Should you make application for a home loan, especially if the loan you want happens to be for more than 80% of the property’s value, with most lenders you’re going to have to show them that you already have a satisfactory amount of savings.
This reassures the lender that you have the capability to fulfill your repayment obligations once you have been confirmed for a loan.
Most lenders policies require that you have a minimum amount of 5% of the property purchase price saved as a deposit.
Although, there are lenders that will loan up to 98% and 100% of a property’s value. However, most mainstream lenders will only lend to 95%.
That is, unless you have an immediate family member who is willing to use equity in their property to guarantee the loan you want (conditions apply).
In these instances you don’t need any deposit and you can borrow up to 110% of the value of the property you want to buy. It’s called a Family Guarantee Loan.
No Deposit Home Loans and LMI
To obtain a loan with any of those lenders the borrower would need at least an 8% deposit in order to be able to capitalise the Lenders Mortgage Insurance premium that will be charged.
Any loan that exceeds 80% of a property’s value will incur a mortgage insurance fee. This is a fee that is paid by the borrower to an insurance company that insures the banks loan in case the borrower defaults on their loan.
What Constitutes Genuine Savings?
The borrowers savings in most instances will be accepted by the selected lender as an acceptable genuine 5% deposit amount if the savings account in the borrowers name shows the required savings have been in the account for 3 months or more.
Alternatively, the savings account had constantly been receiving funds over 3 months or more and now had the required deposit amount.
There are many classifications of savings however these mentioned below may or may not qualify for a home loan deposit:
- Cash gifting program
- an inheritance
- casino/other gambling winnings
- Cash coming from selling a non-investment asset
- Incentives and government financing
- Personal loan
Are No Deposit Home Loans Just a Myth?
That said, if the money can be shown to have been in the borrowers saving account for at least 3 months, most lenders will accept that as genuine savings.
Are there other options for acquiring a loan if I don’t have genuine savings?
The good thing is that there are still loan companies that are willing to provide you with a loan despite having no genuine savings.
- Family guarantor loans – a family guarantor loan is where an immediate family member allows the equity in their home to be used as security to guarantee the loan. Conditions do apply. However, most lenders will allow borrowers to borrow up to 110% of the purchase price of the property they want.
- Some lenders may also accept non-cash genuine savings – some of these include equity in another property, term deposits and shares. In certain cases, the sale of a vehicle owned by the borrower can also stand as genuine savings provided that the borrower shows proof that the vehicle was owned for at least 3 months.
There are some lenders that will allow you to take out a personal loan to obtain the required deposit.
Keep in mind though you will need to show healthy taxable earnings to be able to do that strategy.
Any liabilities you have or create will reduce your borrowing capacity for a new home loan.
- A stable rental history could see a loan provider forgive you to having to come up with 5% genuine savings. There are a few lenders who will waive the 5% deposit rule if documentation can be produced from a licensed property management agent showing that all rent has been paid on time and in full for the preceding 6 to 12 months.
This will highlight your ability to make repayments on time and on an ongoing basis. Nonetheless, you will still need to drum up a deposit from somewhere.
What is the Most Effective Way to get Qualified?
If you’re keen on buying a home and you’re not sure if you will be able to qualify then contact us or a reliable experienced mortgage broker near you and they will be able to assess what you need to do.
Sometimes, all it takes is to understand the situation of the borrower and find a suitable lender with the right policies that can match the borrowers needs.
Brokers are the best bet because they develop their understanding and successful strategies through experience and constant communication with a network of lenders policies and procedures.
Each lender has specific policies and each borrower has specific needs – this is something that the best mortgage brokers understand and matching the borrower with the right lender is what they do very well, especially when it comes to no deposit home loans.
Go to Our Home Page for More InformationBy Dave Fleming : 18 October, 2018
In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.
When you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.
Up until the settlement goes through the home is the property of the existing owner.
And with a large home deposit at stake, you’ll want to ensure you choose the right period length.
How much time should I give myself?
Generally, settlement periods are 30, 42, 60 or 90 days.
In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.
Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).
You see, both the buyer and the seller must agree on the settlement period.
However, you may have competing motivations, so this can be tricky.
Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.
Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.
If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.
You might push for a longer settlement period if:
– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want to deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).
You might push for a shorter settlement period when:
– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.
It’s important to get right
One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.
While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.
This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.
Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.
Other states have a little bit more leeway.
In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.
So that’s negotiating a settlement period in a nutshell.
