What are the most frequently asked questions about / to mortgage brokers?

How do I buy a house?

When you decide you’re ready to buy a house, there are a few steps you’ll need to take to work out what your purchase parameters are:

  • Work out what your living expenses are
  • Set a budget
  • Find out what your borrowing capacity is
  • Figure out how much deposit is required
  • Start saving, and/or ask your folks to go guarantor
  • Get pre-approved for your loan
  • Find a great Conveyancer to check your contracts and assist with the process
  • Keep saving – every little bit helps
  • Do you research – find out what is in your price range
  • Start making offers!

Can I include my car loan and credit card into my new purchase home loan?

The short answer is no. You cannot consolidate other debts into your new home loan. You either need to have the cash to pay out those debts or buy a property that will build equity very quickly, enabling you to refinance. Every circumstance is different and there are some exceptions to this explanation, but they’re rare.

Should I fix my loan or leave it variable?

Should you bet on red or black when you play Roulette?

Effectively, fixing your rate exactly this- a bet! However, if the rate is low, and you want the security of having the same repayment amount over the term of the loan, then fixing your loan may be just right for you. You don’t have to fix the entire loan, either. A combination of fixed and variable may be the best option.

If my parents go guarantor, will it help me borrow more money?

This depends on your personal circumstances. A guarantor allows you to utilise their security to lower your purchase to an 80% lend ratio. You’ll still need to be able to service the total loan, but you won’t incur the Mortgage Insurance cost. So, it’s more likely that they’ll be able to help you secure a higher purchase price. There is such a thing as a ‘Servicing Guarantor’ who can help increase your borrowing capacity, however this person needs to be what’s known as ‘Wealthy and Sophisticated’ and most people do not fall within those requirements!

I have multiple loans that I'm repaying, can I refinance them into one loan?

If you have enough equity within your property, and do not extend your loan above the Lender’s maximum LVR, and you can afford the loan based on the Lender’s calculations, then yes. You can refinance/debt consolidate your multiples loans/repayments into one loan.

Should I make repayments weekly, fortnightly or monthly?

Well, it depends on your cash flow (when and how you get paid) and budgeting. Just a tip, though – loans should be paid weekly or fortnightly to take advantage of the calendar. By paying your monthly repayment weekly or fortnightly, you’re actually making more repayments per year, based on mindset and the extra days gained.

If you pay weekly, you’ll make 52 repayments per year. Your monthly repayment divided by 4 is only 48, so you’ll make an extra 4 repayments per year.

If you pay fortnightly, you’ll make 26 repayments per year. Your monthly repayment divided by 2 is 24, so you’ll make an extra 2 repayments per year.

On a 30 year loan term, fortnightly repayments can save you six years off your mortgage! Meaning that it will be paid out in full at 24 years instead.

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance or LMI is a risk insurance fee charged by the lender to you. It’s a one-off flat fee that you must pay if you don’t have a full 20% deposit.

In other words, if you borrow above 80% LVR (Loan to Value), you will pay LMI.

The amount you pay in LMI is calculated on a sliding scale from 80%- 95%, and it can be put on top of your loan. If you get over 90%LVR, it’s very expensive. This is the main reason buyers use a Guarantor.

Why should I re-assess my loan rates every 3-5 years?

Home loans or mortgages are like computers that need frequent software updates.  Products, policy and rate changes occur almost monthly, so it’s likely that your home loan will be out of date within 3-6 months of receiving it. Most brokers offer you an annual review, and it’s in your best interest to take advantage of that. But, if you don’t hear from your broker, get in touch to see how they can help. 9 times out of 10, a loan that is 3 years old will have a rate that is too high, product options that you don’t use, and/or a lack of available product options that would be useful to you.

How do I choose the right finance broker?

When you’re choosing a finance broker, you need to be able to trust and connect with them. Seek recommendations from family, friends and colleagues. Word of mouth speaks volumes.

Do some research, check out the websites and/or Facebook pages of the businesses you’re considering and read any reviews you can find. As well as credibility, broad knowledge and a commitment to delivering excellent customer service, it’s important to find someone who is accessible and can communicate what they know.

How many properties should I look at before buying?

How long is a piece of string? There is no set number of properties you should look at before choosing the one you want to buy. Really, you’ll need to look at however many you feel is necessary to make an informed decision. Always visit a property in person, as pictures can be deceiving. You may want to also get a building and pest inspection, too. I recommend asking for tips and tricks from any builders or carpenters you know so you can grow your own knowledge base. This way, you can make some informed judgements about the structural integrity of a property yourself, saving money on expert assessments. Open cupboards and pull up carpets when you can – this helps to avoid nasty surprises like leaking pipes!

How much of a deposit do I need to buy a property?

This depends on your circumstances and whether or not you’ll be paying stamp duty. I like my clients to have at least a 10% deposit if possible, to reduce the cost of lenders mortgage insurance (LMI), however a 5% deposit is still possible with a few lenders.

What if I have just found the perfect property but I have not finished saving enough?

