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Why Choose a Sunshine Coast Mortgage Broker?
If the thought of approaching your bank and asking for a home loan intimidates you, or you are thinking of purchasing a property and just don’t know where to even begin, don’t worry, you are not alone. Let a mortgage broker assist you through the lending process. Here’s how…
As a mortgage broker, our job is to act as an intermediary between you as the buyer and a financial institution throughout the loan application process.
We start by assessing your financial situation and calculate your potential borrowing capacity. This involves seeking a range of details in regards to your current financial commitments and your goals for purchasing a property.
As specialists in home lending, we take your specific information and form tailored home loan solutions that are best suited to your needs. If you wish to proceed with your application, we then prepare, submit and support you through the entire loan application process.
We do not work on behalf of any financial institution, therefore our suggestions are based purely on what is best for our clients. Our priority is to see our clients achieve loan approvals and we pride ourselves on the support and guidance we provide through this important life stage.
Preparing to Apply for a Home Loan: Essential First Steps to Take
You’re looking to purchase a property, how exciting! Amongst the real estate searches and suburb guides, now is the perfect time to start getting prepared for your loan. Purchasing a property is a big step and we want to get you as prepared as possible. There are lots of things to consider and this guide will hopefully give you a clear introduction to a few key aspects of the home buying and loan process. We can’t wait to get started with you!
Prepare a Monthly Budget
The first step in determining what you can afford to spend, is to outline what your current expenses are. Create a monthly budget that includes all your regular ongoing expenses (Rent, Bills, Insurance, Groceries, Direct Debits).
Filter your statements to get a clear indication on how much you spend on lifestyle expenses such as eating out, shopping and entertainment as these often get overlooked and underestimated in a budget.
Clear Debt
Did you know that when assessing your lending capacity, banks will look at your total debt allowance, regardless of how much you owe? For example, if you have a $5,000 credit card limit but don’t owe anything on it, they will still factor in a percentage of the limit as an expense.
It’s important to limit your debt to a minimum so, if possible, try to reduce credit card limits, pay off any small loans, cancel store cards and avoid payment systems such as Afterpay/Zippay/ZipMoney as these are considered as a debt.
Pay Your Mortgage
Once you’ve determined how much you want to spend and what your repayments are likely to be, have a look at how much you are currently spending and make up the difference. For example, you’ve estimated your mortgage payment for your budget will be $2,000 per month and you currently pay $1,400 a month in rent, try putting the additional $600 away in savings.
Not only will you be saving additional funds whilst you search, but you are building the habit of paying the full cost of your mortgage. **When planning your budget, consider interest rate changes. It is always advisable to try to budget for an increase in interest rates to ensure you will be able to manage your loan if conditions change
First Home Buyers
Saving an adequate deposit when purchasing your first home can be a daunting task, however the Government has several current initiatives in place to assist first home buyers get into the market. Each initiative has certain criteria that needs to be met to be eligible. For specific information on what you might be eligible to claim, please refer to your state government website.
First Home Owners Grant (FHOG)
First homeowners buying or building a new home may be eligible to receive a grant if state criteria are met. The owners must not have previously owned or currently own a property they have lived in.
First Home Loan Deposit Scheme (FHLDS)
Usually, first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance. Under the Scheme, eligible first home buyers can make a purchase with a deposit as little as 5 per cent (lenders criteria apply)
New Home Guarantee
Under the revised New Home Guarantee, first home buyers can build or purchase a new home with as a little as a 5 per cent deposit. Transaction types include:
- Newly-constructed dwellings Off-the-plan dwellings House and land packages
- Land and a separate contract to build a new home
Stamp Duty Concession
You could be eligible to claim a first home concession for transfer/stamp duty when acquiring your first home, if certain criteria are met. To retain the benefit, you must not dispose of all or part of the property within one year of purchasing.
We Outline The Loan Process
We step you through our entire home loan process from the initial appointment to submitting documentation to settlement day.
1. Initial Appointment With Sunshine Coast Mortgages
The initial appointment is the perfect opportunity for us to meet with you and to discuss your personal goals and plans
2. Let's Consider Loan Options
We will look across our 30+ lenders and come up with a tailored finance solution to suit your requirements. We negotiate on your behalf to make the process easier
3. Choose the Right Lender for You
We will discuss a range of suitable lenders with you and assist in choosing the best solution to suit your requirements based on your personal goals and plans
4. Gather Important Documentation
We will send you an electronic list outlining all the documentation you need to provide to support your application
5. Prepare Your Loan Application
We do all the work to ensure your application can be submitted as quickly as possible
6. Submit Loan Application to Lender
We submit your loan to the lender for approval. The lender will commence assessment of your application and we will update you throughout the entire process
7. Approval From Bank
Congratulations! Your loan has been approved! Formal loan documents will be sent to you for signing and the lender will prepare your application for settlement
8. Settlement Day
It’s here – settlement day! You are now on your way to achieving your goals. Congratulations!
