Wednesday, May 22, 2024

Random Notes: Home Loans & Mortgages

home loan

Buying their first home is the usual dream of many Australians, and perhaps by most other couples all over the world. It has always been a significant part of a family commitment (especially to newlyweds) to have a solid basis fortheir future family.

The following is a quick run-through into the near-impossible task of preparing the many things to get that needed loan to help start the beginning of a personal dream.

Mortgage brokers

According to financial experts, finding the right home loan Brisbane for anyone need not be that overwhelming or scary. (It can be tricky for some, though.)

Mortgage brokers are now available to help provide enough clarity on everything when to buy and what you can afford, plus some other advice on where to look for the right investment.

Mortgage brokers can help with regards to such items as your first homeowner’s grant, lender’s mortgage insurance and stamp duty, among other needed things.

Deposit

Do you have enough for your deposit? If you don’t have enough deposit, looking at home loan options is not very helpful. Without a deposit, or the help of a guarantor you won’t be in any position to get a home loan.

Most banks need 8-10% deposit these days and some can get greedy and ask for more with all sort of reasons. Get to know the prevalent rates, and stay away from these banks.

If you think you can make extra repayments, and pay down the loan faster than that of a variable rate, do the math first and look for other alternatives till you find the most comfortable to your pocket.

However, if you are looking for stability, or are concerned about interest rates, going up for a fixed interest rate might work. Your mortgage broker can help you choose the best alternative in relation to your financial capacity.

Home loan

In all instances, the type of home loan is very important.At present, some banks charge higher rates for investment loans, compared to home loans which you will use to buy a house to live in.

Getting the best home loan comes down to one thing: repayment type. In 2023, buying a home to live in, almost every bank will need you to take Principal and Interest repayments.

(This actually means you are paying back the loan you borrowed from the bank as well addition to the interest.)

Investment property

So, if you are buying an investment property then its fine to look at interest only repayment, but these do often have a higher interest rate.

As a personal goal, your first steps are to set up goals for yourself and what you want to achieve with your home loan. It may be that you might want to buy your first home in the next 3 months.

Maybe save up a little more deposit to save on the lenders mortgage insurance. In any case, it is important to set those high-level goals before you get into the weeds of home loan products, features and policies.

Either way, it’s important to set those high-level goals BEFORE you get into the weeds of home loan products, features and policies.

Approval rates

In home loans, not all banks are the same when it comes to assessing a pre-approval home loan. This loan is also known by several names: conditional approval, indicative approval, approval in principle or home seeker depending on the bank you use.

Typically, a pre-approval is just an indication that the bank is ok to consider approving your loan. Their work is just to complete a credit check and not check any of or your documents.

Mortgage application

They don’t wait until you lodge a full mortgage application. The full mortgage application is done when you find a property and means the lenders will complete the entire assessment of your loan.

Also, they will verify such things as your payslips, bank statements, your income information, savings information and any liabilities. The aim is to be 00% sure they can lend you the money.

Unfortunately, if you have gone out and got a pre-approval from a bank the lender is under no obligation to then fully approve your loan once you have found a property. They can say your situation has changed.

Documents

Like all types of loans or any other transaction that involves money, it is most likely that the banks are going to ask for documents to verify items on you application.

You need to find out what documents they need. Some banks need a few documents; other banks however will want a lot of documents. The question is, do you have all the information the banks are asking?

The most common documents they usually ask for are 1) Your 2 most recent pay slips, 2) the most recent years PAYG payment summary (group certificate), and, 3) the most recent month’s statements for any open credit card, personal loans, or after- pay accounts.

Get these documents ready with youbefore you start talking to your mortgage broker.

Cutting years from your loan

Anything extra you pay in the first 5 to 8 years (when most of your payments) go towards paying off the loan’s interest. This will effectively cut your interest bill and shorten the life of your loan.

Don’t delay paying off your home loan if you can avoid it. Instead, try to make small regular extra repayments.

Here’s an example: most banks, by default, give you monthly repayments. In a year, they will assume you make 12 repayments.

As an example, you might choose your monthly repayment at $2,000. In 2 months, it is assumed you have paid $24,000 in repayments.

If you switch to a fortnightly (every two weeks) repayments, you will make an extra 2 repayments without even realizing and trim off 4 years and 4 months from your loan.

Cutting the fat off

With your broker, here’s the not-too-subtle technique specifically designed to help you uncover every hidden fee and sneaky charges the banks will try to hit you.

One, find out the LMI providers, lenders and discount you qualify for.

Second, specify what you need, why you applied for a loan, and what particular features you want in your loan.

Following this three-step approach will definitely help you secure a good deal and get all the details of Exit Fees, Settlement Fees, Discharge Fees, Ongoing Fees and Application Fees.

According to the RBA, the bank makes over $4.04 BILLION in fees every year.

Some banks won’t lend in particular post costs like Brisbane’s CBD because it is high density.

The best mortgage broker

Just like any other profession, the quality of service you get from mortgage brokers are not the same.

While many mortgage brokers bring in their best and exceptional service to their clients, there are also some, inexperienced, indifferent or bad brokers out there.

Here are some tips for discovering the best of them.

Credentials

It is okay if you do check their credentials. In Brisbane, mortgage brokers should have a Credit License (or being Credit Representatives to operate.) Check if he is

registered at ASICS.

Check their ownership structure. Are they independently-owned or partly-owned by the big banks? Those who are not independent might have a conflict of interest.

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