate home loan balance and save on interest. If you pay more than your minimum scheduled repayments, then you’ll have money available to redraw from your home loan.


The redraw facility is a common feature of many home loans. It’s not available, though, on construction loans and only some lenders allow it for fixed rate loans.


You can redraw funds if, and when, they are needed, or you can keep the funds in your home loan to pay off your principal faster. The amount available for redraw is the difference between what you have paid and how much you were required to pay, less one month’s scheduled repayment.


Accessing Redraw


You can check your loan account online to view your available redraw amount at any time. Alternatively, you can call your home loan customer care team and ask them to check for you.


You can withdraw your funds from certain ATMs depending on your lending provider, but this may attract certain fees and come with restrictions on minimum amounts.


What happens after using redraw?


After you redraw money from your home loan, you continue to make your regular repayments as normal. However, be aware the interest component of the repayments you make will increase since you’re now paying interest on a higher loan principal amount.


What are the benefits?


Like an offset account, a redraw facility can help reduce the total interest paid on your loan and shorten the life of the loan. And, of course, when you need some cash it’s easily accessible.


Depending on your lender, additional payments can be made at no extra cost and redraw funds can be accessed at any time.


When comparing loans and choosing the option that best suits your financial needs, remember to consider the redraw facility.

Finding a home loan when you're self-employed

Posted on 28 June, 2017 at 23:50

There are many perks to working for yourself, but when it comes to applying for a home loan, it seems being your own boss sends up a red flag to banks and other lenders. Why? A salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contractor, entrepreneur, tradesperson or freelancer.


Yet by being proactive and accessing specialist advice, self-employed applicants can also enjoy a successful and hassle-free road to securing a home loan. Try these top tips for starters.


1. Seek expert advice


Trying to navigate the home loan landscape solo may not produce the outcome you desire. There are many experts who can help self-employed people access a home loan, and a mortgage broker is a good first port of call. They will be able to provide you with an up-to-date overview of which lenders on their panel are most comfortable lending to the self-employed, and also explain what sorts of loan products are available. They can also provide valuable advice around the sort of documentation you will need to have ready before you submit your application.


2. Get your affairs in order


Many lenders will lend to self-employed borrowers who provide their full business financials. This generally includes your personal and business tax returns for the past two years. If you have these documents on hand – and they reveal a fairly consistent income – applying for a loan should be relatively straightforward.


However, the hectic schedule that comes with running your own business means many self-employed borrowers’ tax returns are not up to date. If you have time on your side, consider working with your accountant to lodge your outstanding returns. If you’re in a hurry, you may wish to explore the option of applying for a low doc loan.


3. Consider a low doc loan


Low doc loans are offered by a wide range of lenders and, as the name suggests, require less documentation than traditional loans. Many low doc loans only require 12 months of business activity statements instead of full financials, for example. A downside of some low doc loans is that they may only be available at a lower loan to property value ratio (LVR), which means you may need a larger deposit.


4. Do your homework


Checking your credit history is a good step for anyone applying for a home loan. If you’re self-employed, it’s definitely worth taking the time to make sure your credit history doesn’t include any defaults or errors – these can hold up your loan application if they are not rectified in advance.


Taking the time to work out exactly how much you’d like to borrow is also a good idea. That way, you can hit the ground running when you meet with lenders or your mortgage broker.


5. Think outside the square


It may be possible to apply for a home loan using a Certificate of Income Declaration – a document that verifies your income and is signed by your accountant. It’s wise to consult a mortgage broker before applying for a loan in this way, as he or she can advise which lenders will accept an income declaration. It should be noted, however, that applying for a loan using such a document may mean that the required LVR (the portion of the property value you can borrow) may be lower, so you may need a larger deposit.


While it’s a little more complicated for self-employed borrowers, getting a home loan can be easier than you’d imagined with a mortgage broker in your corner. Speak to Brad at Finance Street to find out how we could help you secure a home loan.

Your property inspection checklist

Posted on 28 June, 2017 at 21:00

When you’re house hunting, it’s easy to get distracted by aesthetics. This checklist will help you focus on what’s really important at a property inspection.


Is it right for you?

Is a spare bedroom, second bathroom or ensuite a must? Will everyone be safe or comfortable climbing stairs? Does your dog need space to roam? Be realistic about the features you can’t live without.


Floor plan and room sizes

Walk around the property to get a sense of how one room flows into the next. Check whether the rooms are the right size and shape for your existing furniture and appliances. If not, are you prepared to splash out on replacements? The rooms should also be practical. For example, does the kitchen layout suit your needs? Is there enough space for a dining table?


Orientation and natural light

Check where the property’s windows are, and whether trees or nearby buildings will block out sunlight. If the lights are on, switch them off to get a feel for the natural light. The inspection may have been timed to maximise natural light.


Neighbours

Consider whether neighbours can see directly into the property. It’s also worth checking whether they’ve lodged any development plans with the council. Walk around the block to see how well other properties in the area are maintained, and to listen for noisy pets.


