Smart Buyers Are On The Money!
With Neil Gorman
Spring has sprung and real estate market activity is rapidly gaining pace. Low rental vacancies, interest rates bottoming out at a lifetime low, and an increasing population are all indicators that now is a great time to invest in real estate.
But having your finance options sorted so that you’re ‘market ready’ and able to confidently strike when the right property presents itself, takes careful planning.
“Buyers should arrange a meeting with an experienced broker to determine how much they can borrow,” recommends Neil Gorman, a long-time mortgage broker with Mortgage Choice.
Sound advice!
NYPD asked Neil to answer some of the common questions buyers have when looking for a loan.
Understanding your borrowing power is critical, and with seriously hot competition among Australian lenders who are offering literally hundreds of mortgage products, choosing the loan that will suit you best is challenging. A mortgage broker is a great option. They’ll do the research for you after a thorough assessment of your current situation.
How much can I borrow?
There are a variety of factors that lenders consi der when determining how much to lend to a buyer. A lender will assess your ability to borrow funds based on your income, savings, assets, expenses, current debts, and any other mortgages. As a result one lender may be prepared to lend far less, or more, than another.
Why would I go to a mortgage broker instead of my bank?
Even if your bank will lend you the amount you’re looking for, a mortgage broker will compare multiple mortgage products and make sure that you’re getting a competitive interest rate, low fees and, importantly, a loan that matches your needs and financial situation. A mortgage broker will research the best home loan product for you, completely free of charge.
How does the loan application process work?
Once the buyer has selected the lender and home loan option they’re happy with, the mortgage broker will manage the loan application process for them. This includes the initial submission of the application along with all the touch points right up until settlement day. This saves buyers a huge amount of time and hassle.
The mortgage broker will follow up the lender on the buyer’s behalf, preempt any additional questions from the lender and assist with getting all the necessary paperwork together.
How can I maximise my chances of being approved for a home loan?
Good question. This is a summary of the key things that lenders will consider for each buyer:
- Check your credit file. This is one of the first things a lender will check, and it needs to be pretty much squeaky clean or you may have issues securing an approval.
- Check your bank statements. Make sure you can account for any unusually large or suspicious withdrawals. You need to be able to justify the expense to the lender if it’s queried.
- Reduce as much other debt as possible. Car loans, personal loans and HECS/HELP debts are examples of liabilities that should be paid down as much as possible.
- Review your credit card balances. Keep in mind that with credit and store cards it isn’t the amount owed that matters most to the lender; they’ll factor the overall credit limit into your ability to repay the loan.
- Lenders will want to see a relatively stable recent employment record, a reasonable amount of time in your current job, and receiving regular income. If you recently changed positions within a company due to a promotion, received a payrise, or changed jobs multiple times in a short period of time, be sure to carefully explain that to your mortgage broker.
How much deposit do I need to have?
Almost all lenders will require you to have a genuine savings deposit of at approximately 5% of the purchase price. Ideally, this should have been accumulated over a period of at least three months. This shows that you have the ability to make mortgage repayments, although some lenders will now take into account regular rental payments.
Is a larger deposit beneficial?
Lenders will also look favorably on a larger deposit. In fact, the larger the deposit, the less lenders mortgage insurance you pay. If you have more than 20% deposit you won’t need to pay for mortgage insurance. A larger deposit also brings a better chance of getting the lowest possible interest rate from your lender and the reassurance of already having equity in your property.
How much does it cost to use a mortgage broker?
Most mortgage brokers don’t charge buyers for their services. Instead, a commission is paid to the broker by the lender. Buyers may want to check with the broker whether the commission they earn has influenced the lending options they have proposed. Many brokers, including Mortgage Choice, art paid the same commission rate regardless of the loan selected by the buyer.
It definitely pays to look before you leap into the property market. And for my money, a mortgage broker is definitely the way to go. They’ll nail the best possible deal and save you a lot of headaches.
Thanks to Neil Gorman from Mortgage Choice for contributing to today’s article. If you’d like to have a chat with Neil you can reach him on (03) 9387 9078 or click on the link to visit our website so that you can view Neil's website too!