Alas, you can’t buy a property if it’s out of your price range, and a property you can’t afford is not a perfect property! You may be able to ask someone to be your guarantor, or seek some cash in the form of a refundable or non-refundable gift. If you find some benevolent gifter, please let us know! You may also need less in the bank than you think – it’s always worth checking.

What can I do if I don’t have any savings?

Without savings, your only option (provided you have borrowing capacity) would be to seek some capital from a guarantor or gift.

Am I eligible for any grants?

Grants are still available for First Home Buyers from the federal government if you are buying or building a new property. State-based grants have switched to stamp duty savings, so it’s best to check with your state Office of Revenue or the equivalent service. Your conveyancer may also be able to advise you on this.

Will I have to pay stamp duty?

If you are not a First Home Buyer, then you will have to pay stamp duty.

What other costs should I allow for?

When you’re buying a property, some of the other costs you should allow for are:

Conveyancer – $1000

Adjustments of Rates and other property charges – $1500

Land Title Mortgage registration costs – $300

Can I negotiate fees with a solicitor or conveyancer?

It’s always worth asking. A solicitor will cost more than a conveyancer.

Do I need mortgage insurance?

If you need to borrow more than 80% of the property’s value, then you will need LMI, or Lenders Mortgage Insurance.

Why do I need Lenders Mortgage Insurance (LMI?)

Mortgage insurance, or LMI, is a security measure that protects the lender in the instance that you default on your loan. Without a deposit of 20% or greater, you’re considered high-risk as a borrower, hence the requirement for added insurance for the lender. This LMI fee is a one-off, and non-refundable.

What does accredited mean?

In this context, accredited means that your finance broker is registered with a bank or other organisation to introduce business on behalf of you, the client.

What is the difference between fixed and variable interest rates?

A fixed rate of interest doesn’t change over the time frame that you have it set for. A variable rate goes up or down with the market.

What is serviceability?

Serviceability refers to your ability to make repayments on the loan.

It takes into account:

  • Your income
  • Your living expenses
  • Your debts or liabilities

Once these factors have been assessed, the lender will also ‘sensitise’ or load the rate of your loan (usually by at least 2.25%) to ensure that you can still afford your loan repayments if interest rates go up. Every lender has a different way of doing this, which is why you can sometimes borrow more money with one lender than another.

How does a home loan work?

Here’s how home loans work:

The bank lends you a sum of money over a set term, at a pre-determined LVR (see question 16 above). If your loan is fixed, you will need to make the same set repayment weekly, fortnightly or monthly for the term of the loan. If it’s a variable interest rate, the repayment amount can go up or down as interest rates fluctuate. In a variable rate loan, you can pay extra amounts and utilise an offset account with no penalty. Once you’ve paid it off, the bank will return the title of your property to you.

How can our broker help us get our dream home?

Engaging the services of a broker ensures that you get the most appropriate product for your needs. It can also mean that your loan turnaround time is faster, so you get to property settlement faster. A good mortgage broker will also make sure you’re educated and empowered with the information you need to know in order to make your dreams a reality. A broker can also assist you to do some forward planning, possibly starting off small and then upsizing to your dream home in time.

Why should I use a mortgage broker rather than going straight to the bank?

A bank has one set of products and one set of policies in which they can lend money; a broker usually has 35! This means greater choice for you as a customer.

Do you have your own Credit License or are you a Credit Representative?

As mentioned above, I’m a Credit Representative. I am licensed through BLSSA , and this allows me to spend more time with clients and less time on licensing requirements.

How do you decide which loan is best suited to my personal situation?

There is no hard and fast answer here. The loan that fits you best depends on your personal circumstances. At the end of the day, my recommendations are based on my industry expertise, the longevity of my experience and your needs. I always work with you to find the best arrangement for you and your circumstances and your required needs.

What commissions do you get paid for writing my loan?

I am paid a percentage of the loan amount you secure. It varies from lender to lender, but it’s usually around 0.6% of the loan amount. I also get paid a small trailing commission for the delivery of customer service, answering any of your after-settlement questions.

Do you offer a range of different lenders?

Yep! As my Aggregator is PLAN Australia, I have over 30 lenders.

What impact will my credit card limits have on my borrowing capacity?

Credit card limits can have a huge impact on your borrowing capacity as it is the limit that’s considered, not the outstanding balance. Lenders will take around 3% of the credit card limit as a liability when accounting your borrowing capacity. This is because you could spend up to that limit, and then have to make greater repayments towards your cards as well as your loan.

What fees will I incur when taking out a home loan?

Usually, the fees that you incur when taking out a home loan include the stamp duty/state government fees (a few hundred) plus any settlement fee. If you take  a professional package from a lender, you also have the annual fee in lieu of an application fee.

A professional package is a product suite offered by a lender. It traditionally was offered only to “professionals” but now is based on loan size, it’s still kept the name though.

What is a comparison rate?

Comparison rates were designed to give a true estimate of the real rate of the loan over the full term of it. However, they don’t take into account any extra repayments, any additional fees for late repayments or overdrawn accounts. As a result, they aren’t a strictly accurate gauge of the ‘comparable or comparison’ rate.

What is included in my loan?

