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
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.
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
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.
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.Talk to Phil
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
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:
- Bank Discharge Fees – These fees can vary from one bank to another, so you will need to check with your bank for the exact amount here.
- Break Fees – If refinancing occurs before the fixed term concludes, break costs may apply. These costs are designed to compensate the lender for potential lost profits due to the early contract termination. The amount of break costs varies based on the loan amount and can potentially reach tens of thousands of dollars.
- Registration of New Mortgage Fees – $225
- Settlement Fee – $200
- Discharge of old mortgage – This is usually around $225, but costs can vary. To get the right amount for this, you can use the fees calculator provided by Titles QLD for those registering a release of mortgage.
- Property Valuation Fee – This fee is typically waived, with Low Doc loans being the exception.
- Land Registration Fees – These fees are paid to remove the existing mortgage from the current lender’s records and register the new lender’s mortgage.
- Lenders Mortgage Insurance (LMI) – If the equity in the home is less than 20%, LMI may be required. This insurance protects the lender in case the borrower defaults on the loan.
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:
- Low Loan Value Ratio (LVR) – If you have an LVR ratio below 80%, you can avoid lender’s mortgage insurance.
- New Customer Rates – Taking advantage of “new customer” lending rates can be a strategic move to secure better terms.
- Conclusion of Introductory Rates – When the “honeymoon” or introductory rate of a mortgage ends, it’s a great time to consider refinancing options.
- End of Fixed Term – The end of a fixed-term period is also a good time to review refinancing opportunities.
- Adapting to Economic Changes – Changes in economic circumstances, whether personal or global, can be triggers for considering refinancing. One example of this is the rising cash rate in the country.
- Unleashing Home Equity – Having a substantial amount of equity in the home is a compelling reason to explore refinancing possibilities.
- Adding Loan Features – If the need arises to incorporate additional features into the home loan, refinancing can be a suitable avenue.
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:
- Completeness of your documents
- Speed in which you complete the lender’s requirements
- Application strength (this can include your credit score, current finances, state of your employment, and other similar factors)
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.Talk to Phil
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
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.
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.
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.
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.
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.
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
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]
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!
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
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?
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?
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.
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:
- reduce the amount of interest you pay on your loan
- help you pay off your loan faster
- reduce the amount of time it takes to pay off your home loan.
- help you save on taxes by allowing you to deduct the interest you pay on your offset account from your taxable income
- help you manage your cash flow, as the money you deposit in the account is immediately applied to your home loan balance
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:
- Am I willing to pay the potential extra fees associated with an offset account?
- Am I comfortable with the risk of not having access to my funds in an emergency or if interest rates change?
- Am I able to maintain a consistent balance in the offset account to make it worthwhile?
- How often will I be able to make withdrawals from the offset account?
- Will having an offset account impact my ability to make additional repayments on my mortgage?
- 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:
- 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.
- 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.
- 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..
- 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.
- 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.
- 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
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?
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.
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:
- Virtually perfect credit history
- Stable and lengthy work history
- Often a higher interest rate than other loans
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 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:
- You must occupy the home as soon as it is practicable.
- You must plan to stay in the property for at least 6 of the first 12 months of ownership.
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
Have you heard of the phrase “mortgage prison”? Are you:
- trapped in expensive home loans Gold Coast deals with high interest rates;
- unable to switch to more affordable loans due to strict affordability tests;
- feeling helpless and stuck, with little hope of improving your financial situation?
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.TALK WITH PHIL
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.
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:
- a decline in the value of their property, leaving a homeowner with less equity and a high loan-to-value ratio (LVR);
- being too old to refinance (folks over 50 years old may find it harder to refinance)
- stricter serviceability standards (the Australian Prudential Regulation Authority (APRA) increased the home loan buffer to 3% from 2.5%)
- reduced borrowing power due to rising cost of living and/or stagnant income levels
- having poor credit scores from missed repayments
- the anxiety over transitioning to a higher fixed Australia mortgage rate when the current term ends
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.
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.ASK PHIL
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:
- If a borrower has a variable interest rate loan, a cash rate hike may lead to an increase in the interest rate they are charged. This means that the monthly repayments on the loan will also increase, which impacts the borrower’s ability to make repayments. If the borrower is unable to make the higher repayments, it may lead to the lender requiring the borrower to provide additional security or collateral to maintain the same LTV ratio.
