Should I use a mortgage broker?
Making sense of the home loan market can be challenging. With so many lenders to choose from, it can be hard for you to source the best deal. While a mortgage broker can help you sift through all the lenders in the marketplace, there are distinct advantages to going directly to a lender.
A mortgage broker is responsible for assessing your situation as well as your creditworthiness. This will help him develop an objective picture of your chances of qualifying for a home loan. His assessment also typically covers your income levels and ability to shoulder mortgage repayments.
Aside from assessing your situation, a mortgage broker will take your info and work to find a loan that meets your needs as closely as possible. Most brokers have access to databases of info on available lenders, enabling them to match their clients’ needs to the best lenders quickly and efficiently.
Just as importantly, mortgage brokers will provide valuable advice throughout the entire application process, which helps ensure that you make the right decisions.
Mortgage brokers possess a strong understanding of the policies of 20 to 30 different lenders. By going to a reputable mortgage broker, clients won’t have to go to multiple banks to source the best home loan products.
Additionally, mortgage brokers aren’t aligned exclusively with one bank. They work more like agents for their clients, and don’t represent the interests of the banks.
How much loan deposit do I need?
In the past, Australian property investors and home buyers could access home loans with as little as a 5% deposit. Sometimes, you could borrow the entirety of the property's value -- and in some cases, loans as high as 105% were available.
Nowadays, lending criteria from banks are stricter, and most banks and lenders have restricted the loan to valuation ratio that they’re willing to extend to borrowers. So, if you don't have much of a deposit at the ready, is it possible to get a high LVR loan to buy a house? The simple answer is, it depends.
The Big Four banks may be willing to finance home purchases of up to 95%, provided you have a very strong employment history and savings history and evidence of genuine savings. The loan amount will also strongly influence the lender’s decision. (If you’re interested in taking a look at how much you may be able to borrow for a home loan, you can use an online calculator like this one).
Non-bank lenders may also offer up to 95% of the property value. They may also add an extra 2% to help cover lenders mortgage insurance (LMI) capitalisation. This means the borrower can get a 95% loan and then add the cost of the LMI to the loan.
How much can I borrow?
Find out with our borrowing power calculator how much you can afford to borrow based on your income and expenditure: https://www.yourmortgage.com.au/calculators/how-much-can-I-borrow/
What is the First Home Loan Deposit Scheme?
It can take years for aspiring homeowners to save up enough money for a deposit. For instance, those who would want to snap up a Sydney home need to save for 8.2 years on average, in order to save the deposit required for a median-priced house, according to 2017 data from the Australian Bureau of Statistics.
However, despite rising house prices, Aussie first home buyers are still optimistic about breaking into the market. Enter the First Home Loan Deposit Scheme (FHLDS), which could help them get in the market and reach their dream of having their own house.
FHLDS is an initiative by the Australian Government aiming to support eligible first homebuyers. It provides a guarantee allowing eligible first home buyers on low and middle incomes to buy a home with a deposit as little as 5% without paying for Lenders Mortgage Insurance. Ten thousand first home buyers are expected to be supported by the FHLDS annually.
According to the National Housing Finance and Investment Corporation (NHFIC), participating lenders in the scheme will not charge eligible borrowers higher interest rates.
However, you have to keep in mind that getting a mortgage with a lower deposit does mean paying interest on a larger sum, which will make it more expensive in the long-term.
Under the FHLDS, an eligible buyer could buy the following types of property:
- An existing house, townhouse or apartment
- A house and land package
- Land together with a separate contract to build a home
- An off-the-plan apartment or townhouse
- An ‘eligible building contract’ where you have a contract with a licensed or registered builder to build your home within a set timeframe
- There are price limits that apply to homes, which vary from state to state.
Some of the factors that determine your eligibility are the purchase price of the property and your income. Here are some factors that may determine who may qualify for the scheme:
- Australian citizens who are at least 18 years old
- Single with a taxable income of up to $125,000 annually, or couples with a taxable income of up to $200,000 per year. (Income is evaluated for the financial year preceding the one in which the loan is entered to)
- Couples are only eligible for the scheme if they are married or in a de-facto relationship
- Applicants must have a deposit of at least 5%—but no more than 20%—of the property’s value
- Loans under FHLDS require scheduled repayments of the principal and interest of the loan for the full period of the agreement (with limited exceptions for interest-only loans)
- Applicants must intend to be owner-occupiers of the purchased property
- Applicants must be first home buyers who have not previously owned or had an interest in a property in Australia either separately or jointly with someone else
How long does it take to apply for a home loan?
Getting a competitive home loan offer is one of the first few hurdles Australians need to overcome in their homeownership journey. The mortgage application process can be tedious, however, our home loan specialist help Australians prepare mortgage applications every single day and have some great tips and tricks on offer. Home loan approvals can differ from one lender to another and all subject to their workload in which our home loan specialists can guide you through. However, in short, home loan approvals including the completion of a valuation can be as quick as two to three days.
Tip #1: Have a stable savings history.
One of the things banks and lenders like to see is a customer in a good financial position. They need to know that if they lend you money that you will be able to comfortably pay it back.
Tip #2: Minimise your debts.
When you’re preparing to get a home loan, it’s easier for the banks to understand your financial situation if you have fewer or simple debts. Ideally you would want to minimise your debts and decrease your living expenses.
Tip #3: Stable and easily verifiable income.
Two things that lenders look for when assessing you for a loan are if you have a deposit to put towards the loan and your ’serviceability’ – that is, how much you can afford to borrow and pay the back.
What is a borrowing capacity?
Whether you’re a budding investor or a first home buyer, you need to understand what borrowing capacity is. It’s the cornerstone of your home buying process, after all.
Simply put your borrowing capacity is the amount of money a lender will loan to you, but how is this assessed?
Lenders calculate your borrowing capacity using an assessment rate to examine your application. They have their own assessment rate and it’s based on their appetite for risk, which is why your borrowing capacity may vary from one lender to another.
Aside from the assessment rate, a lender may also consider other factors and will load your existing loans by a buffer and account for all your incomes. Your financial dependants are also considered when assessing your borrowing capacity.
To calculate your borrowing capacity, you may need to provide the following information:
- How many applicants are applying for a mortgage
- Number of dependents
- How much your annual salary is before tax
- How much rental income you receive from properties
- Other regular income
- Living expenses
- Other loan repayments
- Other commitments
- Combined limit of credit cards, store cards, and overdrafts
What is stamp duty?
One of the most common pieces of jargon in the home buying sphere is stamp duty. Simply put, stamp duty is one of the costs a buyer has to settle aside from home deposit and monthly mortgage repayments.
When buying a home, it is important to consider stamp duty as one of the major costs to keep in mind. Each state has its own stamp duty rates, which can be a headache, so Your Mortgage Broker compiled this one-stop guide to equip you with everything you need to know about stamp duties.
How much is stamp duty?
Whilst one of the most varying elements of stamp duty rests in the differing jurisdictions it sits in from state-to-state, rates also depend on the type of property purchased and its value – and the more a buyer pays for their first home, the higher the stamp duty will be.
With this in mind, it can often exist as an unexpected fee that unveils itself further down the buying process, leaving many buyers caught blind-sided – and being given no choice but to take a few steps back in order to factor the tax into their savings, or overall buying budget.
A buyer can also explore options as to how the stamp duty fee can be brought down, by either buying a property that costs less, or looking into purchasing within another state that is governed by more affordable stamp duty laws and benefits.
Our home loan specialists are here to support you with any questions.
Get in touch with us today on 02 8437 4766 or via firstname.lastname@example.org