Deciding where to go for your home loan is one of the most important decisions you’ll make. While
many prospective property owners will choose to use a mainstream lender, non-bank lenders also have their advantages. What are non-bank lenders? Essentially, a non-bank lender is a lender that’s not a bank, credit union or building society. It has its own source of funds, which it lends out with a margin for profit. A non-bank lender may also be a company or individual who borrows money from a bank at wholesale rates and then lends the money with a profit margin added. Most mortgage brokers work with both banks and non-bank lenders. Potential benefits of a non-bank lender There are several benefits associated with taking out your home loan through a non-bank lender, including:
There are pros and cons for both big banks and non-bank lenders, so finding the right lender for you is what’s most important. You’ll be the one making the repayments, so you need to be happy with the rates, service and fees that are offered. Your mortgage broker is an ideal go-to person to discuss your situation and what might be right for you.
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A home loan is generally a long-term proposition, but in some situations it can make sense to
refinance your mortgage. Read this guide to the refinancing process, and speak to your broker, before deciding whether it’s right for you. Refinancing involves taking out a new mortgage and using those funds to pay off your existing mortgage. Doing so can save money and result in significant financial gains over time. Why you might refinance You might want a lower interest rate. The lending products market is highly competitive and interest rates can vary significantly between banks. One of the most common reasons people choose to refinance their mortgage is to secure a lower interest rate from another lender. This could assist you to pay off your home loan sooner, potentially saving you thousands of dollars That makes sense, but before taking any action it’s a good idea to speak with your broker. They can not only look for a better interest rate for you but also help find you the type of lending facility that suits your lifestyle. This may even mean renegotiating a better deal with your existing lender. Either way your broker will help with the right advice. Keep in mind that not all mortgage products are the same. A mortgage with a lower interest rate may not have all the benefits of your existing loan. The interest rates, fees and the features need to be carefully considered and your broker can help you to navigate the options. Buying a property isn’t always a straightforward process, and one area that can cause confusion is
the question of who is responsible for insuring it between the signing of the contract and settlement. There are differences in regulations between states, but the basics are as follows.
General tips When it comes to property insurance, there can be some grey areas, but it’s important to understand your general obligations. Additionally, if both parties are insured throughout the entire process, it saves the headache should anything go wrong. As the vendor, if there’s substantial damage to the property but the purchaser still wants to go ahead with the sale, you may need to consider a negotiation on price, or you may need to fix the damage before settlement. If you’re still insured, your insurance policy will cover the work needed. For purchasers, if there’s substantial damage, you have the option to negotiate a price reduction or alternatively get out of the contract. Importantly, it’s the vendor’s obligation to leave the property in the same condition it was in when contracts were signed, regardless of who holds risk over the property. This is a complex area that can be hard to navigate without support, so it’s a good idea to talk to your mortgage broker to gain a clearer understanding of how best to proceed and protect yourself. For detailed advice about property insurance in your State, contact an experienced property lawyer. Purchasing a property with a loved one can be a great way to enter to the property market, but
taking on such a large financial responsibility with someone else does come with risks. These are some of the pros and cons to consider before you both sign your names on the contract. PRO: Entering the property market earlier – or at all Rising house prices, the need to save for a deposit and the risk of fluctuating interest rates can all make getting your foot in the home-ownership door very difficult. It may seem an impossible task at times, and it can take years before you’re in a serious position to purchase. Buying property with a friend or family member means the dream of home ownership can be realised much sooner. PRO: Buying where you want versus where you can afford Sharing loan repayments with another person can be easier in terms of servicing the loan and may allow you to borrow more. It might mean the difference between buying that inner-city place you’ve always wanted and settling for a suburb you’ve never heard of. By pooling purchasing power you can find your ideal home, which otherwise might have been beyond your budget. You’re walking down the street when you see it – the perfect house. It’s charming, quaint and, okay, maybe a bit small, but you’re sure you could extend it later. But before you sign on the dotted line, consider whether your dreams will hold up under a little scrutiny.
