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car loan broker

Should I Use a Car Loan Broker or Dealer Financing?

Thinking of buying a new car but don’t know whether to go with a car loan broker or dealer financing? If you are, then this article is something you should read.

There’s nothing quite like the excitement of buying a new car. Whether you’re looking for a reliable workhorse, a people-mover for your expanding family, or something a bit flashy to go with your recent promotion, buying a car can be exhilarating. But it can also cause a bit of anxiety. 

Once the thrill of that first test drive wears off, reality sets in and, somehow, you have to pay for the thing! And for most Aussie car buyers, that means you have to make a choice – do you apply for dealer finance or talk to a car loan broker?

Gold Coast Car Loan Broker or Dealer Finance?

According to the Royal Commission into the Financial Services Industry, 90% of all car buyers in Australia use some form of vehicle finance. Of those that use finance, almost 40% will opt for dealership finance, while the rest use a variety of other sources (including online lenders and car loan brokers).

What’s the main difference between dealer finance and car loan brokers? Typically, a dealer will have a standing arrangement in place with a preferred lender. So, the car loan that they offer you will be the same loan that they offer to everyone else. In contrast, car loan brokers will have access to a panel of lenders, allowing for more choice and flexibility. 

Obtaining New Car Loans Through a Dealership

Many car buyers opt for dealership finance purely for the on-the-spot convenience. It’s a fast and simple way to obtain new car loans. However, this speedy process doesn’t always allow time for an accurate assessment of your financial needs or a comparison of different loan products. So, before you decide between using a car loan broker or dealership finance, take a few moments to consider the pros and cons of both. 

Car Dealer Financing Pros

  • It’s fast and easy: You agree on a price, sign a few forms, and the dealer will sort out the rest. The dealer needs finance to be approved if they’re going to make their sale, so they’re highly motivated to push the loan through ASAP.
  • It’s an option for buyers with low credit scores: Obtaining a new car loan usually involves a standard check of a borrower’s credit history. If your credit history is a bit spotty, you may have issues securing finance. However, some car dealerships may be able to help you secure finance, regardless of your current credit score. 

Car Dealer Financing Cons

  • You have less power to negotiate: When you organise finance through a dealer, you have limited power to negotiate for a better price. The dealer knows exactly how much you can get approved for, so there’s no motivation to lower the price.
  • You have to put a lot of faith in your car dealer: How much do you trust the person trying to sell you this car? When they tell you this is the best car finance deal available and it’s in your long-term best interests, do you believe them? It can be hard to read between the lines when the person selling you the car is also the person organising your finance. 
  • You probably won’t get the best finance deal: When you apply for dealer finance, you’re missing out on an opportunity to compare loan products. This makes it almost impossible to ensure you’re getting the best deal to suit your needs, and it may end up costing you a lot more over the life of the loan. 

Using Car Loan Brokers for Gold Coast Car Finance

discussing terms with a car loan broker while car shopping

 
A car loan broker on the Gold Coast can also offer a fast and effective method for obtaining car finance. But by using car loan brokers, you’re eliminating a lot of the doubt and risk. At Professional Lending Solutions, we have a team of experienced finance brokers who can help you find a great car loan with a competitive interest rate.
 

Car Loan Broker Pros

  • An expert does all the hard work for you: By working with a car finance broker, you gain the support of a skilled industry expert who is willing to do all the hard work for you. We’ll take care of the research, fill out the forms, and chase up the lender to prevent delays. 
  • You get access to a wide panel of lenders: Car loan brokers use sophisticated software to compare suitable loan products from a panel of lenders. We’ll compare loan fees, interest rates, features, and the loan term. This enables us to find you the best car loan to suit your needs.
  • You have an advocate working in your best interests: Finance brokers are committed to working in your best interests. This means we’ll work hard to secure your loan approval, but we won’t compromise your long-term financial well-being. Instead, we’ll talk directly with your preferred lender, explaining any irregularities in your application and negotiating for the best possible loan terms. 
  • You can negotiate for a better price: By applying for a car loan pre-approval, you can find out exactly how much you can afford to spend on your new car. This gives you a lot more power when it comes to negotiating the final price of your car because your dealer knows you can’t be talked into paying more.
  • You get personalised service: A car loan broker won’t just offer you the “one-size-fits-all” approach to car finance. This means you’ll not only receive a new car loan tailored to your needs, but you’ll also have someone willing to answer all your questions, discuss various scenarios, and find workable solutions to any roadblocks you might encounter.

Car Loan Broker Cons

  • You need to plan ahead: The process for obtaining a car loan through a broker can be simple and fast, but it does require slightly more forethought (you can’t walk into the dealership and make a same-day purchase). This is why it’s a great idea to talk to us about pre-approval as soon as you start thinking about buying a car. That way, when you’re ready to make a purchase, you’ll have a faster turnaround time on your loan approval. 

Access Multiple Lenders for the Best Car Loan Deals

A car loan broker’s diverse panel of lenders gives you access to a broad spectrum of financial solutions. This makes it much easier to tailor the finance product to your unique situation and preferences. Because we have an extensive lender network, we’re able to match clients with lenders accommodating various credit scores, income levels and financing needs. Whether you’re looking for competitive interest rates, flexible terms or specialised loan features, we’ll be able to help you find what you need.

This versatility is what distinguishes car loan brokers from dealership financing. The power to choose your lender makes it easier to gain the best possible loan terms for your needs.

Car Loan Broker vs. Dealer Finance: Which is Best?

woman deciding between a car loan broker and dealer financing

To illustrate the benefits of using a car finance broker, consider the following scenario:

Sarah is a Gold Coast resident with an average credit score who wants to finance her dream car. With dealership finance, she would face limited options and a predetermined interest rate. In contrast, a car loan broker would assess her financial profile and provide access to a diverse network of lenders. By leveraging this panel, Sarah would be able to secure a competitive interest rate tailored to her budget and financial goals. The expertise of the broker would ensure transparency during negotiations with lenders, giving Sarah confidence that she’s getting the best possible deal.

The broker would also encourage Sarah to apply for pre-approval early in the process. This would not only speed up the purchasing process but would also give Sarah the confidence to negotiate a better price.

Talk to a Car Loan Broker for Access to the Best Deals

New car loans can help car buyers transform a dream into a reality. But finding the best new car loans can present a challenge. At Professional Lending Solutions, our experienced team of car loan brokers is committed to finding you the best car loans to suit your unique circumstances. 

We’ll compare a range of new car loans from our diverse panel of lenders and determine which loan products will be most suitable.

Don’t gamble on dealership finance. Book an appointment with a car loan broker at Professional Lending Solutions today for expert advice that you can trust.

debt recycling 

How Debt Recycling Can Help You Build Wealth

Have you ever heard of the term debt recycling? If you have, do you know what it’s for and how you can use it?

Australians appear to have a real love-hate relationship with debt. Everyone seems to agree that debt is terrible… until we’re offered a new credit card with “6-months interest-free”. As a nation, Australians now own a total of 17.7 million credit cards, with a combined national credit card debt of $40.57 billion. 

This raises some serious questions about debt management. First of all, is all debt bad debt? How do you tell the difference between good debt and bad debt? What is debt recycling? Can you use debt recycling to build wealth? And how can a Gold Coast finance broker help you achieve an effective debt recycling strategy? 

Is All Debt Bad? 

It might sound crazy, but not all debt is necessarily bad. Now, not being able to repay your debt – that’s bad. Taking on more debt than you can handle can lead to a bad credit rating and a lot of unnecessary stress. In a worst-case scenario, you could even end up losing your home. But manageable debt that is helping you work towards a specific goal – now that can be a very good thing. 

What Are the Different Kinds of Debt?

So, what are the different kinds of debt? While debt comes in various forms, it can be listed in three distinct categories:

Necessary Debt

This refers to debt that is for essential purposes (i.e., keeping a roof over your head). For debt to be classified as “necessary” it needs to be “reasonable and justifiable” (so, no, a jet ski does not count). Your home loan is a good example of a necessary debt. It’s not tax-deductible, but in the long run, it will result in you owning your own home (an asset that should increase in value over time). Another example would be HECS-HELP debt, which pays for your higher education.

Bad Debt

Bad debt is when you owe money, but you’re unlikely to see any real benefit once the loan is finally repaid. Credit card debt is a classic example of bad debt. Generally, you’re paying high interest on items that lose their value very quickly, possibly even by the time you’ve paid off the debt. Other examples of bad debt would include ‘buy now, pay later’ schemes and ‘payday loans’ (where you get a short-term loan with high interest).

Good Debt

Good debt is the kind that can help you achieve your financial goals and build wealth. For example, when you take out a loan on an investment property, you’re gaining debt. But the interest on that loan is tax-deductible (so it’s beneficial now), and it’s paying off an asset that is highly likely to increase in value over time.

What is Debt Recycling?

debt recycling conceptUnderstanding the difference between good debt and bad debt is crucial if you want to succeed at debt recycling. What is debt recycling?  According to Michael Yardney (a multi-award-winning property investment advisor), debt recycling is “a sound investment strategy” that can help you build personal wealth.

Debt recycling is when you borrow against the equity in your existing property and then use those funds to invest in income-generating assets (such as an investment property). The debt is tax-deductible and provides an ongoing income (usually in the form of rent) which can then be used to cover the mortgage repayments. This cycle can then be repeated once you build up more equity.

Should You Use A Debt Recycling Calculator? 

As with any kind of financial strategy, debt recycling involves a certain level of risk. One key element is ensuring that you can manage the added debt successfully. Because of this, some potential investors will use a debt recycling calculator to estimate their potential costs vs. returns. 

While an online debt recycling calculator can be useful as an initial indicator, it’s important to keep in mind these tools are generic by design. This means that a debt recycling calculator can’t offer advice tailored to your financial situation.

This is why it’s a good idea to talk to an experienced mortgage broker before you decide to implement a debt recycling strategy.

How Can You Use Debt Recycling to Build Wealth?

A good debt recycling strategy involves taking necessary debt (your existing mortgage) and then using it to create good debt. Basically, the process works like this:

  1. You use the equity in your existing home as a deposit for an investment property loan.
  2. You buy an investment property.
  3. This investment property delivers immediate income (in the form of rental returns), which can then be used to service the loan repayments.
  4. You continue to pay off your investment property loan while also paying down your home loan. Both properties experience long-term capital growth, increasing the total value of your assets.
  5. By the time you’re ready to retire, you’ve paid off both loans, leaving you with a home you can live in and an investment property that will provide a steady income stream throughout your retirement.

How a Debt Recycling Strategy Works

This all sounds good in theory, but in practice, what would a debt recycling example look like? Consider the following debt recycling example:

Shannon is a homeowner in Brisbane with a $500,000 mortgage and $200,000 in home equity. Shannon talks to an experienced broker about debt recycling strategies and decides to use the available equity as a deposit for an investment purchase. Shannon buys a $400,000 investment property, rents it out, and uses the rental income to cover the loan repayments.

Over time, Shannon pays off both home loans in full, resulting in a debt-free home and an investment property that now provides an ongoing income stream. This strategic debt recycling approach allowed Shannon to leverage existing debt for wealth creation, which now funds a comfortable retirement. Shannon decides to celebrate by buying a boat.