The inclusions on your loan depend on the type of loan to you choose to apply for.

You may have:

  • the capacity to redraw
  • an offset account
  • internet and phone banking
  • the ability to make additional repayments.

What procedures do I need to follow in order to obtain my finance and settle my loan?

There are some things you can do to help expedite the process of getting a loan:

  • Be available to meet in person
  • Deliver all required information in a timely fashion
  • Be completely honest about your financial position
  • Sign and return loan application forms
  • Sign and return mortgage documents
  • Ensure your cash is in the correct account if you’re contributing
  • Set up your internet banking
  • Do everything else your broker requests!

Can I choose to fix my interest rate at a later stage?

Absolutely! Some Lenders charge for fixing your interest rate later, others don’t.

If I choose to take out a fixed interest rate can I choose to lock my fixed interest rate in prior to settlement?

Yes, you can choose to lock your fixed interest rate in prior to settlement. This usually incurs a fee of around $750.

How long will it take for you to obtain the appropriate finance for my needs?

The time it takes to secure your finance depends on the Lender and the time of year. Luckily, I’m a Premium Broker with a few lenders and have great relationships that I’ve built over 15 years. This helps to speed things up!

What information do I need to provide you in order to get a loan?

You’ll need to provide the following documentation to get a loan:

  • Drivers license and/or passport and Medicare card
  • 2 pay slips and ATO Notice or PAYG Summary; or 2 years of tax returns and assessment notices if self-employed
  • 3 month of bank statements to confirm your living expenses
  • Living expenses declaration form
  • 6 months of savings statements plus contract of sale for a purchase OR 6 months of loan statements for a refinancing loan, plus your council rates notice.

Are you members of the Mortgage Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA)?

To be a Credit Representative and maintain my license, as well as maintain my Lender Accreditations, I have to be a member of one of these organisations. I have chosen the MFAA as my industry association. I feel they offer more support on a holistic level than the FBAA.

Why should I trust you?

I wouldn’t have made it this long as a Mortgage Broker if you weren’t able to trust me! I’m honest, straight-talking and genuine.

Will you process the First Home Owner’s Grant for me?

I can certainly help you to process your application for a First Home Owner’s Grant in conjunction with your conveyancer.

What’s a credit score?

For the purposes of Lending, a credit score doesn’t refer specifically to your National Credit Score on your Credit File (known sometimes as Veda, or Dunne and Bradstreet Report). Whilst most lenders do utilise the National Credit Report as part of their analysis, your Credit Score relates specifically to an algorithm the bank uses to determine whether you’re a high risk loan recipient and likely to default or not pay your loan.

No individual knows exactly what information the credit score uses, as it’s top secret! This secrecy protects the independence and validity of the score. We do know that lots of little things can have an impact, though, including missing phone numbers, moving around lots, changing employers regularly, lacking in assets, and having lots of debts. This is a good reason to use the services of an experienced broker who understands the process surrounding credit scores, and how the individual lenders apply the score to their loan assessment process.

If I have a default on my Credit Report, will this impact on my ability to obtain a loan?

Yes, a default on your credit report will impact on your ability to obtain a loan. The impact depends on the amount of the default, if it was eventually paid, the reasons you defaulted and how long ago it occurred. Luckily, there are a few lenders that will assist you if you have defaulted in the past, but sometimes the loan interest rate is much higher in this circumstance.

How do I find out my credit score?

You can order your credit report online for free – it takes 10 days. Or you can pay $80, by going to www.mycreditfile.com.au

What are the most common questions about refinancing?

What is refinancing?

Refinancing is the process of seeking a new loan to replace your older one. It’s mostly used to get a better rate and structure, however in some circumstances, like in a relationship separation, we would refinance the existing loan if one party was keeping the asset and the debt.

It can also include something called Cash Out, which is literally the process of drawing equity or cash from your property. This may be for a holiday or renovation, or even for the next property.

How does refinancing work?

Refinancing is a very simple process in which we find the most suitable replacement loan arrangement for you. Sometimes, it’s with the same lender as your original loan, and other times it’s with a new lender. It usually takes around 4-6 weeks.

What type of things do people refinance for?

People refinance for many reasons, including paying for holidays or new cars, completing renovations or extensions, purchasing new properties, or paying off debts and consolidating’ them into one repayment.

How will refinancing benefit me?

It all depends on your circumstances, but refinancing will usually benefit you in some way. This may be:

  • a cheaper rate
  • a better structure
  • lower repayments
  • debt bundling or consolidating debts to make only one loan repayment
  • providing a deposit for a new property

Should I refinance with interest rate rises?

Whether or not you refinance with interest rate rises depends on your circumstances   . Some of the factors that influence this decision include:

  • your ability to service the new loan
  • whether the interest rate and product will save you money
  • how prohibitive the costs of leaving your current lender are.

What do I need to consider before refinancing?

Things to consider before refinancing include: Have I made my loan repayments on time every time? Has the value of my property increased? What are my objectives for refinancing?

How do I find out if have equity in my home?

A bank valuation, which we can organise for you (usually at no cost) will tell you whether you have equity in your home.