The best news? That’s about as much negotiating as you’ll need to do. Because when it comes to negotiating a loan with a lender, we’ve got you covered.
If you’d like to find out more about our services, get in touch, we’d love to help you out.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.By Dave Fleming : 18 October, 2018
Lending regulations have tightened up considerably in the last few months. So much so, it’s time to examine the 11 issues that could put the kibosh on your home loan dreams and aspirations, and some solutions on how to fix them.
Godsend or big mistake?
The fact is, despite their rising popularity and fast convenience Payday or cash loans are definitely a huge no, no if you are looking to apply for a home loan, because any prospective lenders will get the impression that you are financially stretched and are going to be a lousy risk
Slowly but surely the Nanny state grows
With record low interest rates the demand for home loans have not been this high since before the Global Financial Crisis. However, authorities are now stepping up the pressure on lenders to reign in their previous unconstrained lending practices.
This is being done under what is known as the National Consumer Credit Protection (NCCP) act, or Responsible Lending Practices. When first initiated in 2011 there wasn’t too much fanfare about the new rules and in the main, other than a few mild policy changes, it was pretty much business as usual.
That said, in the last few months things have changed dramatically and the Australian Prudential Regulatory Authority (APRA) have been bringing pressure to bear on the banks to start enforcing the new rules to the letter.
Also, along with the current Royal Commission Inquiry into banking practices, the banks themselves are trying to put on a ‘Goody, Goody Two Shoes Face’ to try and convince the Inquiry and associated authorities that their bad behaviour is a thing of the past and they have now turned over a new leaf.
They now want to know what size underwear you use
Anybody who has made an application for a mortgage over the past few months can tell you that things have become a lot more difficult to obtain any kind of loan now that the banks have gotten serious about the new affordability lending. They are now starting to forensically focus on borrower’s income and expenses in much finer detail. Some lenders are insisting that applicants provide them with their latest bank account and credit card statements so they can ascertain how much goes in and how much goes out on a regular basis.
In other words, they will now know how much your hair cut and dry cleaning bills are.
Many would be borrowers will have to be a whole lot more savvy nowadays if they have any chance to meet these strict new requirements before making any mortgage or personal loan applications.
Financial house cleaning is now in order
In fact, most seasoned mortgage brokers will tell you that you should put your financial house in order at least 3 months in advance of submitting any kind of application. On the other hand though, depending on your chosen lender it may necessitate you do this at least 12 months in advance.
Whether you’re looking to purchase your first home, upgrade to another, downsize, refinance or buy an investment property you’re going have to ensure that your finances are in good order if you want to give yourself any kind of hope in getting any kind of home loan application approved these days.
Here are 11 issues that could scuttle any mortgage aspirations you may have and how to rectify them.
1 RECENTLY SELF-EMPLOYED
Prior to and during the financial crisis you could get loans based on what you told the bank you earned. Yes, that’s correct; they would take your word for it. Funnily enough they earned the nickname of ‘liar loans’. All the borrower had to do was sign a self certification document declaring what their annual earnings were. I’m sure some bank staff occasionally had a good chuckle when they saw applications from occupations like a bus driver claiming to make $180,000 a year. Nonetheless, they opened a gateway for many self-employed people to purchase their own home. However, the continuing abuse of these mortgages and the global financial crisis soon put paid to these loans.
The market conditions today, show many self employed people struggling to qualify for a home loan. All main stream lenders require that self-employed individuals have had an Australian Business Number (ABN) for at least two years, have been trading profitably for at least two years, and have at least two years financials available. A couple of lenders will accept one years tax returns, but you still must have had an ABN number for two years.
That said, most lenders will also do what’s called Low Doc loans. You still will need to have held an ABN for two years, but now the lenders will rely on your trading bank statements and/or Business Activity Statements (BAS) to calculate your income.
Beyond that there are lenders who will cater to newly self-employed people if they only have had an ABN for 1 day, 3 months, 6 months and 12 months. Of course, they view these loans as higher risk and they come with a premium when it comes to interest rates, fees and charges. Nonetheless, they aren’t the end of the world as they can be used as a means to an end. Meaning, you can have your cake now and refinance the loan to a better rate a little way down the track when you have the required documentation.
Self-certified loans previously offered a way for the self-employed to buy a home, but abuse of these mortgages – dubbed “liar loans” because they required no proof of income – brought about their demise during the financial crisis. The Financial Conduct Authority will officially ban self-cert mortgages in April when the mortgage market review rules come into place, but this has left some self-employed borrowers struggling to access finance.