A Gold Coast Finance Broker Can Help with Your Debt Recycling Strategy 

Of course, any kind of significant financial investment should only be made after seriously considering your personal financial situation. But if you’re interested in obtaining an investment property loan and you’re not quite sure where to begin, start by giving me a call on Ph: 0421 934 033 or Ph: 07 5597 6049. As an experienced Gold Coast finance broker, I can explain in more detail exactly “what is debt recycling?” and help you evaluate the various pros and cons of this particular finance strategy.

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Home Loan Refinancing in 2024: Is It a Good Time to Refinance?

With interest rates rising (along with the cost of everything else!), it’s no wonder so many people are now showing interest in home loan refinancing. The Reserve Bank of Australia (RBA) has spent the past 18 months increasing the official cash rate in a bid to control inflation. From a historic low of 0.10% in early 2022, the cash rate just kept climbing! 

By the time Christmas 2023 rolled around, the cash rate was sitting at 4.35% and thousands of Aussie homeowners were paying significantly more for their mortgages than they were back in 2021.

Aussie Homeowners Feeling the Pinch of Rising Interest Rates

As per the latest Finder survey, one in five mortgage holders (that’s over half a million Aussies) admit to struggling with their repayments once their interest rate increased by 3%. Of those affected, about 65% are concerned about defaulting on their home loan payments and around 145,000 said they might be forced to sell their homes in a worst-case scenario.

Despite these shocking statistics, an overwhelming 8.5 out of 10 Australians admit they haven’t taken any kind of action to remedy the situation.

How Much Would an Interest Rate Rise Cost You?

In another alarming statistic, 75% of Australians are unaware of how a cash rate increase would impact their household budget. To paint you a picture, here’s a real-world scenario using the PLS Refinance Home Loan Calculator:

Imagine you had a 30-year home loan with a balance of $650,000 and an interest rate of 2.6%. In this situation, your monthly repayments would be $2,603. But then your 4-year fixed term ends and the loan automatically rolls over onto the lender’s standard variable rate of 6.55%. All of a sudden, your monthly repayments would increase to $4,130. That means you’d be paying an extra $1,527 every month, or over $18,000 more in the first 12 months alone! This example illustrates why home loan refinancing is so important in 2024.

Fortunately, there is some good news. As interest rates have climbed, so have the number of Australians choosing to refinance a home loan (over 450,000 during FY23!). This has generated some serious competition amongst lenders, who have responded with some excellent home loan refinance offers.  

To find out how much you could save with a home loan refinance, talk to an experienced mortgage broker.

How Can a Home Loan Refinance Help You in 2024?

Everything will be more expensive in 2024. Our grocery bills have gone up, our power bills have spiked, our insurance bills just keep climbing…and don’t even get me started on the cost of a takeaway coffee! But while these price hikes may be causing a little discomfort, the successive interest rate hikes are likely to trigger the greatest amount of financial stress for the average Australian homeowner.

But by regularly reviewing your home loan, you can check the competitiveness of your current rate against the home loan refinance rates now available. A mortgage broker specialising in home loan refinancing can help you lock in a competitive rate now so you can have peace of mind that you’re not paying too much over the months and even years ahead.

At Professional Lending Solutions, we encourage you to review your home loan annually with the help of a mortgage broker. A routine home loan refinance could save you as much as 1% in a year. And while 1% may not sound like much, it can translate into thousands of dollars of annual savings!

How Does Home Loan Refinancing Work?

mortgage broker discussing home loan refinancing with a client

When you refinance a home loan, you’re essentially taking out a new loan to pay off your old one. This new loan usually has a lower interest rate, which can save you a lot of money in the long run.

Home loan refinancing allows you to switch from a variable to a fixed interest rate, or vice versa. A variable interest rate will go up and down with the market, while a fixed interest rate will stay the same for the entire life of the loan.

Home loan refinancing also enables you to tap into any equity you may have built up in your property. This equity can be leveraged to get you better home loan refinance rates or cashed out to finance a renovation or new vehicle purchase.

One thing to keep in mind when it comes to refinancing and equity is your Loan to Value Ratio (LVR). The LVR shows how much of the property value you own (or how much equity you have) and what percentage is still covered by the mortgage. You’ll want to make sure you have at least 20% equity to avoid paying the Lenders Mortgage Insurance (LMI) on a home loan refinance.

Chat with a mortgage broker to find out how much equity you have and how it can benefit you when you refinance a home loan.

What are the Benefits of a Home Loan Refinance?

There are significant benefits to home loan refinancing. These include:

Lower Monthly Repayments

Refinancing allows you to lock in a lower interest rate, resulting in reduced monthly mortgage repayments.

Enhanced Financial Flexibility

Transitioning between variable and fixed interest rates can provide greater financial flexibility. It can also shield you from market fluctuations and provide added stability in the face of rising interest rates.

Long-Term Cost Savings

By capitalising on lower home loan refinance rates, you could achieve significant long-term cost savings (improving your overall financial situation).

Access to Home Equity

Home loan refinancing unlocks your ability to access equity in the property. This could help you achieve various financial goals such as debt consolidation or renovation projects.

Reduced Financial Strain

Reduced monthly repayments will help to alleviate financial strain, making mortgage commitments more manageable and minimising the risk of default.

Customised Loan Terms

When you refinance a home loan, you can often tailor the loan terms to suit your evolving financial circumstances. This ensures that your mortgage will continue to align with your future goals.

Debt Consolidation

Accessing equity through home loan refinancing could enable you to consolidate high-interest debts. This will help to streamline your finances and reduce overall interest payments.

Improved Financial Position

Overall, home loan refinancing is a strategic financial move that not only helps improve your current financial situation but also positions you for improved financial health and resilience.

Clearly, there are many benefits to a home loan refinance. However, as with any major financial decisions, it’s a good idea to seek expert advice. A mortgage broker can help you determine if any current home loan refinance offers are right for you.

When Can You Refinance a Home Loan?

knowing when home loan refinancing is ideal

The home loan market has seen significant change over the past 18 months, with new, more competitive products being offered constantly. Now is a good time to take advantage of these home loan refinance deals.

Are you trying to decide if you should refinance a home loan? The following situations are usually a good indication that it’s time to talk to a broker about refinancing a home loan:

  • When you want to take advantage of ‘new customer’ home loan refinance rates
  • When your introductory rate or honeymoon rate ends
  • When your fixed term period ends
  • When your economic circumstances change
  • When you want to access equity in your home
  •  When you want more flexibility in your home loan

How Long Does It Take to Refinance a Home Loan?

How long it takes to refinance a home loan will usually depend on a few different variables. Mostly it will come down to how long it takes your existing lender to discharge your home loan to your new lender. On average, the total process will take 2-4 weeks (although, in some cases, it can take up to 6 weeks).

Talk to Professional Lending Solutions About Home Loan Refinance Offers

If you’re thinking about refinancing your home loan, NOW is the time to act. But that doesn’t mean you should just rush in and grab the first home loan refinance offer you see. It’s important to work with a professional who understands the current lending landscape. 

At Professional Lending Solutions, our brokers are experts in comparing home loan refinance rates. We’ll analyse the various offers available and then make an impartial recommendation based on which home loan refinance offer is best for you. We’ll guide you through the entire process, from start to finish.

Let us help you take advantage of current home loan refinance offers. Get in touch today to discuss your home loan refinancing options with our friendly brokers.

guarantor home loan_banner

Guarantor Home Loan: Can Parental Guarantee Help You Buy a House?

Ever heard of a guarantor home loan? If you haven’t and you’re planning on buying your first home, then this article is for you. Now, picture this scenario.

You’ve been sticking to your budget; you’ve cut back on all non-essentials and you’ve been diligently saving for years…but it still feels like you’ll never be able to save that 20% deposit for a home loan. With a booming Gold Coast property market and skyrocketing interest rates, the goal of owning a home may feel like it’s drifting further and further away. As a result, many prospective first home buyers are now looking to their family for help. How can parents help first home buyers get a mortgage? A guarantor home loan could be the solution.

Gold Coast Property Prices Booming

Property prices on the Gold Coast have boomed recently, thanks to a surge in interstate and overseas migration. In 2021, the Queensland property market was one of the strongest performing in the country, with increases of over 30% in multiple locations. While this phenomenal growth has since slowed, we’re still seeing property prices increase. In 

September 2019, the Gold Coast’s median house price was $642,000. By February 2023, it was $945,000. That’s an increase of 47.2% in less than 3.5 years! For first home buyers trying to save a 20% deposit, this increase in property prices has moved the bar of homeownership about $60,000 higher. 

Add to this the significant increases in rent costs and grocery bills across the country, and it’s easy to see why it now takes 10 years on average to save a 20% deposit. But with a guarantor mortgage, you could buy your first home without having to wait so long.

Could a Guarantor Home Loan Help You Buy Your First Property?

It’s no surprise, then, that many first home buyers are looking for guarantor home loans. In fact, the ‘Bank of Mum and Dad’ is now recognised as one of the top 10 lenders in Australia, with loans totaling about $35 billion (for perspective, that’s more than the Bank of Queensland)! Back in 2010, only about 12% of first home buyers were applying for guarantor loans. By 2017, that figure had increased to 60%.

And data shows that guarantor loans have been instrumental in helping a growing number of first home buyers. The Australian Housing and Urban Research Institute (AHURI) has stated that borrowers with a home loan guarantor are twice as likely to enter the property market compared to those without this support.

What Is a Guarantor Home Loan?

A guarantor home loan is one of the most common ways parents can help their kids get a foot on the property ladder. When providing a parental guarantee, your parents basically use the equity in their own property as collateral for your home loan. How does this work? 

Imagine you’ve saved up a 10% deposit for a home loan. But to avoid paying Lenders Mortgage Insurance (LMI), you need a minimum of 20%. Instead of making you wait until you’ve saved the extra funds, your parents offer the additional 10% from their equity as a form of security. They don’t have to physically hand over the cash, and you qualify for a home loan without paying LMI. Sounds like a winning situation! 

What Else Should You Know About Parental Guarantees?

 
father and son discussing guarantor loans

Keep in mind though, when your parents act as a home loan guarantor, they become liable if you default on your repayments. In a worst-case scenario, they could lose their home to repay your debt. That’s why a guarantor mortgage arrangement isn’t something to take lightly. 

As with any major financial decision, it’s important to seek expert advice before weighing up all the relevant pros and cons. If you’re thinking about asking your parents to act as a home loan guarantor, why not start by contacting the experienced brokers at PLS for some free advice?

Besides Guarantor Loans, How Else Can Parents Help?

After evaluating all that’s involved, your parents may decide that they’re not comfortable acting as your home loan guarantor. If that’s the case, there are still plenty of other ways they can help.

From offering a financial gift or a cash loan to letting you move back in and live rent-free for a while, parents can provide valuable assistance to their first home buyer children.

1.   Receiving a financial gift

Instead of a parental guarantee, a financial gift from your parents can be used to top up a deposit for a home loan. However, keep in mind that most lenders will also want to see a history of “genuine savings” as part of your home loan application.

If you have no savings and then receive a large cash deposit into your account, the lender won’t view this as “genuine savings”. You’ll either need to show a history of your own savings (at least 3 months) in addition to the cash gift or, you’ll need to hold the cash gift in your bank account (without spending any of it!) for a minimum of 3 months. 

