Useful Tips

Eleven + Home Loan Questions answered

Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.

I’ve just started a new job. Can I apply for a loan?
Generally you need to not be in a probationary period of employment.

If you have enough deposit, are in the same industry, doing the same job, then there are lenders who will consider your income while on probation.

If you have less than 20% plus stamp duties to contribute to a property purchase, you will most likely have to have been in your current role for more than 6 months.

Email or call us if you would like to make a time to discuss how your current employment situation will impact the lenders assessment of your borrowing Character.

Why would I use a Mortgage Broker?
As a professional mortgage broker, we will assess your needs taking into account both your personal and financial goals, and will provide professional written advice on loan structure, lenders and products.

We manage the overall home loan process from your initial goal setting through to the settlement of the property, and ensure that all parties to the loan are on track. We provide you with updates along the way to remove the stress for you.

After your loan is in place, we contact you at least annually for a loan review, and on ad hoc occasions when something that would benefit you becomes available in the loan market.

We can email you with How Can we help You, which defines all of the steps and documents that we provide once we become your mortgage broker.

What do I need to know before bidding at an Auction?
An auction is conducted in public on a date set by the vendor. If you intend to make a bid, you or your representative will have to attend the auction to make an offer. You will win the auction if you’ve offered the highest bid above the vendor’s reserve price.

How can you maximise your chances of bidding and winning at an auction?

Request my Hints & Tips on bidding at Auction.

How do I negotiate a Private Sale?
Private sale is where have to negotiate with the vendor’s agent (the Real Estate Agent) and arrive at an acceptable price to both parties, resulting in a contract of sale being signed.

How can you maximise your changes of buying your property by Private Sale.

Request our Hints & Tips on buying by Private Sale.

What is Lenders Mortgage Insurance?
LMI is a one-off, upfront insurance premium that is generally payable when you borrow more than 80% of the property value. It does not protect you as a borrower. It protects the lender in the event that you default on the loan, and they have a shortfall in funds after selling the property.

Request oue Hints & Tips on Lenders Mortgage Insurance.

What is an offset account?
An offset account is simply a savings account that’s attached to your home or investment loan. It operates like a regular transaction account but any money that goes into it is deducted from your loan balance before the interest is calculated. Your savings remain in the offset account and can be easily accessed when needed.

Request our Hints & Tips on Offset loans

Can my parents help me buy my home?
There are several ways that parents or close family can help you to buy a property – whether it is your first, or subsequent property.
Some of these ways include:
Family Equity Pledge – they can utilise the Capital in their own property, by a limited guarantee
Gift from family– they can gift you funds to increase your cash contribution to a property.
Loan from family – term loan– they can lend you the money to increase your cash contribution to a property.
Loan from family – repayable on sale – they lend you money to increase your cash contribution to a property, that won’t be repayable until you sell the property, or other trigger events.
Family as co-borrowers – they can co-own the property and co-borrow on the loan.

Email us to discuss how your family can help you to buy your home

How can I buy a house with a friend or family member, and do we need to put in the same amount of money?
Two incomes are better than one when entering the home loan market, and joint purchasing is all very well if you are married or de-facto, but much more cares needs to be taken when buying with friends, business colleagues or other family members.

Rather than purchasing as Joint Tenants it might be more suitable to purchase as Tenants in Common to delineate and clearly define ownership. (ask to see Michele’s Tips on Property titles – co-ownership and Sharing a Property – tenants in common). Tenants in Common may also be held in unequal shares, which may be important if each party contributes a different amount of cash to the original purchase of the property.

You should always obtain professional legal advice on how to structure the ownership.

Tenants in Common are able to sell their share independently to other parties without the approval of the other owners. So it’s vital that you plan how any or all of the co-owners can exit from the property if they want, and if the whole property is sold, pre-plan how you will split any costs and capital gains when the time comes to sell.