- An increase in interest rates may also cause property values to decrease. If property values decrease, the value of the collateral (usually a home with equity) used to secure the loan may decrease as well. This can result in a higher LTV ratio, as the amount borrowed remains the same, but the value of the collateral has decreased.
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.BOOK AN APPOINTMENT WITH PHIL
The non-stop cash rate hikes have left a lot of Australian homeowners with mortgages overwhelmed and burdened by the increasing mortgage payments. If you’re struggling to make ends meet and are considering debt consolidation, you’re not alone.
When you consolidate debt you can simplify your finances and reduce your monthly repayments. But what does debt consolidation mean, and will it help you pay off mortgage faster?
In this post, we’ll explore the ins and outs of debt consolidation and how it can impact your mortgage payments. Keep reading if you’re looking for great debt management ways and to get back on track financially.TALK WITH PHIL
Worrisome cash rate hikes and why people are refinancing
More and more Australian homeowners with mortgages are rushing to refinance their home loans because of the nonstop cash rate hikes. With the current cash rate at 4.10%, no wonder people are trying to be smarter and more proactive about their home loans.
Debt consolidation is an option readily available for those who want to refinance their mortgages. And for folks who are already refinancing, consolidating their other debts (e.g., credit cards, car loans, personal loans) into their mortgage is seemingly becoming a popular option.
What is debt consolidation?
Debt consolidation is the process of bringing together all your debt and rolling it into one easy-to-manage loan. This may help you to combine your outstanding financial obligation into one convenient loan, potentially at a lower interest rate than you might be paying now.
How does debt consolidation work?
Here are the benefits of debt consolidation:
- get the opportunity to secure a lower interest rate than what you are currently paying on your individual debts. This can save you money in the long run and help you pay off your debt faster.
- have one payment to make each month, rather than juggling multiple payments to different creditors and risk missing payments.
- combining your debts into one loan with a longer repayment period may enable you to reduce your monthly payments
- pay off high-interest credit cards or other debts that may be hurting your credit score — positively impacting your credit score over time
- ability to choose a repayment period that better fits your budget or opt for a fixed interest rate that won’t fluctuate over time.
How will debt consolidation help you pay mortgage faster?
Debt consolidation can help you pay off mortgage faster by streamlining your debt payments and potentially reducing your overall interest rates.
Consolidating your high-interest debts like credit card balances or personal loans into your mortgage allows you to secure a lower interest rate and reduce the amount of interest you pay over time. This can help you save money on interest and free up more of your income to put towards your mortgage payments.
You may also be able to reduce your monthly repayments and free up more of your monthly budget to put towards your mortgage payments. This can help you pay down your mortgage faster and potentially save you money on interest over the life of your loan.
Is there anything I have to know before consolidating my debts?
While there are potential benefits to consolidating your debts, there are also some potential drawbacks to consider. You may end up:
- with an extended repayment period than what you had with your individual debts
- paying more interest over the life of the loan than you would have with your individual debts, which can increase the total cost of your debt
- being responsible for paying fees and charges associated with consolidating your debts
- incurring new debt while you’re paying off your consolidated loan because you have freed up some of your monthly budget
Is debt consolidation for you? Professional Lending Solutions can help
Of course each individual has their own circumstances, so it’s best to cover all bases and explore other options.
If you need help figuring out if consolidating your debts into your home loan is the right move for you, don’t hesitate to contact myself and my team so we can assist. We also offer guidance to folks who are refinancing personal loans or their mortgages as well.BOOK AN APPOINTMENT WITH PHIL
Hey there mortgage seekers and first home buyers Gold Coast! Are you tired of scrolling through endless Google search results and feeling overwhelmed by the mortgage process?
Have you considered reaching out to a mortgage broker for help with Gold Coast home loans, but are hesitant to trust them to act in your best interest?
Well mate, it’s time to take a deep breath and relax. In this blog we will dive into the world of mortgage brokers and this nifty little thing called Best Interests Duty.BOOK AN APPOINTMENT WITH PHIL
What do mortgage brokers do?
A mortgage broker Gold Coast is a professional who act as intermediaries between borrowers and lenders. They work with a wide network of lenders, including banks, credit unions, and other financial institutions, to offer a variety of mortgage options to their clients.