2.   Accepting a cash loan

Another alternative to a guarantor home loan is for your parents to offer you a cash loan. Keep in mind that, with a cash loan, you’ll need to manage repayments to your mortgage lender and your parents simultaneously (which could place you under added financial stress).

It’s also important to know that a lender won’t view a cash loan as a form of “genuine savings”. For these reasons, careful financial management is essential when accepting a cash loan from your parents.

3.   Letting you live with them rent-free

Rather than act as a parental guarantee or provide you with cash, your parents may feel more comfortable with having you move back home for a while. This might not be your preferred option (moving back in with the parents is never easy!) but living rent-free can be a viable alternative to a guarantor mortgage. 

If you’ve been paying $500 a week in rent, you could potentially save an extra $26,000 in just 12 months of rent-free living. That represents a significant boost to your savings in a relatively short space of time. This option also allows your parents to provide valuable assistance with minimal financial risk to their own assets. This makes rent-free living a beneficial arrangement for both parties.

4.   Buying a house with your parents

Instead of a guarantor home loan, you could consider buying a house in partnership with your parents. In this scenario, both you and your parents contribute funds to purchase a property and you are all registered as co-owners on the property title. 

This would allow you to buy a property much sooner, and it would act as a form of investment for your parents. If you’re considering co-ownership with your parents, it’s important to work through and agree on all the details in advance. For example:

Who will live in the house?

Who is responsible for ongoing costs (council rates, maintenance, insurance, etc.)?

Will the person who lives in the house pay a form of rent?

What will happen if one party wants to sell their share in the property?

A detailed and signed agreement is essential when buying a property in partnership with your parents, as it will help prevent misunderstandings down the track.  

These are just some of the alternate ways that parents can assist their children with buying a property, without signing on to a guarantor home loan.

What Other Help Is Available for First Home Buyers? 

 
happy daughter talking to mom about her guarantor home loan

There are also various government and lender initiatives available that have been designed to assist first home buyers. For borrowers who don’t have a parental guarantee, these programs could be a viable alternative to help you secure a mortgage faster. These include the: 

To find out more about any of these initiatives, talk to a mortgage broker today.

Talk to a Broker About a Guarantor Mortgage

A home loan guarantor could help you buy your first home sooner, without having to pay Lenders Mortgage Insurance. To find out more, book a free appointment with the friendly team at Professional Lending Solutions. Or give Phil a call on Ph: 0421 934 033 or Ph: 07 5597 6049. 

 
home loans for doctors_banner

All About Home Loans for Doctors and Medical Professionals

The average Australian might think it’s easy to get a home loan when you’re a doctor. After all, ATO reports show that 5 out of the top 10 highest-paying jobs in Australia are all within the medical profession. But when it comes to home loans for doctors and other medical professionals, it’s not always that simple.

Doctors have to spend years studying, which can lead to substantial HECS/HELP debt. While newly qualified doctors could be earning a substantial wage, they may have been unable to save for a deposit while studying. And even though a doctor may receive substantial amounts of overtime pay, not all lenders will factor this in when calculating borrowing capacity.

Fortunately, there is a solution.

Home Loans for Doctors

As a medical doctor finally working in your chosen field, you’re understandably ready to start climbing the property ladder. But realistically, it could take you years to achieve this goal if you have to save for a 20% deposit first. 

This is where doctor mortgage loans offer the perfect solution. A medical doctor mortgage is a specialised home loan tailored for medical professionals. It gives those in the medical profession access to favourable lending criteria customised to suit the unique needs of doctors.

So, what home loans for doctors are available? And how can a mortgage broker help with financing for doctors?

Why Do Lenders Offer Special Home Loans for Doctors?

Mortgage lenders are all about minimising risk. Every home loan application is carefully assessed for risk because lenders don’t want to issue loans to borrowers who will default on their repayments. Borrowers who work in the medical profession are typically deemed low-risk. This is because, statistically, doctors have some of the lowest mortgage default rates in the country.

Additionally, even qualified doctors who are just starting out will usually receive an income that is considered ‘above average’ for most first-home buyers. And as they develop more experience, this income is likely to grow.

So, when a lender looks at an application from a doctor, they see a low-risk borrower who has a high potential for ongoing future investment. This is why some lenders are willing to offer special home loan deals to those working in the medical profession.

What Are Doctor Mortgage Loans?

doctor checking out details on home loans for doctors_banner

A home loan for doctors is a type of specialist mortgage product exclusively available to select medical professionals. It is characterised by having more relaxed qualifying criteria when compared with a typical home loan. 

A medical doctor mortgage may also come with some great perks, such as discounted interest rates and more flexible loan terms. This is fantastic news for those in the medical profession who are ready to dip their toes into the real estate market, whether as a first home buyer or as an investor.

What Home Loans for Doctors Are Available?

There are a few different medical doctor mortgage products available for those working in the profession. Some lenders offer discounted interest rates, while others will relax the typical first-home buyer lending criteria. The most common home loans for doctors will usually include some of the following features:

  • The option to borrow 105% of the total property value if you have a guarantor.
  • The ability to apply for a loan with just a 5% deposit and no need to pay Lenders Mortgage Insurance (LMI).
  • Relaxed criteria for accepting “genuine savings”.

To find out more about what home loans for doctors are currently being offered, contact the team at Professional Lending Solutions.

Lenders Mortgage Insurance Waiver on Home Loans for Doctors

A borrower is typically charged Lenders Mortgage Insurance if their deposit is lower than 20% of the property value. With LMI, a borrower will ultimately end up paying thousands of dollars extra on their mortgage. 

This is where home loans for medical doctors and a medical mortgage broker become incredibly valuable. If a doctor is purchasing a property that they intend to occupy, their LMI could be waived for doctor mortgage loans up to 95% LVR (loan-to-value ratio). This means you’d only need to save for a 5% deposit.

While the LMI waiver can be an excellent option for first home buyer doctors, it’s important to keep in mind that specific lending criteria will still apply. Some lenders may impose postcode restrictions, meaning properties purchased in high-risk postcodes would not qualify for the LMI waiver. There may also be added restrictions on interest-only doctor mortgage loans.

The LMI waiver can apply for doctor mortgage loans up to the value of $4.5 million. This waiver is available with most home loans for doctors, provided you’re a member of an approved industry organisation. To find out more about specific eligibility requirements, talk to the experienced brokers at Professional Lending Solutions.

Eligibility Criteria: Who Qualifies for a Medical Doctor Mortgage?

Who can apply for a doctor mortgage loan? Eligibility criteria for exclusive discounts or LMI waivers will ultimately come down to your choice of lender. In general, lenders will be willing to accept applicants with a good credit history, stable employment, genuine savings and minimal debts (like credit cards or personal loans). They will also calculate borrowing capacity to ensure the borrower can service the value of the loan on their current income.

For medical professionals, eligibility must be verified on the Australian Health Practitioner Regulation Agency (AHPRA) website or, in the case of veterinarians, through a relevant veterinary board.

Typically, the following medical professionals will find that they are eligible to borrow a loan-to-value ratio of 95%, without having to pay for Lenders Mortgage Insurance.

  • Doctors
  • Dentist
  • Optometrist
  • Physiotherapist
  • Psychiatrist
  • Chiropractor
  • Pharmacists
  • Veterinarian

A Step-by-Step Guide to Applying for Home Loans for Doctors

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1. Do the research: Start by identifying which lenders offer home loans tailored to medical professionals and review the specific eligibility criteria (to ensure you qualify).

2. Get your paperwork together: Collect the necessary paperwork that you’ll need to support your application. This usually includes:

  • Proof of identity
  • Proof of income
  • Evidence of genuine savings
  • Details of any existing debts

3. Confirm your status as a medical professional: Lenders providing home loans for medical doctors will require verification of your professional status, usually with the Australian Health Practitioner Regulation Agency.

  • Choose a home loan product: Compare the various doctor mortgage loans available to identify which product aligns with your financial goals and offers favourable terms.
  • Submit the application: Fill in the application form and attach the supporting documentation. Ensure all paperwork is complete and accurate before submitting.
  • Approval and finalisation: The lender will assess the provided information to ensure you meet the eligibility criteria. Once approved, you’ll be provided with a contract to finalise the loan details.
  • Settlement: It’s a good idea to work with legal professionals to ensure a smooth settlement process. Once settled, congratulations! You’re officially a homeowner!

Top 4 Tips when Applying for a Medical Doctor Mortgage

Applying for a home loan is one of the most significant financial decisions you’ll ever make. To ensure you make the best decision to suit your long-term financial needs, consider:

#1   Taking time to explore special features and discounts offered by lenders for medical professionals.

#2   Strengthen your application in advance by:

  • Maintaining a good credit history.
  • Obtaining stable employment and income.
  • Building genuine savings.
  • Minimising existing debts.

#3   Consider obtaining pre-approval before you start house hunting. This will give you a clear understanding of your borrowing capacity and strengthen your position when making offers.

#4   Talk to a broker who specialises in obtaining medical doctor mortgages.

How Can a Mortgage Broker Help with Finance for Doctors?

While it’s true that some lenders are willing to make special exceptions when it comes to finance options for doctors, this isn’t always the case. And not all lenders will offer the same deals, interest rates or loan structures on doctor mortgage loans. 

To make sure you get the right home loan to suit your needs, the best thing to do is talk to a broker. This is because we can:

  • Make sure you have access to the widest possible panel of lenders.
  • Assess the various home loan products on offer and determine which represents the best solution for both your short- and long-term financial needs.
  • Set up the loan in a way that will minimise complications should your circumstances change.
  • Ensure you have access to the right home loan features (such as allowing for added repayments or the inclusion of an offset account).

How Can Professional Lending Solutions Help with Home Loans for Doctors?

At Professional Lending Solutions, we understand that, as a medical professional, you’re busy. You don’t keep standard office hours, and you don’t have time to waste on paperwork and unnecessary appointments. That’s why we offer flexible meeting arrangements that can accommodate your changing schedule. We’ll take care of everything relating to your application, and we won’t bother you with the little things. 

In fact, we’ll jump through all the necessary hoops on your behalf (leaving you to get on with more important things). To find out more about home loans for doctors, book a virtual, phone or in-person appointment for a time that suits you.

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Self-Employed First-Time Home Buyer: Step-by-Step Guide

Are you a self employed first time home buyer? Are you feeling overwhelmed by some of the challenges that come with applying for a mortgage when you’re self-employed? If so, you’re certainly not alone. What you need is some expert guidance, delivered in a way that is easy to understand. What you need is a ‘Self-Employed and First-Time Home Buyers Guide’.

As a self employed first home buyer, you will encounter some unique issues. You’ll be asked to provide proof of a stable income; you may face stricter lending criteria and there may seem to be an endless amount of paperwork involved. Fortunately, it’s not all bad news for first home buyers who are also self-employed. 

Why You Need a Self Employed First Time Home Buyer Guide 

There has been a steady increase in the number of Australians who work for themselves. Self-employment now accounts for 16.6% of the Australian workforce. Of those who are self-employed, the Australian Bureau of Statistics (ABS) classifies 1.1 million as independent contractors (accounting for 8% of the workforce). With the rise in self-employment, there has been a natural and simultaneous upsurge in the number of first-time home buyers who work for themselves.  