Parking

If there’s off-street parking, are there enough spaces? Check local parking restrictions, and how much a resident’s or visitor’s parking permit costs. Consider how hard it would be to find on-street parking at peak times.


Heating, cooling and ventilation

If the property has heating or air conditioning systems, check that they work, how old they are and if they’ve been recently serviced. Keep in mind that high ceilings can make it difficult (and expensive) to heat a room. Ventilation is especially important in kitchens and bathrooms, so test the extractor fans.


Water

Check whether the water pressure’s up to scratch, especially in the shower. Can you get the right mix of warmth and pressure, or will it cost you to change this? Consider whether the hot water heater is big enough for your family’s needs. And don’t be afraid to flush the toilets.


Storage

Do the built-in wardrobes suit your needs? If there aren’t any, will the bedroom be large enough for a freestanding wardrobe? If there’s a garage, check that it’s big enough for your car and any other items you’d like to store.


Fixtures and fittings

Are there enough power points? Are they in convenient locations? Check behind the furniture, because they may be hidden. If the house has blinds, curtains, flyscreens, light fittings or other fixed features, they should ideally be clean and in good working order.


Noise

Common walls, floors and ceilings can be a real issue, as can communal areas such as stairwells. Consider how well-insulated the property is, how well-fitted the doors and windows are, and whether there’s carpet or double glazing. Traffic, shared courtyards and nearby schools and sporting grounds are all potential sources of noise.


Garden upkeep

Outdoor maintenance can be hard work. Do you have the time or money to mow the lawn, weed the flower beds or clean the pool?


Security

Will you need to install or repair security doors? If the property has a shared entrance, check whether the main door locks and if the other owners and tenants generally keep it closed.


A building inspection covers the property’s structure, but there many other things to consider. Check for what’s important to you, so you can make the best home-buying decision.

More than meets the eye: white-label loans are more than a good price

Posted on 28 June, 2017 at 20:55

For those unfamiliar, a white-label loan is essentially a home-branded loan. Just like your favourite home-branded products you see in supermarket aisles there is more than meets the eye – the white-label loan is more than its competitive price tag. White-label products are high quality and are developed by leading lenders – they are just packaged differently and therefore available at a sharper rate.


White-label loans are exclusively available through mortgage brokers and have rapidly grown in popularity over the past few years. So much so that over 85% of brokers now have a white-label offering for their clients. And, as brokers and customers both demand more from white-label, the products have evolved to be about much more than price, to also focus on flexibility, service and quality.


Flexibility

There is a range of choice in white-label – you can get variable, fixed or combo rate loans. They are particularly suitable for home-buyers looking for a simple, straightforward product as through white-label you can have access to the loan features you need (like redraw, debit card access and a customer care facility) and you don’t have to pay for bells and whistles you won’t use.


Service

In addition, service is increasingly becoming a differentiator for white-label. Sourcing a home-loan can be the biggest financial decision a person ever makes and understandably then, customers demand support from their brokers and rely on them as trusted advisers to guide them through the process.


A common misconception is that because the loan’s rate is more competitive, it does not come with the same level of support. Through a white-label loan, brokers can still access dedicated support teams – and ultimately give their customers quick responses to their queries and every chance of first touch unconditional approval.


Quality

Essentially, white-label delivers many of the same great features as bank-branded home loans, but for a lower cost to the customer. The quality remains the same, and the growing popularity of white-label is evidence that consumers are tapping into the opportunity and high-value of this product.


If you’re not sure if white-label is right for you, your mortgage broker can help you with this important decision. Because brokers have access to a myriad of loans from a range of different lenders – you can receive independent, unbiased advice based on their expertise and experience in the industry.


Please contact Brad at Finance Street to discuss whether a white-label product is suitable for your needs.

Understanding which home loan features are right for you

Posted on 28 June, 2017 at 20:55

Loans are by no means ‘one size fits all.’ Different loan types suit different age groups, different living situations and even different attitudes to money.


A common trap some home-owners fall into is to consider a mortgage ‘set and forget’. You did your research, shopped around, found the right option and now you’re reluctant to revisit the process – even if your personal circumstances have dramatically changed.


Before you start shopping around for a new loan, or an upgrade to your old loan, it’s worth knowing a little bit about the options available. The three most common differentiators are variable rates, fixed rates and combo rate loans:


A variable rate loan offers greater flexibility than a fixed rate loan and will appeal to you if you don’t want an interest rate to be locked in for a set term. Often with variable rate loans, you can also redraw or make additional payments electronically at no cost, so you can pay off your home loan sooner and get ahead.


A fixed rate loan is right for you if you need greater peace of mind, as you will have the certainty of knowing what your repayments will be during the fixed rate term. You can choose different terms on a fixed rate loan – often between 1 to 5 years, depending on what suits you.


Combo rate loans offer both the flexibility of a variable rate and the certainty of repayments offered by a fixed rate. Like with a variable rate loan, you will have the flexibility to make additional repayments electronically at no cost to the variable rate portion.