Self-employed people finding it difficult to get traction in obtaining a home loan may well consider getting in touch with a well-seasoned mortgage broker
2 ANY MAJOR CHANGES IN LIFESTYLE CAN AFFECT YOUR ELIGIBILITY
Bankers like to see stability, it calms their ‘Risk Meter’ down no end (lol). Switching jobs or having another child at the time of a mortgage application can cause lenders to scrutinise your application a lot more closely. If you’re expecting another child lenders will increase your number of dependents immediately even though the baby isn’t quite in this world yet. That in turn will reduce your borrowing capacity. Lenders like to see stable residency and employments.
3 AVAILABLE CREDIT LIMITS OR NUMEROUS OUTSTANDING DEBTS
Lenders get nervous with people who have a lot of existing outstanding debt. So, it’s a good idea to pay off as much debt as possible prior to applying for a mortgage. This will also increase the applicants borrowing capacity when existing liabilities are reduced. Another key point to observe is that lenders go on credit card limits and not the balances owed on them. Therefore, where feasible reduce your credit card limits as much as possible if those limits are affecting your borrowing capacity. You can even cancel then and reinstate them after your mortgage has closed/settled.
Always keep in mind, if you are able to present lenders with a well-managed personal financial profile the better they like you.
4 ARE YOU ON THE ELECTORAL ROLL
Electoral rolls are a handy tool that some lender use to confirm a potential customers identity. If you’re not there it can at times cause some confusion and cause you additional frustration when the lender starts to pursue you for additional ID documentation verification.
5 WHEN WAS THE LAST TIME YOU LOOKED AT YOUR CREDIT REPORT?
It’s important to keep an eye on your credit report, regardless of how good you think it is. Equifax (formerly Veda) will send you a free copy in 10 days or overnight for a fee. Identity theft is rife these days, so don’t let yourself in for a nasty surprise the next time you go for a loan.
6 PAYDAY LOANS ARE NOT A GOOD LOOK
Payday or fast cash loans with their outrageous rates of interest give mainstream lenders cause for concern when they come across them on a borrower’s profile. It gives them cause for thought that any individual who uses them regularly is stretched financially or may be having difficulty managing g themselves monetarily.
It gives the impression that a person cannot make it from pay check to pay check and they use them as a desperate measure to get by on a day to day basis instead of having a practical back up plan if they get themselves into a situation that needs sorting.
7 KEEPING IT AFFORDABLE: DON’T OVER REACH BY BORROWING TOO MUCH
We now have a generation of borrowers who have no idea what 7 ½ – 8% interest rates on a mortgage would be like. At this stage of the game where interest rates are at record lows it’s a great opportunity to take advantage of the situation and pay down a mortgage as fast as possible. Keep in mind mortgage rates won’t always be this low and when they do rise that you will be able to afford the higher repayment amount.
Use your mortgage as a stepping stone to eventually bypass the Jones’s. Start with a smaller property, a smaller mortgage and pay that down with your extra spare cash to create equity that you can use to step into a larger property.
8 COURT JUDGEMENTS, DEFAULTS AND BANKRUPTCY
These don’t preclude you from getting a home loan, nonetheless if you have experienced damaging financial circumstances that have ended you up carrying an impaired credit report then mainstream lenders won’t want to know you.
There are enterprises out there that are known as alternative lenders and they exist in the main to cater to people with impaired credit profiles. Should you find yourself in this situation we highly recommended you find a mortgage broker who specialises in this niche to guide you through the minefield of fees, charges and high interest rates.
Keep in mind though if you have a minor paid default under $1,000 on your record there is a possibility some main stream lenders will still consider you if you have a reasonable explanation for the default.
9 ARE YOU A CREDIT JUNKIE AND LEAVING TOO MANY FOOTPRINTS?
Every time a person applies for credit there is a listing of that credit request noted on the persons credit file. If the number of listings are low there isn’t too much to be concerned about, it may affect your credit score marginally.
That said, if you are frequently putting in applications for credit this and credit that, any credit assessor assessing your mortgage application is going to get a negative impression on how you can’t find what you want and how desperate you are.
Be careful when making financial inquiries over the phone or the internet as the person on the other end could be pulling your credit file without you even being aware of it.
If you’ve ever been declined or have concerns about the number of enquiries on your credit file, use a broker as they can sort through all the various lenders and loans to find the one you will possibly succeed with.