Many self-employed contractors or small business owners experience a certain amount of financial variability. Some months you might receive payment for multiple completed jobs and be flush with cash. During other months, you may be mid-way through a project and waiting until it’s completed before issuing an invoice. 

This irregularity can make it difficult to prove to a lender that you’ll be able to service a monthly mortgage repayment. Additionally, it can be hard for self-employed borrowers to meet the standard documentation requirements of some lenders.

This is why it’s so important to consult with a reputable ‘Self-Employed First-Time Home Buyers Guide’. With the right advice, a self-employed first home buyer can get the necessary paperwork together, and follow practical steps to improve their application.

Self Employed First Time Home Buyer Preparation Guide

self employed first time home buyer getting tips from mortgage broker on phone

If you’re self-employed and planning to buy your first home, then there are some practical steps you can take now to get prepared. These include:

1. Try to improve your credit score

This is a good tip for anyone who wants to apply for a home loan, but it is especially important for a self employed first time home buyer (since you’ll likely face stricter lending criteria). Start by checking your credit report to make sure it doesn’t include any errors. 

Once you’re sure everything is in order, try to boost your credit score by paying all your bills on time and reducing debt (things like personal loans and credit cards). It’s also important to hold off on applying for any new forms of credit, as this will have a short-term negative impact on your credit score.

2. Get your paperwork together

Start compiling all of the paperwork you’ll need to apply for a home loan. This may include up-to-date tax returns, business activity statements (BAS), profit and loss statements and copies of your bank statements for the past few months. It can be a good idea to speak with your accountant at this point to ensure everything is accurate and in order. 

The lender will want to see some evidence of an overall stable income, even if this may fluctuate from month to month. If you have evidence of a steady income (in the form of an ongoing contract with a customer), this can also be used to support your application.

3. Put together (and follow!) a realistic budget

Start by analysing your cash flow throughout the past year or two to identify any patterns. Do you see your income vary based on season or at certain points throughout the financial year? Once you’ve identified these patterns, put together a conservative budget that you can easily manage during these periods of lower income. 

3. It’s also a good idea to build up an emergency savings fund to cover unexpected breaks in your income. This demonstrates to a lender that you’re living within your means and planning for periodic income downturns.

4. Talk to a mortgage broker

It’s a good idea to consult with a mortgage broker, even if you’re not yet ready to apply for a home loan. An experienced broker can be your ultimate self-employed and first-time home buyers guide. They’ll be able to assess your current financial situation and provide expert advice on any other practical steps you can take to get ready to apply for a home loan.

Mortgage Brokers: Your Ultimate Guide for Self Employed Home Loans

A self-employed first home buyer can have a positive experience obtaining a mortgage. The key is to be diligent and proactive throughout your home buying journey. Implementing the suggestions in this ‘Self-Employed First-Time Home Buyers Guide’ is a great first step. But to really take your home buying plans to the next level, you need to talk to an experienced broker.

At Professional Lending Solutions, we’re extremely proud of our reputation as brokers who specialise in helping self-employed first-time borrowers. If you’re ready to get started with buying your first home, or even if you’re just after some free and friendly advice, contact our office today.  

Self-Employed Mortgage Approval

Mortgage Success for the Self-Employed: Tips and Strategies

Obtaining self-employed mortgage approval can be tricky. Why? Because a self-employed person can’t just hand over a couple of months’ worth of payslips as evidence of a regular salary. As a result, mortgage options for self-employed individuals used to involve a lot more stress and a lot more paperwork. However, that was the old days. 

If you’re self-employed and in the market for a home loan, then there’s good news: it doesn’t have to be that hard any more. Qualifying for a mortgage when self-employed has gotten a lot easier.

A Growing Demand for Mortgage Options for Self-Employed Individuals

According to the latest statistics, self-employment accounts for 16.6% of the Australian workforce. That’s around 2.2 million Australians who are now working for themselves! As the demand for mortgages among self-employed individuals continues to surge, the industry has seen an increasing number of lenders who now offer solutions.

Challenges of Self-Employed Mortgage Approval

small business owners figuring out how to get a mortgage as a self employed person
  • A lack of documentation: A self-employed individual generally can’t provide routine payslips prepared by a third party. Because of this, a lender may ask for several years’ worth of financial statements prepared by an accountant.
  • Variable income streams: When you’re self-employed, your income is more likely to fluctuate. Instead of receiving your salary every week, fortnight or month, you’ll get paid once a job is completed. This irregularity can make some lenders question if the borrower will be able to make monthly home loan repayments.
  • Business expenses offsetting taxable income: Most businesses will offset their taxable income using authorised business expenses. These deductions are beneficial for the business (because they reduce the amount of tax owed), but they can also make a business seem less profitable (which could be a red flag to a lender). 
  • Stricter credit requirements: Some lenders will apply stricter credit requirements when it comes to self-employed mortgage approval. This is done in an attempt to offset the “higher risk”, but it has the effect of making things more difficult for self-employed borrowers.
  • Proof of long term business viability: Lenders may ask for proof that a self-employed individual’s business is viable for the long term. They may ask a borrower to provide proof of how long they’ve been operating or show contracts for future ongoing work.

Fortunately, these challenges can be successfully overcome thanks to lenders who now offer a range of mortgage options for self-employed individuals.

Mortgage Options for Self-Employed Individuals

  • One of our top tips for self-employed mortgage approval is to explore all your options with the help of a mortgage broker. This will make it easier to figure out exactly which kind of loan is going to be right for you. In Australia, lenders offer the following mortgage options for self-employed individuals:

    1. ‘Full Doc’ loans: A full doc loan is a great solution for self-employed borrowers who have been in business for a while and have plenty of documentation to back up their application. Usually offering a competitive interest rate, this kind of loan will require several years of tax returns, financial statements and bank statements (plus a strong credit rating).
    2. ‘Low Doc’ loans: Low doc loans are specifically designed for people who are self-employed and who don’t have a lot of financial paperwork to back them up. Up-to-date business activity statements (BAS) or a letter from your accountant can often be used to prove your income (instead of full business financials). A low doc loan often requires a bigger deposit and may come with slightly higher interest rates.
    3. ‘No Doc’ loans: As the name implies, this kind of loan requires minimal or no documentation to prove your income (although you’ll still need to provide proof of ID and other standard loan paperwork). While a no doc loan may make things easier for a self-employed borrower, they come with some pretty strict criteria and, often, higher interest rates (because the lender views it as a higher-risk loan).
    4. Asset-backed loans: An asset-backed loan could be a good solution for a self-employed borrower who already has some assets that they can offer as security on the loan. However, an asset-backed loan will usually still attract higher interest rates.
    5. Non-conforming loans: A non-conforming loan can be a simple way of qualifying for a mortgage when self-employed. They’re designed for borrowers with a “non-traditional” financial situation, and they’ll normally come with higher fees and interest rates. This kind of loan can be a good temporary loan option which can later be refinanced once you’ve demonstrated that you’re reliable with repayments.

    Fortunately, there are now quite a few lenders in Australia who offer mortgage options for self-employed individuals (so you’ve got a range to pick from). Eligibility and lending criteria will differ between lenders, but a good mortgage broker can compare all the different options available and help you figure out which option is going to be best for you.

Self-Employed Income Documentation for Mortgages

  • Self-employed income documentation for mortgages will vary depending on which lender you decide to apply with. Besides the usual proof of ID requirements, you’ll probably also need to provide at least some of the following:

    • Up-to-date tax returns for the last 2-3 years (business and personal).
    • Business Activity Statements (BAS) for the past 1-2 years.
    • Profit and Loss Statements for the current financial year, plus 2-3 years prior.  
    • Bank statements for the past 3-6 months (both personal and business).
    • Business financial statements (including balance sheets and cash flow statements).
    • A letter from your accountant confirming your income and verifying that all financial statements are correct.

    If you’re worried you won’t be able to provide all of the above information (for example, if you’ve been self-employed for less than 2 years) then talk with your broker about what your best options will be for self-employed mortgage approval.

Tips for Self-Employed Mortgage Approval

  • Besides talking to an experienced mortgage broker, what else can you do to improve your chances of qualifying for a mortgage when self-employed? Here are some of our top tips for self-employed mortgage approval:

    1. Improve your credit score: This is something really simple that can make a lot of difference. Make sure you pay all your bills on time and try to reduce debt.
    2. Get your paperwork together:  It’s easy to get a little behind with things like tax and BAS when you’re self-employed. So, take a bit of time to get on top of all the paperwork. Make sure things are up to date, accurate and filed so they’re easy to find.
    3. Save for a bigger deposit: The bigger your deposit, the more likely a lender will be to look favourably on your application. Even a slight increase may be enough to get you a lower interest rate or better lending terms.
    4. Aim for a steady income: Lenders will be happier if you can show you’ve had a steady income over the past few years. Talk to your accountant for advice on how to balance mortgage eligibility vs. tax deductions that will reduce your reported income.
    5. Hold off on new credit applications: Too many credit applications in a short space of time can hurt your credit score. Try to hold off on applying for a new credit card or other loans in the lead-up to your home loan application.

    Think outside the home loan lending box: You might be tempted to go straight to your bank when applying for a home loan. After all, you’ve got a history with them, they’re the ones most likely to lend you money…right? Actually, by going straight to your bank you could be missing out on some much better options. Certain lenders specialise in providing mortgage options for self-employed individuals. By thinking outside the box, you could get yourself a mortgage with a lower interest rate or much better terms.

Self-Employed Mortgage Approval – Work with an Experienced Mortgage Broker

  • Qualifying for a mortgage when self-employed doesn’t have to be as stressful or as difficult as you think. The key is to get the right advice early on. An experienced mortgage broker can help you successfully dodge potential issues. They’ll be able to compare all of the available loan products, identify which one will be most suitable for your particular situation and smooth out any application roadblocks before they become a real problem.

    Are you self-employed and thinking about applying for a home loan? If so, don’t wait until the last minute to get some expert advice. The experienced team at Professional Lending Solutions specialise in providing mortgage options for self-employed individuals. Give us a call today or book a free consultation for a time that suits you.

Car Finance Approval Tips

Tips to Get Car Loan Approval

Are you worried about getting car loan approval? If so, you’re not alone! According to one survey, 54% of people said they found buying a car to be more or just as stressful as planning a wedding (and 37% said it was as stressful as being trapped in an elevator!). Fortunately, it doesn’t have to be that bad! There are some simple car loan approval strategies that you can use to make obtaining a car loan easier and far less stressful. In this article, we’ll look at some effective car finance approval tips that will have you driving off into the sunset in no time.

Car Finance Approval Tips That Actually Work!

Improving your car finance approval could get you behind the wheel of your new car sooner than you expected. However, not all financial advice is created equal. So, don’t settle for tips from the finance guy at your local car dealership. Instead, look for car finance approval tips from an experienced car loan broker. Personally, the team at PLS have found the following tips for car loan approval can go a long way towards improving your chances:

1. Review your credit report

If the goal is improving your car finance approval odds, then start by checking your credit report. Your credit report holds vital information about your financial situation. It contains your credit history – the good and the bad – and this information is used to generate your credit score. Lenders will look at your credit report and credit score to decide whether to approve your car loan. You should always check your credit report before applying for car finance. The easiest way to check your credit score? Contact us today and we’ll provide you with a credit report free of charge.