Every state has disclosure laws that require the vendor to tell you some of the potential pitfalls of the property. These laws aren’t comprehensive so consider the following when you’re inspecting your dream house. 1. Building inspectionNo matter what the agent has told you, or how new the property is, a building inspection is a must. A building inspection report is sometimes referred to as a pre-purchase property inspection report. An inspector will check for structural damage, damp issues, compliance problems and anything else that might prove to be a headache down the track. While building inspectors should also identify damage caused by termites, a building inspection is separate to a pest inspection. Always use a qualified building inspector, such as a licensed builder or surveyor. Ask any potential inspectors what their qualifications are and whether they carry insurance. Also ask what the report will include – is it a standard report, or a more-expensive comprehensive report? There are Australian standards for building inspection reports, and a professional must ensure that their report meets these standards 2. Your wish listBefore visiting a property, think about the practical things that you want in a home. For example, how many bedrooms do you need? Do you want an outdoor space such as a balcony or garden? Does it need to be near public transport? Do you want a large entertainer’s kitchen or a separate bathroom for the kids? You probably won’t get everything on your wish list in one house, so split the list into ‘musthaves’ and ‘nice-to-haves’. Some things can be added later, but there’s no point buying a house that’s missing a much-needed bedroom because you fell in love with a cosy reading nook. 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:
You’ve been dreaming of that new kitchen and dining room for as long as you can remember, and now the time has come to put your plans in motion. But do you really have the budget to afford the works? Here are a few things to think about before making the leap from Pinterest board to blueprints.
Work out your budget before you look at borrowing any money, you first need to work out how much your renovation will cost. Get Ask An Architect to send you their comprehensive guide to costing a renovation. Before your finalise your plans, you can arrange for a building inspector to help identify any structural work that might be needed. Major work could significantly increase your budget, so it may be worthwhile to talk directly to a professional to get a more tailored understanding of how much you’re up for. Architects and master builders are usually happy to provide a quote, so think about getting more than one quote to give you an idea of the range. In addition, add a percentage for contingencies: most experts recommend that you add another 10% to 20% to the overall budget to cover the inevitable delays and complications that arise throughout the renovation process. Once you know what the costs may be, you can start to think about how to raise the cash. Of course, in an ideal world you’ll have saved up at least part of the amount beforehand, but renovations can run into the tens or even hundreds of thousands, so most people will need to borrow some money. Unlock your equity If you’ve been in your home for a while, chances are that you have considerable equity, both as a result of paying off your initial home loan and from rising property values. Equity is the amount of your home that you own; that is, the value of your property, less the outstanding loan amount. For example, if your property is valued at $500,000 and you owe $300,000 on your loan, your equity is $200,000 ($500,000 - $300,000 = $200,000). As long as you can meet the repayments and the renovations are likely to add value to your property, most lenders should be willing to lend you a percentage of your equity for home renovations. Depending on your situation, this equity could be accessed through redrawing, increasing your existing loan or refinancing your loan entirely. A mortgage broker will be able to advise on the best option for you. The home loan market is constantly changing, with new and attractive deals coming up all the time.
Refinancing can help you secure a more competitive interest rate, access the equity in your home, add features (such as an offset account) or consolidate your debts, but there are some important questions to consider before you get the ball rolling. 1. Has my financial situation changed since I first applied for a home loan? A refinance is effectively a brand new loan application. All of the personal financial data you had to gather the first time around will need to be produced again. The stability of your income stream, your assets, and your credit card debts and other debts and expenses will all be reviewed, and may impact the result of your application. It’s important to think about your ongoing ability to pay off your loan, particularly if you’re planning on making big changes that will affect your financial situation, such as starting a family or quitting your job to start your own business. Of course, if you’ve just received a big pay rise or are now an empty-nester, this may also make a difference to your loan application. 2. Will the refinance really save me money? Negotiating a lower interest rate or consolidating debts may seem like a financial no-brainer, but the fees associated with switching loans can be hefty, so you need to look at all the costs to work out whether you will really be saving money. Fixed rate loans can be particularly expensive to exit, and leaving your home loan early will usually see you pay some combination of exit fees, application fees, stamp duty or even legal fees. If you’re borrowing more than 80% of the value of your property, lenders mortgage insurance (LMI) may also be required. Unfortunately, these fees and costs are not usually transferable from one loan to another, so you may need to pay them again even if you paid them when you took out your original loan. |