Here’s what mortgage brokers typically do:
- assess their clients’ financial situation, including their income, assets, debts, and credit history, to determine how much they can afford to borrow and what type of mortgage would best suit their needs.
- present a range of mortgage options from different lenders to you based on your financial profile
- prepare and submit loan applications to the chosen lender on their behalf
- negotiate with lenders on behalf of their clients to secure the best possible mortgage terms and interest rate
- continue to provide support and guidance to their clients by helping them with any questions or issues that arise during the loan repayment period.
What is Best Interests Duty and how does it help me as a borrower?
It is essential for clients to have trust in their mortgage broker when navigating one of the largest financial commitments of their lives. To give them greater security and assurance during this process, the Australian Securities and Exchange Commission (ASIC) introduced the Best Interests Duty (BID).
Best Interests Duty is a statutory obligation that was implemented based on the recommendations of the Royal Commission. It mandates all mortgage brokers to act in the best interests of consumers and prioritise the consumers’ interests when providing credit assistance.
ASIC formally introduced this new legislation on 1 January 2021. Ultimately, it aims to align the consumer’s expectations and interests with those of the mortgage broker’s.
When does best interest duty apply?
While it may seem obvious what a client’s best interests are, there could be instances where a client’s objectives contradict them.
Here are some examples:
- client is insistent upon an interest-only loan or an offset account despite not being in a position to get much value from those features;
- client doesn’t want to entertain any products from, say, a credit union or one of the big four banks, which rules out some excellent products which would suit their personal situation.
The Best Interests Duty provides additional assurance for consumers seeking advice from mortgage brokers. Under this new regulation, the broker must:
- explain why these requests are not in the best interests of their clients
- make “all reasonable efforts” to educate clients about different borrowing option
- help them understand why certain solutions may be more beneficial
- have systems and processes in place that empower customers to make informed decisions about their mortgages
- provide clear information on fees and charges associated with different products and services as well as outlining the pros and cons of each option
At its core, the Best Interest Duty provide protection for consumers who may otherwise be vulnerable to bad advice or misaligned incentives.
Mortgage broker vs bank: does the Best Interests Duty apply to banks and lenders?
You would be surprised to know that NO, it does not!
Banks and other financial institutions do not have to adhere to this duty when providing credit assistance. This means that when you approach banks directly for credit, you are not always guaranteed the best options available.
You will only be presented with one set of options – generally those available at that particular lender – as they only offer their own products. This means no comparison can be made between different lenders or products.
Are mortgage brokers worth it?
YES, a hundred percent, mate. Bound by best interest duty mortgage brokers are held to a high standard of trust and accountability when advising consumers.
If you’re looking for a trustworthy mortgage broker to work with, look no further than Professional Lending Solutions. My team collectively has decades of experience helping hundreds of clients get the right lending solutions for their circumstances. With this, I can confidently assure you that my team and I will ALWAYS act in your best interests.
Trust Professional Lending Solutions with your property purchase journey — and make sure to give me a call!Speak with a car broker Gold Coast
Are you looking to build a dream home but feeling overwhelmed by your financing options? Home construction loans can be a great way to finance the purchase of materials and labor required for constructing a new home, so you can turn those visions into reality.
While the process may seem overwhelming at first glance, we want to make sure you have all the information necessary when considering applying for a home construction loan on the Gold Coast.
In this post, we’ll provide an overview of how home construction loans work and how you can be eligible for one.
What is a construction loan?
A home construction loan is a short-term loan that is used to finance the building of a property or to make additions or renovations to an existing property.
It is usually granted for a specific period of time and is used to pay for the costs of construction as the work is being carried out.
The loan is then typically paid off when the construction is complete and the property is sold or refinanced with a traditional mortgage.
The terms and conditions of a construction loan can vary depending on the lender, but they are typically secured against the property being built or renovated.
How does construction loan work?
A construction loan works by providing the funds necessary for a borrower to construct a building or make improvements to an existing property.
- The loan is usually disbursed in stages as the construction progresses or after the completion of specific project milestones (i.e., progress lending). The lender may require regular inspections to ensure that the work is being carried out according to the agreed plans and budget.