2. Boost your credit score to get approved for car finance

The higher your credit score, the better your chances of getting approved for car finance. If your credit score is below average, then don’t worry! You can improve it by:

  • Paying your bills on time: Make sure that you’re consistently paying all of your utilities and rent or mortgage bills on time.
  • Paying off your credit cards each month: Making sure your credit card repayments are paid off on time is an excellent way to build up a good credit history. 
  • Avoiding mini loans: A lot of people are shocked to discover just how bad Zip, Afterpay and payday loans (where you borrow a small amount of cash to tide you over in the short term) are for your credit score. Lenders view these kinds of mini loans as giant red flags because they tell a lender you’re not living within your means.
  •  Reducing debts on existing loans: Accelerate the pace at which you’re repaying your current loans. Try making small but more frequent payments throughout the month. This signals to creditors that you’re taking control of your debt.
  • Fixing any errors: Sometimes your credit report will show something incorrect. If you notice any errors, then apply to get them fixed ASAP – they could be ruining your chances of getting approved for car finance.
  • Limit your applications for credit and loans: Every time you apply for credit, it’s flagged on your credit report. The more applications you make in a short period of time, the more red flags you may have.

3. Consider making a deposit

making a deposit for faster car loan approval

Putting down a deposit is a fast and effective way of improving your car finance approval chances. If you’re interested in using a deposit as part of your car loan approval strategy then get in touch with the car loan brokers at PLS – we can research what kind of a deposit you’ll need and help you calculate how much you can afford to pay upfront.

4. Choose your car loan carefully

One of the most frequently overlooked tips for car loan approval is making sure you choose a car loan that’s right for you. Car finance deals are not all created equal. Are you planning to buy a new or used car? Do you want a secured or unsecured loan? A fixed or variable rate? It’s important to consider which option works best for you when comparing all of the available car finance deals. If you’re not sure, a reputable car finance broker can steer you in the right direction and improve your prospects of getting your application approved. You can use Professional Lending Solutions’ car loan calculator now to get a picture of your car finance.

5. Discuss car loan approval strategies with professional car finance brokers

Did you know the finance manager at a car dealership is the only person in the country who can legally provide car finance without being licensed? Is that really the person you want to go to for financial advice? There are a lot of lenders out there. Choosing the one that best suits your current needs is not an easy task. A car finance broker can save you a lot of time, money and stress by matching you with the lender that fits your profile. They can provide effective car finance approval tips and help you implement the ones that will be most beneficial for you.

Car Finance Approval Tips: Use A PLS Car Finance Broker

A PLS car loan broker can help take the anxiety out of buying a car. We’ll start by doing thorough research and then compare car loan products from a wide range of lenders to find which deal offers the best value for your circumstances. Plus, we’ll double-check your loan application and make sure all your paperwork is in order (before it gets sent off to the lender). If the lender requires any follow-up information, we’ll handle that too. Essentially, we’ll smooth out the speedbumps and make it easier for you to get approved for car finance.

Contact PLS for More Car Loan Approval Strategies

For more car finance approval tips, contact the Professional Lending Solutions team of car loan brokers today. We’ll answer your questions, offer some friendly advice and help you get your car loan application sorted…without the stress.

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How Much Does It Cost to Refinance Your Home Loan?

Thinking of refinancing your home loan? If you are, then you’re not alone. Before you jump the gun, however, you should first find out, how much does it cost to refinance a home loan? Is it free or are there fees associated with such a move?

As a homeowner with a mortgage, paying your home loan regularly is a must. Unfortunately, with the recent increase in cash rates, which influences the interest rates of variable-interest home loans, paying in full and on time has become a challenge for many. One option people turn to when they face such a dilemma is a refinance.

When mortgage rates rise due to circumstances like the one mentioned above, the prospect of securing a lower interest rate through refinancing can be alluring. However, beneath the surface of this seemingly advantageous strategy lies a complex web of costs and considerations that homeowners must navigate. 

This article will guide you through the intricacies of home loan refinancing costs and will provide insights into the economics behind the process, offering you practical tips for making informed decisions.

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The Basics of Home Loan Refinancing

What is home loan refinancing? In a nutshell, a refinance involves the replacement of an existing mortgage with a new one. This new loan can come with altered terms, modified amounts, or most enticingly, a reduced interest rate. It can also come with extra cash that you can use for other purposes.

This opportunity to secure a lower rate is often what people aim for, primarily when there is an uptick in mortgage rates due to the changing financial landscape. It also grants homeowners the flexibility to transition from a variable interest rate to a fixed one, or vice versa, based on their financial preferences and risk tolerance.

Figuring Out the Cost to Refinance

Calculating the cost of refinancing a home loan is an essential step in making informed financial decisions. This process involves a meticulous assessment of various factors, which can include the potential savings from lowered interest rates as well as fees that may be associated with it, such as exit and application fees. You should also factor in the impact of break costs if refinancing occurs before the end of a fixed term.

Understanding these components and conducting a comprehensive cost-benefit analysis will give you the ability to gauge the financial viability of refinancing. By looking into the intricacies of these costs, individuals can confidently navigate the complex financial landscape, ultimately making choices that align with their long-term goals and aspirations.

Deciding If You Should Refinance Your Home Loan

The decision of whether to refinance a home loan is not a one-size-fits-all proposition. It’s a case-by-case decision that’s influenced by a number of factors. These include current interest rates, the remaining term of the loan, and individual financial goals.

Some experts suggest it might be prudent for homeowners to consider refinancing every two years. This is to ensure that they are consistently accessing the most favourable mortgage rates available. This idea, however, is something you should ask a professional mortgage broker about so you go into such a plan with the right information.

Weighing the Costs and Benefits of a Refinance

should you refinance

Reduced interest rates and enhanced terms may seem like a good idea, but the reality of refinancing fees and costs shouldn’t be ignored. You should conduct a thorough cost-benefit analysis before diving into the process. This is so you will know how much you end up saving and if the cost to refinance mortgage loans is higher than you expect, you might want to rethink such a plan.

On a positive note, the fierce competition among lenders has compelled them to waive certain refinancing costs and introduce compelling incentives for potential clients. This competitive landscape empowers borrowers to negotiate and seek deals that not only optimise their financial situation but also help offset the upfront costs of refinancing.

Breakdown of Refinancing Costs

Understanding the added rates on refinancing mortgage loans is key to making informed decisions. The cost of refinancing can vary significantly depending on factors such as location, loan amount, and individual circumstances. It will also depend on which refinancing fees are applicable to your case. Note, however, that some lenders offer cashback refinancing to help minimise these costs, so you might want to talk with a professional mortgage broker about this.

To give you an overview of what these costs are, here’s a breakdown of the common refinancing costs:

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Equity Requirements for Refinancing

For those thinking of tapping into their home equity for refinancing purposes, there’s a crucial threshold to bear in mind. To avoid paying lender’s mortgage insurance (LMI), it’s advisable to have at least 15% to 20% equity in the home. Consulting with an expert mortgage broker can provide clarity on the amount of equity available during the refinancing process.

Exploring Refinance Cashback Opportunities

Due to the competitive nature of the lending landscape, some financial institutions may offer cashback deals to incentivise homeowners to refinance. These deals can range from direct cash rewards to gift certificates to discounts on annual fees and more.

These play a significant role in offsetting the overall costs of refinancing. The specific terms of these incentives will vary from lender to lender, providing homeowners with additional leverage in the negotiation process.

Strategic Timing of Home Loan Refinancing

Timing is a critical factor when considering home loan refinancing. When is it the right time to explore refinancing opportunities? Here are some suggestions:

How long does it take to refinance a home loan?

How long the refinancing process takes is dependent on a variety of factors. Usually, this takes somewhere between two to four weeks, but there are circumstances that affect how long the process takes. The factors that affect how long it takes to refinance your home loan include the following:

Working with a Mortgage Broker for Your Refinancing Needs

Collaborating with a Professional Lending Solutions mortgage broker can be a strategic move when you’re considering refinancing a home loan. Our team can bring a wealth of industry knowledge and experience to the table, offering you personalised insights tailored to your unique financial situation.

If you want to know how much it will cost to refinance your home loan, we can help you figure it out. Our team can also guide you through the refinancing process. To optimise your refinancing journey, make informed decisions, and learn more about your refinancing options, don’t hesitate to contact us so we can help.

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How to Calculate Mortgage Repayments in Australia

For many Australians, buying a home is a significant milestone in their lives. However, navigating the world of mortgages can be overwhelming, especially when it comes to understanding how one can calculate mortgage repayments.

How much is repayment on a mortgage? As of June 2023, the average initial monthly repayment on a $500,000 mortgage for a 25-year loan with a 5.00% per annum interest rate is $2,923. How can you calculate that number? How can you find out how much you need to have per month for your mortgage payments?

In this article, we will explore the process of calculating mortgage repayments. This should help you to make informed decisions as a homeowner. Whether you’re a first-time home buyer or looking to refinance your existing loan, understanding the intricacies of mortgage repayments is essential to your financial well-being.

Understanding Mortgage Basics

To comprehend mortgage repayments, you need to grasp the fundamentals of a mortgage itself. So, a mortgage is defined as a loan obtained from a financial institution, whether it’s a bank or a lender, to finance the purchase of a property. This property can be a house, an apartment, or some other type of property.

The lender gives you, the borrower, the money needed to purchase the property. In exchange, you agree to pay back the loan, with added interest, over an agreed-upon period. For most Aussies, a mortgage repayment is their biggest monthly expense.

It’s crucial for you as a borrower to know ahead of time whether you can afford that dream property. You need to ascertain if you can stay on top of your repayments each month for the next 25-30 years. The good news is that a mortgage broker can help you understand your potential repayments, and your borrowing power, from your first appointment.

Now, in Australia, various mortgage types are available to borrowers. These include fixed interest rate and variable interest rate mortgages. A fixed-interest rate mortgage maintains a constant interest rate throughout the agreed fixed rate period, helping to provide stability in repayments at the start of your loan. On the other hand, a variable interest rate mortgage comes with an interest rate that can fluctuate, depending on market trends, thereby affecting your monthly repayments any time there is an interest rate change from your lender.

Key Mortgage Terminology and Factors Affecting Mortgage Repayments

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Before you can start calculating your monthly home loan repayments, you should first familiarise yourself with some of the terms used by mortgage brokers, lenders, and real estate agents. Mortgage repayments are also influenced by several factors. These factors will have an impact on how much you have to pay every month for your home. Understanding what these terms and factors are can help you better understand mortgage repayments and to manage your finances more effectively.

Principal

The initial amount borrowed, which constitutes the purchase price of the property. This includes the cost of the house as well as any fees related to setting up your home loans or lender’s mortgage insurance (LMI).

Interest and Interest Rates

Interest is the cost of borrowing money from the lender, which is expressed as a percentage of the principal. Interest rates dictate how much interest a borrower pays when repaying a home loan. These two play a significant role in determining the size of your mortgage repayments. A higher interest rate leads to larger monthly payments, while a lower rate reduces the repayment amount.

Loan Term or Length of the Loan

The loan term is the length of time in which the borrower must repay the entire loan. The length of the loan term significantly impacts the total cost of your mortgage. Longer terms may result in lower monthly payments, but you will pay more in interest over time.