Are You Considering a Guarantor Loan?
Buying your first home is an exciting milestone and big financial decision. With ever changing market conditions and entry requirements, it can be increasingly difficult for first home buyers to get their foot in the door with acquiring the required deposit to make that first step. For first home buyers especially, it is common that they may turn to family for some financial assistance in getting started by being a guarantor. If this is a scenario you are considering, here are some key considerations for this loan option.
What Is A Guarantor?
A guarantor is a person who agrees to repay the borrower’s debt should the borrower default on agreed repayments. The guarantor is often a family member or close friend who has a good credit history and/or assets and equity to assist the borrower.
A guarantor loan can, consequently, enable someone to borrow either more money, or the same amount at a lower rate of interest than they would otherwise be able to secure through a more traditional loan type.
Who Can Qualify As A Guarantor?
Due to the financial risks involved, the role of guarantor is generally limited to the borrower’s immediate family members. Some lenders allow extended family members or close friends to be a guarantor, although this can depend on the type of loan and how much is being borrowed. Your broker will be able to detail how each lender defines who can be a guarantor.
How Does a Guarantor Loan Work?
Like a regular home loan, for a guarantor home loan you would borrow an amount from a lender and repay it, but the guarantor’s equity essentially acts as additional collateral should something go wrong with the repayments.
Guarantors can also allow you to borrow up to or slightly over 100% of the purchase price plus associated costs by using their equity for you loan if you don’t have the required deposit saved. By using a guarantor, you could avoid paying Lenders Mortgage Insurance if you are required to borrow 80% or more of the purchase price.
What Are The Risks Involved in being a Guarantor?
Whilst there are many benefits to having a guarantor, it is important to understand some of the key risks associated with this type of loan. As guarantor loans generally involve family members, all loan parties need to fully understand what could happen, should things not go to plan.
Future Finance
Because their property is acting as security for your purchase, this can add a layer of complexity should the guarantor wish to sell or move in the future.
Repayment Failure
Your guarantor is committing to covering your payments should you not be able to. If this is the case, not only could your home be repossessed but so too could your guarantors’ to make up any shortfall owed.
Relationship Impact
By being a guarantor, your family are showing a significant level of trust in your financial reliability. Be sure to discuss what would happen if things went wrong, how is that likely to impact your relationship?
Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) is insurance that a lender takes out to insure itself against the risk of not loan balance if the recovering the full borrower (you) were unable to meet loan repayments. LMI is a one-off fee charged by the Lender, to you, when you need to borrow more than 80% of the value of the property.
Lenders Mortgage Insurance (LMI) is insurance that a lender takes out to insure itself against the risk of not loan balance if the recovering the full borrower (you) were unable to meet loan repayments. LMI is a one-off fee charged by the Lender, to you, when you need to borrow more than 80% of the value of the property.
your broker can advise how When applying for your loan, as this is calculated using much LMI you are likely to pay various factors such as the size of the deposit and the type of loan you are applying for.
Although it is an additional cost repayment amount, LMI is that is added to your loan and people to obtain a home loan beneficial in that it allows that they might have not otherwise been able to access using smaller deposits.
LMI is NOT the same as Mortgage Protection Insurance (MPI). MPI is an insurance that can provide cover by means of paying some of your repayments or providing a lump sum should certain specified events occur such as unemployment, disability, illness, or death. If you require this cover you need to seek insurance separate to LMI.
Fixed or Variable Home Loans
So which should you choose for your loan?
You’ve committed to a purchase and now you have the decision of what type of loan you want to secure. Deciding whether to go with a fixed or variable rate loan can seem overwhelming, but there are key features of each which may make the decision easier based on your personal needs.
Did you know that you don’t necessarily need to choose one or the other outright? The benefit of your broker is that they can determine whether a split-loan is a suitable option for you. A split loan is where you have one portion (for example, $400,000 of a $500,000 loan) set at a fixed rate, and the remaining $100,000 set at variable. This can give you the benefit of both loan structures while giving you some security knowing what the majority of your repayments are going to be.
We break down a few key features of both loan structures next.
Fixed Rate Home Loans
A fixed rate home loan is a loan that has a fixed rate of interest for the selected duration of the loan. Although you may have a total loan length of 25-30 years, the fixed rate period may be anywhere between 1-5 years initially. Once that time has lapsed, you have the option whether to fix for another set period at the new fixed interest rate or let the loan roll over to a variable loan.