10 GAMBLING SITE PAYMENTS, OVERDRAWN ACCOUNTS AND OVER THE LIMIT CREDIT CARDS
Showing regular payments from your bank account or credit card statements will in most cases get you a swift decline notification as they are definitely a big ‘No-No’ in this age of responsible lending. Even though payday or fast cash loans are fairly new to the lending world lenders still get nervous when they see them. If you show a prospective lender any loan or credit card statements that have late payments or over the limit notations showing on them you will in most instances get an automatic decline for your application.
11 OVERTIME, BONUSES, COMMISSIONS AND ALLOWANCES
These payments can become a bit sticky when it comes to include them to boost your borrowing capacity.
With bonuses, commissions and overtime most lenders want to see documentary evidence of the same for periods ranging from 12 – 24 months. If there’s any confusion or doubt about the payment amounts the lender will insist on an employer letter confirming the amounts and dates paid.
Additionally, when they do accept the amounts tendered they will shade the total amount by 20% and only allow 80% of those payments toward borrowing capacity purposes.
WHERE DO YOU GO FROM HERE?
Inquire in advance to any lender or mortgaged broker as to what documentation you will need for any given lender application. Keep in mind that any bank or credit card statements you provide are going to be examined for income deposits, outgoing expenses, late payments or over the limit balances.
Examine the above information carefully so you can prepare and present any application you are planning on making it in the best light possible.
How to make your mortgage life easier
It is really much easier to get the real dollars you’re going to need to invest in a home with the assistance of loan brokers. When you need a broker who isn’t specifically associated with a certain finance lending organization but could offer you the most beneficial remedies to your fiscal necessities, a mortgage broker will possibly be your smartest choice.
People who have unfavourable financial history could find it not so easy to request the help of financial companies, but a mortgage broker understands how to adjust to several different instances to ensure you get what you want. It is really feasible to make use of two or more agents at a time.
Sometimes it’s who you know
A mortgage finance broker does have connections in the market and can scree your own personal financial information through a number of mortgage companies without necessarily giving your identity away. By simply partaking with more than a single finance agent you can look at a wider variety of lenders and begin to zero in on the right home loan offers readily available.
In certain cases agents are doing work for a specific mortgage lender. When working together with an agent who’s also a loan provider, it is very clever to become mindful of this issue. This is simply because they’re not likely to go out of their way to advocate you to many different credit firms and rather will simply seek their own loan company.
Playing the ends against the middle
The great thing to try and do is utilize numerous agents, if you’re planning to employ a mortgage broker that is also a loan provider.
Don’t sign any written agreement if you intend dealing with a few agents at any given time. If you happen to get into a binding agreement you could be compelled to take whatever special offers they have even if they aren’t the most effective they’ve found for you.
Fantastic benefits can be expected when obtaining aid from an agent. Most likely you don’t need an agent to find the very best rates on offer for mortgages should you have a good credit standing. You can accomplish that in your own if you have the time and resources, rather than pulling another group into the mortgage loan procedure.
When you’re in a tight spot
In case you have bad credit, although, an agent could probably get funds for your specific case which you didn’t know about. Their understanding of the sector permits them to look for the funds from a variety of trusted loan companies that will assist you in getting your home.
You will recognize that there are a great number of expert loan providers on the market which are not typically readily available directly to the general public that great mortgage brokers would have access to. These expert mortgage companies support and fund someone who has problems in their credit data as well as earnings range.
They’ve got a wide array of items available that serve all degrees of bad credit, from mild to heavy.
Where to look
It’s not hard to acquire mortgage agents. You can search online to locate their contact information or inquire from people you know to get referrals. Right after acquiring a broker, you could setup a scheduled appointment with them to find out some of their personal and also financial data.
They’ll have to look at your credit report so that they know exactly what financial circumstances you’re in. The great thing is that they’ll keep all this info and will likely move it to a mortgage lender if you decide to choose one they see, therefore helping you save a little time along the way.By Dave Fleming : 18 October, 2018
What Some Mortgage Brokers
Don’t Want To Tell You
Recently I was reading an article from http://banking-and-financial-services.news.top4.com.au/ about mortgage brokers and the headline was “4 Things Your Mortgage Broker Will Never Tell You” and it went something like this; Please note; The maroon writing are my own personal comments.