Loan Amount

The total amount borrowed (principal) directly affects your repayments. Larger loans result in higher monthly payments. The loan amount is influenced by a number of factors, which include the kind of home you’re planning on purchasing, your current financial standing, your deposit, and other factors your chosen lender or bank believes are important to their assessment.

Deposit

A deposit is a percentage amount of the property purchase price. It shows the seller you are committed to purchasing, and it shows the lender your ability to save and manage your money.

Your deposit has a bearing on how much you need to borrow towards the purchase of your chosen property. It also helps determine your interest rate and the kind of loan you’re eligible for.

A home loan deposit plays a big part when you calculate home loan repayments. The bigger your deposit, the less you need to borrow, which will then equate to smaller monthly payments on your mortgage.

Repayment frequency

Your initial home loan repayments are usually set up as a fortnightly or monthly payment. However, the more frequently you make repayments, the more you’ll save in interest over the life of your mortgage. Interest is calculated daily, so if you pay off your loan early, you could end up paying less interest than if you paid off your loan late.

There are many repayment schedule options available, and a professional mortgage broker can help you understand which is right for you and help you set it up with your lender.

Repayment type

There are various types of repayment plans you can choose from, like principal and interest repayments and interest-only repayments. You should know which repayment types suit your situation.

The first option gets you to pay a bigger amount since you’re paying both the principal and the interest portion of the loan at the same time. This scheme helps lower your overall loan costs.

In the second option, your repayment amount is lower because you’re only paying the interest. Since you’re paying more slowly, and interest rates can fluctuate based on multiple factors, this can make the overall cost of the loan bigger.

Additional Costs and Fees

There is a range of fees that come with buying property in Australia. These can include LMI, stamp duty, conveyancing costs, legal costs, valuation costs, and other miscellaneous costs. Some of these fees can be included in your home loan with your lender and therefore part of your monthly repayment.

Other fees will need to be paid upfront as part of your sales contract. Mortgage insurance, application fees, and other associated costs may increase your total loan amount and, consequently, your repayments.

By working with a mortgage broker, you will never pay for our services (because we are paid by the lender and this is not passed on to you) and we can advise you on what different fees you will have depending on loan type, lender and your deposit amount.

The Mortgage Repayment Calculation Formula

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Calculating mortgage repayments can be done using a simple formula. In Australia, the most common method used is the Fixed Monthly Interest Repayment formula. The formula is:

M = P * [r * (1 + r)^n] / [(1 + r)^n – 1]

Where:

M = Monthly repayment amount

P = Principal (loan amount)

r = Monthly interest rate (annual interest rate / 12)

n = Total number of monthly payments (loan term in years * 12)

Let’s flesh out this formula with an example:

Suppose you borrow $500,000 at an annual interest rate of 4.5% for a loan term of 25 years.

Step 1: Convert the annual interest rate to a monthly rate:

r = 4.5% / 12 = 0.375%

Step 2: Convert the loan term to the total number of monthly payments:

n = 25 years * 12 = 300 months

Step 3: Calculate the monthly repayment amount using the formula:

M = 500,000 * [0.00375 * (1 + 0.00375)^300] / [(1 + 0.00375)^300 – 1]

Mortgage = $2,777.75

Using Online Mortgage Calculators

In the digital age, online mortgage calculators have become invaluable tools for prospective homeowners. User-friendly calculators allow you to estimate your mortgage repayments based on your loan amount, interest rate, and loan term without having to drain your brain doing so.

Many online calculators incorporate additional features, such as factoring in extra repayments or considering the benefits of offset accounts.

To use an online mortgage calculator, here are the usual steps to follow:

  • Input the loan amount, interest rate, and loan term.
  • Click the “Calculate” button to generate an estimated monthly repayment amount.
  • Experiment with different scenarios to see how adjustments affect your repayments.

Let Professional Lending Solutions Help You Calculate Mortgage Repayments!

Understanding how to calculate mortgage repayments is fundamental in preparing for your monthly financial obligations. By grasping the basics of mortgages, analysing the factors influencing repayments, and using online calculators, you can confidently manage your mortgage responsibilities.

Working out a suitable mortgage repayment plan can take a lot of paperwork, time, resources, and energy. Trying to calculate house loan repayments can also be tricky.

To make things easier, you may want to consider getting advice from a licensed professional.

At Professional Lending Solutions, we will explain all your available finance options and answer any questions you may have in terms that are simple and easy to understand. We can also help crunch your numbers for you!

Lenders Mortgage Insurance - banner

As a first home buyer on the Gold Coast, you may have heard that you need to save a 20% deposit before you can apply for a home loan. Otherwise, you’ll have to pay… Lenders Mortgage Insurance! 

And let’s face it, none of us like having to pay extra for stuff. But on the flip side, how long will it take you to save that 20% deposit? And do you really want to continue living in a share house/old rental/your parents’ spare room for that long?  

According to data from the Reserve Bank of Australia, around 25% of home loans have Lenders Mortgage Insurance. Despite this, almost half of all surveyed Australian millennials in a separate study (42.1%) do not understand it, and 8.2% of respondents thought the LMI premium protects the borrower (which is clearly not the case…).  

So, what exactly is Lenders Mortgage Insurance? Is it something to be feared and avoided at all costs? Or could it help you buy your first home a lot sooner? 

 

Understanding Lenders Mortgage Insurance

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What is LMI?

Often referred to by the acronym LMI, Lenders Mortgage Insurance is an Australian insurance policy that is paid for by the borrower. It’s designed to provide the lender with additional security in case the borrower ceases being able to service their repayments. Yes, you read that right: It protects the lender, not the borrower (something which comes as a shock to many, who may be confusing LMI with ‘mortgage protection insurance Australia’). 

How does LMI work?

When a borrower applies for a home loan, the lender will assess their risk level based on factors such as their credit score, employment status, income, and the size of their deposit. If the borrower has a smaller deposit (usually less than 20% of the purchase price of the property), the lender may require them to pay lenders mortgage insurance as a condition of the loan.

The cost of LMI is calculated based on the size of the loan and the size of the deposit. The smaller the deposit, the higher the LMI premium will be. LMI is a one-time payment that is typically added to the loan amount and paid off over the life of the loan.

While the lenders mortgage insurance protects the lender, it does not protect the borrower. If the borrowers stop paying their repayments and default on their mortgage and the lender makes a claim on the LMI policy, the borrowers will still be responsible for any shortfall between the amount owed and the amount recovered from the sale of the property.

Why does the lender need protection? 

Lenders are all about assessing risk. Anything too high risk makes them (understandably) very uncomfortable. If a borrower has a 20% deposit, it means the lender is only risking 80% of the property value (known as the Loan-to-Value Ratio, or LVR). If the borrower defaults on their loan, the lender should easily be able to sell the property to recoup their full costs.  

But if the borrower only has a 10% deposit, then the LVR is 90% – a much higher risk proposition for a lender. If property prices decline and the lender can’t sell the property for at least 90% of the original purchase price, they’ll lose money. To prevent that from happening, most lenders will require borrowers with a deposit of less than 20% to pay for an LMI policy. 

Is Lenders Mortgage Insurance non-refundable?

Lenders Mortgage Insurance (LMI) is typically non-refundable. This means that if a borrower pays LMI upfront and then pays off their loan or refinances their loan within a short period of time, they will not receive a refund of the LMI premium.

Is LMI a one off payment?

The reason for lenders mortgage insurance being non-refundable is that it is a one-time insurance premium paid by the borrower to protect the lender in case the borrower defaults on the loan. Once the policy has been paid for, it cannot be refunded or cancelled.

However, there are some conditions in which LMI may be partially refundable. For example, if a borrower has paid LMI on a variable rate loan and then switches to a fixed rate loan with the same lender, the lender may apply the LMI premium already paid to the new loan and issue a partial refund to the borrower.

Do you pay LMI upfront?

Is LMI paid upfront? Yes; however, the payment of Lenders Mortgage Insurance (LMI) can vary depending on the lender and the specific loan.

This brings us to the next question: when do you pay LMI? In some cases, the LMI premium is paid upfront at settlement, while in other conditions it may be added to the loan amount and paid off over the life of the loan.

If the LMI premium is paid upfront, the borrower will need to have it available at settlement. This can be a significant addition to the upfront costs, as LMI premiums can range from several thousand dollars to tens of thousands of dollars, depending on the size of the loan and the size of the deposit.

If the LMI premium is added to the loan amount, the borrower will not need to pay the premium upfront, but they will need to pay interest on the added amount over the life of the loan. This can increase the overall cost of the loan and result in higher monthly repayments.

How much is Lenders Mortgage Insurance for First Home Buyers on the Gold Coast?

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The premium for your LMI policy will depend on a range of factors, including the estimated property value and how much of a deposit you have saved. First home buyers, in general, are viewed as higher-risk borrowers than existing homeowners, so they’ll usually be charged a higher premium.

If you’d like a more detailed assessment of how much you’d be charged for Lenders Mortgage Insurance, then feel free to give me a call.  

Who else pays the Lenders Mortgage Insurance?

Lenders Mortgage Insurance (LMI) can apply to a range of borrowers, not just first home buyers. Below is a list of borrowers who may be required to pay the LMI premium:

  • Investors: If a borrower is purchasing a property for investment purposes and has a smaller deposit, the lender may require them to pay LMI.
  • Self-employed borrowers: If a borrower is self-employed, they may be required to pay LMI if they have a smaller deposit or if their risk profile is deemed to be higher than usual.
  • Refinancing homeowners: If a borrower is refinancing their existing home loan, they may be required to pay Lenders Mortgage Insurance (LMI) if the loan amount is higher than 80% of the current value of their property.
  • Owner-builders. If you take out a construction loan and have a deposit of less than 20%, you may be required to pay Lenders Mortgage Insurance (LMI). This is because the loan amount is typically drawn down in stages as the construction progresses. This means that the loan balance may be higher than the value of the property during the early stages of construction, which could increase the lender’s risk.

Is Lenders Mortgage Insurance worth it?

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The answer to this question will depend very much on your personal circumstances. If you’re not far off having a 20% deposit, it could be worth waiting just a little bit longer to avoid it. However, if it’s going to take you years of savings to reach that 20% (during which time property prices on the Gold Coast could continue to skyrocket), then it could very well be worth paying LMI so you can buy now.  

How to avoid LMI? Here are 6 ways

Here are some ways to get an LMI exemption:

1. Save more to pay the 20% deposit.

This is the most common way to avoid LMI, as it lowers your loan-to-value ratio (LVR) to 80% or less.

2. Consider a guarantor.

A guarantor is a person who agrees to cover your loan repayments if you default. This can help you borrow up to 100% of the property value without paying LMI.

3. Check if your profession can help you save on LMI.

Some lenders offer an LMI waiver for professionals or discounts for certain professions. This includes medical professionals, accountants, lawyers, professional athletes and more. You may be able to borrow up to 90 or 100% of the property value without paying LMI if you qualify.

4. Qualify for the First Home Guarantee scheme (formerly First Home Loan Deposit Scheme).

The First Home Guarantee can help you avoid paying the lenders mortgage insurance premium by allowing you to buy a home with a deposit of as little as 5% without paying LMI premium. The government will guarantee up to 75% of the required deposit for you, so you don’t need to save up to 20% of the property value. This can save you thousands of dollars in LMI fees and help you get into the property market sooner.