Pros
- Rates stay the same for the fixed term
- Peace of mind that you know what your repayments are
- Precise budgeting
Cons
- If rates decrease, you are committed to your original rate for the fixed term
- Limits are in place for additional payments to be made
- Break fees may be applicable if the loan is paid out during the fixed term
Variable Rate Home Loans
A variable rate home loan has interest rates that fluctuate; approximately in parallel with the Reserve Bank of Australia’s cash rate. As variable rate loans operate and reflect the current economic climate, they can rise and fall several times over the duration of the loan.
Pros
- Ability to make extra payments towards your loan
- Increased flexibility such a redraw facilities
- Allows offset accounts to help reduce the interest paid
Cons
- Can be unpredictable and cause uncertainty for customers
- No security in knowing when the rate can change and whether this will increase or decrease your repayments
- Can be difficult to plan ahead
How an Offset Facility Works
A mortgage offset account is effectively a savings account that’s attached to your home loan. With it comes additional benefits such as allowing you to make regular deposits and withdrawals whilst the money in the account is “offset” daily against your home loan – As a result you are only charged interest on the difference between the total loan balance and the offset amount.
The financial benefit of having an offset account against your mortgage is that it could help you save thousands of dollars in interest on your loan. Whilst it may sound out of reach, you don’t need huge sums of money to make a difference. Anything you can offset against your mortgage is going to have an impact.
For example, if you had a home loan with a balance of $500,000, with a linked offset account that held a balance of $50,000, you would only pay interest on $450,000 of your loan balance. You will continue to pay your minimum repayment amount, however you pay less interest meaning you are paying off more principle of your loan. This will ensure your loan is paid off well ahead of schedule.
The flexibility of offset accounts make them favourable as you can have savings in a linked transactional account, that assists with reducing the interest you are charged daily. Your savings however remain available to you should you need them.
Ultimately an offset account allows you to have easy access to excess funds while minimising your interest payment on your mortgage – a win/win!
Have You Considered These Additional Costs When Buying a Home?
Purchasing a property can be an expensive exercise, with several added costs involved that are often overlooked. We’ve outlined some common added expenses in the home buying process so you can be prepared for the next steps.
Loan Application Fee
It’s a one-off payment at the start of your loan application process. In a general sense it covers the preparation of loan documents, the lender’s legal fees for loan set up administration and the cost of a valuation by a licensed property valuer.
Conveyancing
In most cases, purchasers engage the service of a trusted conveyancer. A conveyancer will ensure you meet all the legal obligations involved in your property transaction, whilst assisting you through the buying process. They have a responsibility to protect your rights and will be involved in helping you navigate the purchasing process.
Building & Pest Inspection
Building and pest inspections are critical in the purchase process and could help you to identify if a property isn’t structurally sound or requires expensive repairs. An excellent building inspector will consider the condition of external features such as timber fences, sheds and retaining walls to provide an overall condition report. If any issues are determined, this can also serve as a bargaining tool in your purchase if there are concerns that need addressing.
Stamp Duty
Stamp duty is a tax imposed on home buyers by local governments and varies from state to state. Click here to calculate your stamp duty on a Queensland property purchase, or visit your local government website for all other states.
Insurance
In preparation for settlement, you will often be required to and loan type. Some states even require you to have provide proof of insurance depending on your purchase insurance immediately following signing your contract. Speak with your broker to discuss your requirements
Glossary
Break Cost
Fees charged by the lender if the loan is paid-off in full before the end of a fixed term
Capital Gains Tax
Tax payable on the profit made when selling an investment property
Conveyancing
Legal work carried out by your legal representative to transfer ownership of a property
Credit Report
A report outlining an individual’s credit history, public records and any credit black marks
Debt Servicing Ration (DSR)
The Debt Servicing Ratio measures whether you can afford the mortgage payments. To calculate the DSR, the lender uses a number of factors to work out the amount of your income that is available to repay the debt
Equity
The difference between the balance of your mortgage and the value of your property
Lender
A person or organisation who provides money to another under the proviso that it will be repaid according to set guidelines and terms
Lender’s Mortgage Insurance (LMI)
Lender’s Mortgage Insurance is a once off insurance premium that protects the lender in the event you default on your mortgage repayments
Loan to Value Ration (LVR)
The value of the loan divided by the value of the property that the loan is for (eg. if you buy a $500,000 property and need a $350,000 loan – your LVR is 70%)
Mortgaee
The lending institution
Mortgagor
The borrower (you)
Principle
The amount of capital borrowed
Settlement
The day on which the process of changing title of a property occurs. Your conveyancer will organise for the exchange of money and documents so that you become the legal owner of the property
Valuation
An estimation of the value of the property prepared by an independent professional valuer
Vendor
The person who is selling the property
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