You could also consider purchasing a white-label loan. White-label loans are increasingly popular – but for those unfamiliar with the term it can be confusing. A white-label loan is essentially a home-branded loan, much like the home-branded products you see in the supermarket aisles. Like these products, white-label loans aim to deliver many of the same great features as bank-branded home loans, but for a lower cost to the customer.


You can access different types of white-label loans – whether variable, fixed or combo. White-label products are known for being high quality, low-cost and flexible. They are particularly suitable for home-buyers looking for a simple, straightforward product as through white-label you can have access to the loan-features you need, (like redraw, debit card access and a customer care facility), and you don’t have to pay for bells and whistles you won’t use.


If you’re not sure which of these options sounds right for you, Brad at Finance Street can provide real value to customers who need a helping hand to make this important decision. Because brokers have access to a myriad of loans from a range of different lenders – you can receive independent, unbiased advice based on our expertise and experience in the industry.

Selling your home? Here are the first steps to take

Posted on 10 April, 2017 at 3:05

There is more to selling your home than putting up a ‘For Sale’ sign on your front lawn. Here are the first things you should check off your list to help you get the largest return from your investment and to ensure the process runs as smoothly as possible.

Choose a quality agent


Asking family and friends who have purchased or sold a property about their experience is a great way to ensure the agent you’ve enlisted will provide quality service. A website and promotional material will always highlight the agent in the best possible way, but word of mouth and past client reviews will show their true colours.


Make sure the agent specialises in your area and is someone you feel comfortable around as they don’t just negotiate prices on your behalf, they also act as a mediator and represent you as a vendor.


Prepare the paperwork


Getting together all the documents required is a tedious yet necessary part of the process. Before a property can be marketed for sale, your agent may require a copy of the Contract from your legal representative (depending on which state you are selling in). From a disclosure document to a home loan pre-approval, ensure all the paperwork is prepared in time to ensure it all runs smoothly.


Don't take things personally


Remember this is a business transaction; don’t feel insulted if you receive feedback on the property that doesn’t match how you feel about your home. To ensure you come out with the best deal, remove all emotion and think of your house as a commodity.


Your property won't sell itself


Thinking that your home will sell itself can be a costly mistake. Despite how much you like the way you have it set up, furniture, flooring and painting changes can make a big difference to the property’s wider appeal, and marketing it widely can increase the competition and, therefore, the price.


Engage in a thorough marketing campaign and invest in presenting your property in its best light. Trusting your agent’s strategy can help secure the best financial result.


Speak with your broker


If you are making a decision to sell, speak to your finance broker to ensure that your plans after selling – whether they are buying a similar property, upgrading or building – are actually feasible.


I always advise clients to speak to their broker first to make sure their plans for post-settlement are realistic. There is nothing worse than selling your home and then not being able to achieve what you had set out to do.


Surround yourself with a good team


When all of the people in your network, including your broker, conveyancer and agent, communicate effectively, you should be blissfully unaware of any minor issues that pop up during the course of the sale.


As an MFAA accredited finance broker we must meet the highest industry standards, so we will be able to refer you to a great agent and other professionals that will help make the home selling process flow with minimal stress. Please contact Brad at Finance Street now to discuss.

Solicitors versus Conveyancers

Posted on 9 April, 2017 at 23:35

A conveyancer is a solicitor, but just deals with property, right? Wrong. The two are different, and it is important to have the right one on your team, in order to avoid paying too much while still getting the advice you need.


Buying property is one of the biggest decisions most of us will make in our lifetime – it’s something you want to get right.


Every Australian state and territory has different laws, forms, regulations and taxes associated with purchasing property, so having either a solicitor or a conveyancer will help the whole process run smoothly.


“A property purchase is one of the biggest financial commitments a person can make. It is therefore important to have professional advice about what you are buying,” says O’Connor Harris & Company Partner Ruth Harris.


“Solicitors and conveyancers are familiar with all the procedures and, while it may seem to be just paperwork, when you are not familiar with all the procedures it can be very time consuming.”


For a straightforward property purchase, a conveyancer can do the job. Their main responsibilities include giving advice and information about the sale of property, preparing documentation and conducting any settlement processes.


Although there is a licensing process for conveyancers, they do not have to be legal professionals. As a result, they are cheaper to hire. However, they can only provide information relating to property, so if you have additional legal questions, you might have to search elsewhere.


“Conveyancers must cease to act for a person as soon as the matter moves beyond conveyancing,” Harris explains. “When this happens, the conveyancer must refer you to a solicitor for advice.”


While conveyancers are limited to advising on your property purchase, solicitors can provide you with a wide range of legal advice in addition to your conveyancing needs, and may be necessary if your property transaction isn’t straightforward.


“If there are other matters that affect the transaction like family law, asset protection, asset structuring, tax law or estate planning, you will not be able to receive advice from a conveyancer,” Harris says. “If things get complicated with a conveyance you will need to get a solicitor’s advice.”


Solicitors are more expensive, but the investment may be worthwhile if you anticipate any legal issues – having this established relationship with a solicitor means you won’t have to scramble for one later.


Please feel free to call Brad Grant at Finance Street to discuss on 0477611232 or email brad@financestreet.com.au.




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