5. Borrow the LMI premium along with your loan.

This is not a way to avoid LMI, but rather a way to reduce the upfront cost. Some lenders may allow you to add the LMI premium to your loan amount, so you can pay it off over time instead of in a lump sum.

6. Take advantage of other government first home buyer grants

There are several Australian government grants that you may be able to avail as a first home buyer, depending on your eligibility and the state or territory you live in. Some of these grants are:

  • First Home Owners Grant (FHOG). This is a one-off payment of up to $20,000 for eligible first home buyers who purchase or build a new home. The amount and conditions vary by state or territory.
  • First Home Super Saver Scheme (FHSSS). This scheme allows you to save money for your first home inside your superannuation fund. You can make voluntary contributions of up to $15,000 per year and $50,000 in total, which you can withdraw later for your deposit. You may also benefit from the lower tax rate of superannuation.
  • Family Home Guarantee (FHG). This scheme is similar to the First Home Guarantee, but it is designed for eligible single parents with dependants who have at least a 2% deposit. You can buy a new or existing home without paying LMI under this scheme(joust.com.au).
  • Regional Home Guarantee Scheme (RHGS). This scheme is expected to start in January 2023 and will support eligible regional first home buyers to buy a home in a regional area with a deposit of as little as 5% without paying LMI. There will be 10,000 places available each year under this scheme

What you can do

The best thing to do is talk to an experienced mortgage broker on the Gold Coast. I can review your current situation, answer all your questions and then provide tailored advice for your specific situation. I can also let you know if there are any other options available to you, such as the First Home Loan Deposit Scheme or having someone act as a guarantor on your home loan.  To find out more, get in contact via Ph: 0421 934 033 or Ph: 07 5597 6049.

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No one really likes paying interest on their home loan. For most people, paying interest is a kind of necessary evil – a depressing reality that will ultimately help you achieve your goal (owning your own home).

So, when people hear that an offset account could help them pay less interest, they usually get excited. But what exactly is a home loan with offset account? Is it worth having a mortgage offset account? And how can you make the most of your home loan offset account?

This is offset account explained.

What is a Home Loan Offset Account?

A home loan offset account is an incredibly useful tool for homeowners. With an offset account connected to your mortgage, the balance in the account is used to reduce the amount of interest charged on the home loan. This makes an offset account a great way to save on interest and reduce the time taken to pay off the loan.

This type of account is particularly useful for those who have a regular flow of income, such as salary or investment income, as the balance in the account will be constantly changing. This means that the amount of interest charged on the home loan will be constantly adjusted, allowing for maximum savings. Additionally, an offset account allows for easy access to funds, with no penalty for early withdrawals. For those looking to reduce their home loan while still having access to funds, a home loan offset account is a great option.

How do offset accounts work?

How offset account works is that it pretty much operates just like an everyday bank account – you can have your salary deposited straight into the account, you can set up direct debits and you can use the funds to buy groceries, fuel, or your morning latte. But any money you have sitting in your home loan offset account will be used to “offset” the balance of your mortgage. In other words, when calculating how much interest you owe on your home loan, the lender will first deduct the total balance of your offset account. The figure remaining will then be used to determine your monthly interest.

So does offset account reduce monthly repayments? Yes — in fact, it is a great way to reduce your monthly loan repayments. An offset account effectively reduces the interest you are charged on the home loan, as the bank is no longer calculating interest on the full loan amount. This can result in a substantial decrease in your monthly home loan repayments, which can be extremely helpful if you are struggling to make ends meet.

How an offset account can benefit your home loan

An offset account can help you save money on your home loan in a variety of ways. Below are offset account benefits:

With these benefits, an offset account can be a great way to maximise your savings and make the most out of your home loan. However, keep in mind that there are also offset account disadvantages when used without a thorough evaluation of how exactly it can fit your needs. You can ask the following questions to determine if you need a home loan offset account:

  1. Am I willing to pay the potential extra fees associated with an offset account?
  2. Am I comfortable with the risk of not having access to my funds in an emergency or if interest rates change?
  3. Am I able to maintain a consistent balance in the offset account to make it worthwhile?
  4. How often will I be able to make withdrawals from the offset account?
  5. Will having an offset account impact my ability to make additional repayments on my mortgage?
  6. Is an offset account the best option for me, or are there other options that may better suit my needs, such as a redraw facility or a fixed-rate mortgage?

Is an offset account worth it?

To answer this question, you’d first need to assess the loan product on offer. Does it come with added fees? Is the interest rate competitive? You’d then need to calculate how much money you’ll be able to deposit in the offset account. With the right conditions, a mortgage offset account could substantially reduce the amount of interest you’ll need to pay over the life of your home loan.

For example, imagine you had a 30-year loan with a balance of $550,000 and an interest rate of 4.5%. If you were to deposit $30,000 in your offset account, you could potentially save yourself $77,497 and pay off your loan over 2 years earlier than planned!

What is the maximum amount in offset account?

This will depend on the terms and conditions of your mortgage and offset account. Generally, there is no set limit, but there may be restrictions on the amount of interest that can be offset against your mortgage.

In some cases, lenders may impose a cap on the amount that can be held in an offset account. This is because the lender is essentially “losing out” on the interest that would be charged on the portion of the loan that is being offset. They may also charge fees or penalties for holding a large balance in an offset account.

We recommend speaking to your lender or mortgage broker if you have any questions regarding your home loan offset account.

Talk to Phil

How to use an offset account?

Below are the basic steps to using an offset account:

  1. If you don’t already have an offset account, you’ll need to open one with your mortgage lender. Be sure to check the terms and conditions of the account, including any fees or minimum balance requirements.
  2. Once your offset account is open, you can start depositing funds into it. This can include your savings, income, or any other money that you can spare. Remember, the more money you have in your offset account, the more interest you’ll save on your home loan.
  3. You can use your offset account like any other transaction account. This means you can withdraw money, transfer funds, and use it to pay bills and other expenses. Keep in mind, though, that every time you make a withdrawal, your offset balance will decrease, which means you’ll be paying more interest on your home loan..
  4. To get the most benefit from your offset account, you’ll need to keep a close eye on your balance. Try to maintain a consistent balance in the account, and avoid making unnecessary withdrawals. The more money you keep in the account, the more interest you’ll save on your home loan.
  5. Consider making extra repayments on your mortgage. This can help you pay off your home loan faster and save even more money on interest in the long run.
  6. Finally, review your offset account regularly, especially if your financial situation changes. You may need to adjust your strategy to make the most of your savings and reduce the amount of interest you pay on your home loan.

7 Ways to make the most of your home loan offset account

There are some steps you can take to maximise the benefits of having an offset account. These include:

1. Depositing your savings into the account

Most of us are taught from a young age that savings belong in a savings account, where they can earn interest. However, depositing your savings in your offset account will often deliver better results in the long term. This is because the interest you save on your home loan will typically be more than the interest you’d earn with a savings account. Additionally, you’ll be charged tax on any interest you earn, but not on the interest you save. The great thing about putting your savings in an offset account is that you can still access the funds when you need them.

2. Putting any income straight into your offset account

Because an offset account is transactional, it’s easy to get your wages deposited straight into the account. And what many people don’t realise is that interest is calculated daily on an offset account. So, every extra dollar you have in there (even if it’s just short term) will help to reduce the total amount of interest you owe.

3. Use your offset account in conjunction with a credit card

Another way to maximise your offset account is by using a credit card to pay for your monthly expenses. This defers any withdrawals from the offset account until the end of the month when you can make a single withdrawal to pay off your credit card. However, keep in mind that this will only be beneficial if you pay off the credit card in full (and on time) every month.

4. Maintain a consistent balance in the offset account

Maintain a consistent balance in the account. This means keeping as much money as possible in the account at all times to maximize the amount of interest you save on your home loan.

5. Keep your offset account separate from your everyday spending account

To avoid spending your offset account funds on everyday expenses, it’s a good idea to keep your offset account separate from your everyday spending account. This can help you stay focused on your long-term financial goals and prevent you from accidentally dipping into your savings.

6. Consider making extra repayments on your mortgage

In addition to depositing your savings into your offset account, consider making extra repayments on your mortgage. This can help you pay off your home loan faster and save even more money on interest in the long run.

7. Use a mortgage offset calculator

To get a better understanding of how much money you could save with an offset account, consider using a mortgage offset calculator. This tool can help you estimate the amount of interest you could save by depositing your savings into an offset account, and how long it could take to pay off your home loan.

Don’t have a home loan offset account?

An offset account can be a useful tool for reducing interest, but consider all the pros and cons before making a final decision. To find out more about home loan offset accounts, or to see whether an offset account could be beneficial for you, get in touch today on 0421 934 033 or 07 5597 6049.

BOOK AN APPOINTMENT WITH PHIL

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Buying a home is a wish that many people on the Gold Coast dream about. But with prices so high right now, it can seem like it is impossible to get there. Most banks prefer you to have a 20% deposit for a home loan approval. Fortunately, that does not always have to be the case. A lot of people are looking for ways to get access to no deposit home loans — but do they actually exist?

Read on to learn about several ways you can get into the housing market without needing a full 20% deposit. Buying a house with no deposit or a low deposit could be a solution for you to find that dream home. It is strongly recommended you chat to a professional mortgage broker before applying for a home loan to ensure you know all the options available to your personal situation.

Talk to Phil

Can you buy a house with no deposit?

Happy young couple showing keys from hew home together, looking at camera, smiling, sitting at cardboard relocation boxes, feeling happy, enjoying moving into new flat, apartment, house

I guess the real question is can you get a home loan with no deposit?

To be brutally honest, a home loan zero deposit is almost virtually impossible. Home loans without deposit do exist, but they are so rare and are not offered by most lenders. They also come with higher interest rates and a stricter criteria set for eligibility.

However, there are ways to obtain no deposit housing that lenders would consider.

How to buy a house with no deposit:

1. Guarantor loans

A guarantor loan is a loan where a family member or friend guarantees the loan repayments in the event that the borrower is unable to pay. This means that you can buy a house without a deposit, as the lender will take the equity in the guarantor’s property as security.

The guarantor must have enough equity in their property to cover the deposit for your new home. This option can be risky for the guarantor, so it’s important to discuss the risks and responsibilities before going ahead.

Read: How Can Your Parents Help You Secure Your First Home Loan

2. Using equity in another property to buy house without deposit

If you already own a property, you may be able to use the equity in that property as a deposit for your new home. Equity is the difference between the value of the property and the outstanding mortgage.

You can use a home equity loan to borrow against the equity in your existing property to use as a deposit for your new home. However, this option also carries risks and responsibilities, as you are taking on additional debt.

3. Get a non-refundable monetary gift

If you have family members who are willing and able to help, you may be able to receive a monetary gift to use as a deposit for your new home. This gift must be non-refundable, meaning that the giver cannot expect the money back at any point. Lenders will want to see a gift letter outlining the details of the gift and the giver’s relationship to the borrower.

Go Lower with 5% Deposit

Some Gold Coast no deposit new homes are potentially available to prospective homebuyers. But they usually come with very strict criteria for approval:

If these are roadblocks for you though, many lenders also have much lower deposit loans available.

In some cases, you could have as little as 5% of the property price saved and still secure a loan. You may have to pay additional costs like lender mortgage insurance (LMI). But this could be a great alternative to buying a house with no deposit if you can swing the 5% deposit.