Co-purchasers will also have to be co-borrowers on any home loan. It isn’t possible for each of you to take out separate loans. This is because the lender can’t sell part of a house in order to recoup their money should one of the borrowers default on their loan repayments. Each borrower is legally held jointly and severally liable for the loan – so even though each partner may own a different share of the property, each is held responsible for the whole of the mortgage repayments. You can set up “split” loans to easily define who pays for which, but this is a convenience rather than a legal division of responsibility for the loan.

I’m going on maternity leave, what options do I have with my loan repayments while I’m not earning an income?

Where do I start looking for a property to buy?

How many lenders do you look at when advising on my loan options?

Why should I consider changing my Home loan?

If I change my home loan, will I have to change my savings account and credit cards too?

What are the pros and cons of buying Off the Plan?
Pros
tate government stamp duty savings. These savings vary depending on the progress of the development when you sign the purchase contract.
You have more time to save up a larger deposit, so you have a smaller loan.
In a rising property market, you will secure a property at today’s prices.

Cons
You can’t touch, see or feel what the property will look like on completion.
There is no guarantee what the property will be worth at the time of completion, or if you are buying an investment, what the rental return will be.
If the property market falls, you have signed a purchase contract at today’s prices. Lenders will often calculate how much they will lend on the lower of purchase price or valuation at completion date.
You can’t obtain loan pre-approval earlier than 6-8 weeks prior to completion, and there is no guarantee what lender policies will be in future.
Your own financial or employment position may be different in future.
You will need to try and understand how issues within the development will be addressed – including the style, appearance and finish of common areas, likely noise, proposed security system, visitor parking, access to garages, ventilation, garbage disposal and landscaping.
Will you get your deposit back if the developer goes bust?

What you will not hear from developers or real estate agents or at most, if not all, of these seminars is the four keys risk that I have outlined below. This article is not meant to scare you into buying established property; it’s meant to make you aware of some very real risks that could eventuate.
Developer Risk – This risk involves the developer going bust, producing a substandard product, or taking far longer to complete the project than originally advised. A developer going bust or producing a substandard product can drag on for years through the courts and, while the law is there to protect you, it’s costly and it will be at your own expense to fight initially – this is a sad, but very true, fact about our legal system.
Real Value Risk – What you may or may not realise is most off-plan purchases are not open market transaction. The developer simply sets a price and you either pay it or you don’t. The real question is, is this property worth this much in today’s market? In my experience, developers price their property at the upper end of the marketplace and, in some cases, above market levels.
Market Risk – Let’s assume you paid the right amount to begin with and, when the property is complete, the market has dropped 15 per cent. The bank will only lend on the property’s value upon completion, not the sale or contract amount and you, the purchaser, are obligated to pay the difference. Let’s assume you sign a contract to purchase a property at $1 million and, upon completion, the bank valued it at $850,000 because of the decline in the market. You would have to cover the difference.
Finance Risk – The first questions you need to ask yourself are if I was to purchase this property today do I have capacity to repay the loan, and will the bank lend me the money? If the answer is no, I strongly suggest that you stop right now. If the answer is yes, I would still proceed with caution, as what guarantees do you have that you will be in a position to get finance in the future? Have you considered things such as what would happen if you could not work because of injury or illness, what if you or your partner had a baby and you went down to one income, what would happen if you lost your job or got demoted, and are you protecting your credit file. Will the banks’ lending criteria change between now and when you settle on this property? Banks have recently tightened up their loan to value ratios and some economists are forecasting this to contract further as the debt crisis unfolds in Europe.
The above four risks are not simply not relevant when buying established property so the question begs whether buying off the plan is really worth it. My opinion is that off-plan property is a great investment strategy for seasoned investors, as there is a huge upside if you choose the right market conditions, right developer, right property and buy at the right price. But off-plan property is definitely not for everyone. It’s not for those who are just starting out, it’s not for those that are still financially fragile and it’s certainly not suitable for those who have not done their homework and don’t understand the risks.