Are you on the hunt for a home loan and considering recruiting the help of a mortgage broker? While mortgage brokers can be a great resource if you have a more complicated home loan or need a little mortgage advice, before you go down this road it’s important to know exactly what you’re signing up for.
So to help you decide, we’ve called on Mozo’s property expert Steve Jovcevski to reveal the common things a broker will never let you in on:
‘Of course Steve Jovcevski is going to be totally unbiased, right?’
1. Brokers don’t compare the entire market
Most brokers use an aggregator, which is a third party who has the accreditation to deal with the lender on the broker’s behalf.
Steve explains, “these aggregators only compare a select number of providers and home loan packages, which means when you use a broker you won’t have access to the entire home loan market and the lowest rates in the market.”
Smaller lenders offering super low rates often aren’t found on broker panels because they can’t afford to pay the commissions.
‘This can be true in some instances, except the part about the commissions. When a broker submits a customer’s loan application to a lender they virtually do so on a platter. In other words the broker has used their capital resources to bring the customer to the bank; the bank has had no capital outlay in recruiting that customer.
Also, many of these small lenders can be mortgage managers. In other words they are not strictly lenders in the true sense. They are acting on behalf of a money wholesaler who in actuality’ will be holding the title for your property as security. If the mortgage manager goes out of business the loan will revert back to to the wholesaler who might sell your loan off to the highest bidder.’
2. Brokers receive a higher commission for recommending certain home loans
If you sign up with a home loan through a broker they will get paid a commission by the lender, which is a percentage of your loan amount. According to Steve, lenders often run a “commission special”, which means the broker will be paid a higher percentage of the loan amount if they recommend that product to a customer.
While brokers must reveal the commission they receive in the loan doc, they won’t reveal which lenders are offering the biggest commission percentages of the loan amount. “This drives broker behaviour, as the lenders that pay a higher commission percentage often receive the most leads from the broker,” says Steve.
‘In the main this is not true, brokers look to cultivate long term relationships with their customers, because they realise that some fish grow into big fish. If your butcher keeps selling you tainted meat you’re going to find another butcher. If you buy a car from one dealer and then later find that same car at another dealer for $5,000 less there’s a big chance you’ll never go back to the dealer who sold you the car in the first place.
The facts are smart brokers negotiate with lenders to get the very best interest rate they can for their customers in order to consolidate the relationship they have with their customers.
Additionally, there is very little variation in the commissions most lenders pay anyway, with the exception of specialist lenders who cater to alternative loans such as loans for bad credit loans applicants.’
3. Brokers are not property experts
While mortgage brokers can help you decide on the home loan you’ll go for, Steve says it’s important to remember that they are not experts when it comes to providing you with advice about the type of property you should go for or the tax deductions available to you.
“For this type of information, you will need to speak to a financial advisor or tax accountant that specialises in property.”
‘So what, you probably never went to the broker to get property advice in the first place, they’re home loan experts not real estate agents.’
4. You can do it yourself
Since brokers only have a number of home loans that they offer to their clients, they will generally not reveal what the best interest rate in the market is. “To find this out, home loan borrowers need to search the home loan market themselves,” advises Steve.
‘Of course you can do it all yourself, but why are mortgage brokers so popular these days? Why are they now writing 55% of all the home loans in Australia today? Primarily they save their customers time and money. They do all the hard yards of finding the lenders best rates that aren’t advertised on any web site. They will save you time by accurately knowing what documents are required with any given lender and once the application is submitted work on pushing it through the bureaucratic banking system. While all this is happening you can lean back and enjoy your cappuccino.’
Rather than spending hours visiting each lender’s website, use a reputable home loan comparison website like Mozo.com.au to compare home loans side by side and find out which lenders are offering the best home loan rates.
Mozo compares more than 550 home loans from banks, non-bank lenders, credit unions and building societies to help you find the best value loan for your needs.
Pretty slick article don’t you think?
Now you shoot over to his website and what do you find, a comparison website selling anything and everything financial, including home loans. How do they work? Well it’s very clever, you see a lender you like and you click on the button that says ‘Go to Site’ and lo and behold you have to fill in all your personal details.
What happens next? You guessed it you get a call from a telemarketer, but you knew that was coming, right?
So, Steve Jovcevski, how do you make your money? That’s a pretty expensive web site you have there.
The bottom line is, mortgage brokers need your support as they have been the major reason that competition is now so keen between lenders. There’s a number of good reasons as to why they are so popular, but the bottom line is they look after their customers and they do a good job.