Understanding First Home Guarantee Scheme (FGHS)

The First Home Guarantee Scheme (FHGS) allows eligible first-time home buyers to purchase a new or existing owner-occupied property with a minimum deposit of just 5% and avoid paying the Lenders Mortgage Insurance (LMI) premium.

The scheme is limited to 35,000 eligible first-time buyers per year, and the government acts as a guarantor, paying the difference between the deposit saved and the 20% threshold required to waive the LMI. The FHGS can be used in conjunction with other QLD first home buyer grants, and interested applicants can apply through a participating lender or broker.

To qualify for the FHGS, applicants must meet specific criteria related to income, age, citizenship, and property value, as well as provide relevant financial documents during the mortgage application process.

Understanding the First Home Owner Grant

The First Home Owner Grant is a national scheme that provides a one-off grant of $10,000 to eligible first-time homebuyers. 

The grant itself can be used to help offset the cost of a home deposit. It may not cover the whole thing, but it could help a great deal.

Please note that the FHOG usually is paid on settlement for new homes or highly renovated ones. This means that if a home is being built or under major construction, you will not receive the grant until you make the first progress payment on the loan.

Also, you will bear the cost of other home buying expenses like moving, legal fees, and the like. These regulations vary by state and territory, so make sure to check all the requirements for your area first.

Can I Use My Superannuation?

Your super may also help pay for your home deposit using Australia’s First Home Super Saver Scheme (FHSS).

The FHSS allows for voluntary concessional and non-concessional (before and after-tax) contributions into your super fund to be used for your “first home savings”. You can then release these contributions and earnings toward the purchase of your first home.

There are some requirements you need to know with the FHSS scheme:

There are also other requirements to using this program. Check with an expert to better understand everything you need to have in place for this benefit.

Get the Home Buying Help You Need

For first home buyers Gold Coast who need some more information about no deposit home loans, get in touch with Professional Lending Solutions. My team and I will work with you to help you understand all the home loan options available to you.

Chat with us today and get the ball rolling on your own new home.

BOOK AN APPOINTMENT WITH PHIL

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Have you heard of the phrase “mortgage prison”? Are you:

Chances are, you could be in a mortgage prison yourself. While taking out a mortgage is often a necessary step towards achieving the dream of homeownership, a combination of the least unfavourable circumstances could send homeowners to mortgage prison.

Let us take a closer look at what a mortgage prison is, how it can happen, and most importantly, how to escape it. I will provide practical advice and guidance to help homeowners take control of their finances and weather the storm during this cycle of high mortgage rates in Australia.

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More and more homeowners are refinancing their home loans

Refinancing activity has seen a spike in 2022 during the start of the RBA cash rate hikes. In 2023, refinancing value soared to $19.9 billion or 2.7% in February this year, according to the latest Australian Bureau of Statistics lending data. It rose to 14.9% over 12 months.

The trend in external refinancing of housing loans is going on an upward slope at a much faster pace than new lending. In fact, the former may very well soon overtake the latter, the value of which currently sits at $22.6 billion — a 30.9% drop over the 12 months to February.

Why refinance?

More people are refinancing their mortgages due to the increasing number of low fixed-rate home loans taken from the Australian mortgage marketplace in 2020 and 2021, which are now on the verge of expiring.

Worries over inflation and concerns about further rising interest rates on homes are the main reasons why this is the case. Another reason is the fact that refinance rates generally more competitive than existing home loan rates. Lenders tend to offer better interest rates and terms to encourage you to refinance with them. 

What does this suggest?

Given the current economic climate, it is worth considering refinancing your home, even if you haven’t made plans to do so yet.

But what if you are unable to refinance?

Then mate, you could be in mortgage prison. Let’s delve into this pressing issue.

What is mortgage prison?

A mortgage prison refers to a situation where a borrower is unable to refinance their mortgage, leaving them trapped on a high or average interest rate. 

This can occur due to several reasons, including:

8 Ways to avoid or escape mortgage prison

To avoid or escape mortgage prison, here are five things you can do:

1. Evaluate your financial health

Reviewing your budget and expenses can help you identify areas where you can cut back on spending, which can free up funds to pay down your mortgage or other debts. This can help improve your financial situation and make it easier to qualify for a new loan with better terms.

2. Get rid of your other debts

Reducing your other debt, such as credit card debt or personal loans, can improve your overall financial situation and make it easier to qualify for a new mortgage. This can also free up more funds to put towards your mortgage repayments.

3. Increase your household income

Finding ways to increase your household income, such as taking on a side job or negotiating a pay raise, can help improve your financial situation and manage your monthly repayments.

4. Cut down your credit card limits

By reducing your credit card limits, you can decrease the amount of debt you have, which can improve your debt-to-income ratio and make you a more attractive borrower to lenders. You can also avoid overspending and accumulating more debt this way.

5. Ask for a better loan term 

Requesting a new, longer loan term can lower your monthly repayments and make it easier to keep up with your mortgage repayments. However, a longer loan term means you will pay more interest over the life of the loan, so carefully consider whether this option is right for you. 

6. Consider interest-only payments

Moving to interest-only repayments can reduce your monthly repayments, but it’s important to note that you will still owe the principal at the end of the term.

7. Contact your bank for hardship assistance

If you are struggling to keep up with your mortgage repayments, contact your bank to see if they can offer hardship assistance. This may include options such as a temporary repayment holiday or a loan modification.

8. Reach out for debt counselling

Seeking advice from a debt counsellor can help you develop a plan to manage your debts and improve your financial situation. They can also provide guidance on how to avoid getting trapped in mortgage prison in the future.

You can try reaching out to the National Debt Helpline (NDH) for guidance.

Manage your home loan with Professional Lending Solutions

If you feel any kind of hardship related to your mortgage, don’t hesitate to contact me and my team. We will help you explore your options and find a solution that works for your unique situation. 

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cash-rate-hike

The consecutive RBA cash rate hikes have certainly put a damper on real estate sales activity. According to the Housing Industry Association (HIA), sales in the three months to February were 46.85% lower compared to the same time last year. In Queensland alone, the RBA rate rise has caused a 51.2% dip in sales.

This, despite wages climbing 3.3% which is the fastest growth spurt in a decade. The steep home loan rate increase is eroding consumer confidence; this has been a tremendous upward movement of Reserve Bank interest rates Australia has not seen since 2012.

Are you aware of how the increases in the RBA cash rate actually affect your home loan and your very property? In this blog we thoroughly tackle the four major ways that this negatively impacts you as a homeowner.

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What is the cash rate?

The RBA cash rate is the target interest rate that the Reserve Bank of Australia sets for overnight loans in the money market. This rate is determined by the RBA’s monetary policy, which aims to achieve its objectives of price stability, full employment, and the economic prosperity of the country

The RBA board meets on the first Tuesday of each month (except January) to review the cash rate and decide whether to leave it unchanged, increase it, or decrease it. The RBA interest rate announcement is closely watched by financial markets and the public.

This is because changes in the cash rate can have a significant impact on the economy and individual households, and especially on mortgage holders on variable rate home loans.

Current cash rate Australia

On March 2023, the board decided to increase the RBA cash rate by 25 basis points, so the current RBA cash rate sits at 3.6%. The RBA cited the continued efforts to combat inflation as the main factor supporting its decision to maintain the current monetary policy stance.

4 Ways the RBA cash rate hikes affect your home loan

1. Increase in your monthly repayments

The most obvious implication of RBA cash rate hikes is causing mortgage monthly repayments to SOAR. As a matter of fact, a $500,000 mortgage now requires $11,800 MORE in annual repayments!

When the RBA increases the cash rate Australia, banks and other lenders typically pass on the higher interest costs to borrowers by raising their variable interest rates. This means that borrowers with variable rate mortgages will see an increase in their monthly repayments, as they will now be paying a higher interest rate on their outstanding loan balance.

Borrowers who had previously been on fixed rates are now facing higher variable rate repayments, as their fixed rate term has expired and the variable rate has increased.

As a result, these borrowers are now spending 30% of their income on mortgage repayments, which could put them at risk of financial difficulties — as opposed to 5%-20% of their income from just a few years back.

There will be 800,000 homeowners with fixed rate mortgages who are going to have it rough when they switch to revert rates once their term ends. Those who did not save during the period of low fixed borrowing costs and spent more money are especially vulnerable.

2. Interest rates on existing mortgages becoming less competitive than new rates on the market

For fixed rate mortgage holders that locked in 2% rates, the transition to today’s rates that range from 5% to 6% will be quite a whiplash.

However, those with variable rates are left to brace themselves for impact after every RBA interest rate announcement, hoping for the cash rate to remain the same or go lower.

When the Australian Reserve Bank interest rates climb up, interest rates on existing mortgages may become less competitive compared to new rates on the market. This is because existing borrowers are locked into their current loan arrangements, and they may not be able to take advantage of lower interest rates that are now available to new borrowers.

In other words, when interest rates on new mortgages become more competitive than the rates on existing mortgages, it means that new borrowers may be able to secure loans at lower rates than what existing borrowers are paying. This could lead to existing borrowers refinancing their loans with another lender or renegotiating their rates with their current lender to get a better deal.

In fact, that is precisely what is happening right now. Around 2370 homeowners are refinancing home loans every business day!

3. Your loan-to-value ratio increases

Unfortunately, not all homeowners have the option to refinance. One factor that hinders them from switching home loans is their increased loan-to-value ratio as a result of the RBA cash rate increase.

The loan-to-value (LTV) ratio is the ratio of the amount borrowed to the value of the property used as collateral for the loan. When the Australian RBA interest rates increase, it affects the interest rates that lenders charge on loans, including home loans.

When interest rates increase, it means that the cost of borrowing increases, and this can affect the LTV ratio in a few different ways:

4. Your home value and equity decrease

As mentioned in the third item, an increase in interest rates may also cause property values to decrease. To be clear, it does not directly cause a decrease in property values or equity. However, it can indirectly impact property values and equity through its effect on the broader economy and the housing market.

When the RBA raises the cash rate, it can increase borrowing costs, making it more expensive for borrowers to take out loans, including mortgages. This can reduce the demand for property, particularly among first-time buyers who may be deterred by higher borrowing costs. If demand for property decreases, this can put downward pressure on property prices, which can lead to a decrease in property values.

A decrease in property values can also result in a decrease in equity. Equity is the difference between the value of the property and the amount owed on any mortgages or loans secured against the property. If property values decrease, the amount of equity a homeowner has in their property will also decrease, as the value of the property is lower than before.

To add, an increase in the cash rate can also impact the broader economy, which can also affect property values and equity. If the cash rate increases, it can decrease consumer spending and economic growth, which can negatively impact the housing market. This also leads to a decrease in property values and equity.

Case in point: A recent RateCity analysis showed that a Sydney first home buyer who purchased a $1.3m house in July 2021 with a 20% deposit will only have 17% in equity today after the median price fell to $1.2m!

Know your next move with Professional Lending Solutions

For refinancing homeowners and first home buyers Gold Coast who are unsure what the next step to take is during this tight cycle, don’t hesitate to ask help from a finance broker Gold Coast such as myself.

My team and I will answer your questions and make every effort to work with you and your financial situation. Click the button below to book a call with me today.

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