- Construction loans with progressive drawdowns allow the borrower to access the loan funds as needed during the construction process or in stages, rather than receiving the full amount upfront.
- The borrower will make interest-only payments during the construction period, with the principal balance being due when the construction is complete.
- Once the construction is finished, the borrower may need to refinance the construction loan into a traditional mortgage. This is to pay off the balance of the loan and take ownership of the property.
- This refinancing process involves paying off the outstanding balance of the construction loan with a long-term mortgage, which may have a lower interest rate and more favorable terms for the borrower.
Are rates on construction loan higher than a traditional mortgage?
In general, interest rates on construction loan are higher than those of traditional mortgages. These rates:
- compensate lenders for the perceived higher risk, as the property being built or renovated is not yet complete and therefore has no established value; and
- help ensure that lenders are able to recoup their investment if the construction project is not completed or if the property does not sell as expected.
Terms and conditions of construction loans can vary greatly between lenders. Some lenders may offer more favourable terms and lower interest rates for home construction loans.
What can you use a home construction loan for?
In Australia, a construction loan can be used for the following purposes:
- Building a new home: A construction loan can be used to finance the construction of a new home from start to finish.
- Renovating or extending an existing property: You can use a construction loan for renovations or extension of an existing property.
- Building multiple dwellings: A construction loan can be used to finance the construction of multiple dwellings, such as townhouses or apartments.
- Building a commercial property: A construction loan can also be used to finance the construction of commercial properties, such as office buildings or retail spaces.
How to be eligible for home construction loans
To apply for a construction loan in Australia, the following requirements are typically needed:
- Proof of income including pay stubs, tax returns, and employment contracts.
- Good credit score
- Detailed construction plans and budget
- Proof of ownership or agreement to purchase land
- Deposit of at least 20% of the property price to avoid paying Lenders Mortgage Insurance
- Builder’s insurance
- Building contract
Shopping around for home construction loans? We can help
Home construction loans are the real deal to finance your building, renovation, or extension project. By getting the lowdown on what construction loans entail, you’ll be well equipped to make an informed choice.
And if you’re feeling overwhelmed, don’t worry — that’s where I come in. My team and I would be more than happy to sit down and discuss what is required to find you the right home construction loan for your personal circumstances.
Give us a ring and watch your building project go from concept to masterpiece!
If you’re looking to make the plunge and buy your first car, congratulations! But before you do, there are a few things you should consider in order to secure the right type of Gold Coast car finance.
For first time car buyers, let’s start off on the right foot! This blog post explores everything that comes along with getting a car deal that puts a smile on both your face and pocket.Get started on your car finance Gold Coast
How does a car finance work?
In Australia, car finance typically works by allowing individuals to borrow money from a lender, such as a bank or dealership, to purchase a vehicle.
The borrower then repays the loan, plus interest, over a set period of time. The vehicle serves as collateral for the loan — meaning, you will borrow money against your car. If the borrower defaults on the loan, the lender can repossess the vehicle.
There are several types of Gold Coast car finance available, including personal loans, secured car loans, and leases. Each option has its own advantages and disadvantages, and it is important to compare and understand the terms and conditions before making a decision.
We recommend enlisting the help of a car finance broker. They have access to a wide range of lenders, can help you get the right deal, and assist you with the paperwork. Best of all, they can help you understand the car financing process.
What do you need for car finance?
Am I eligible for a car loan?
Here are the general requirements for car finance in Australia:
- Proof of income: Lenders will typically require proof of income, such as payslips or tax returns, to determine your ability to repay the loan.
- Good credit history: Lenders will check your credit history to assess your creditworthiness. A good credit history and a high credit score will improve your chances of getting approved for car finance.
- Residency: Most lenders will require that you are a permanent resident or citizen of Australia.
- Age: Some lenders have minimum age requirements, typically 18 years or older.
- Vehicle: The vehicle you wish to purchase must be less than a certain age, usually 5-7 years.
- Collateral: Some lenders may require additional collateral such as assets or another vehicle as security for the loan.
- Deposit: Some lenders may require a down payment or a deposit.
How to check if car has finance
- PPSR (Personal Property Securities Register) check: This is a national database that allows you to check if a vehicle has any outstanding finance, or if it has been reported as stolen or written off. You can do this by searching the vehicle’s VIN (Vehicle Identification Number) or the registration plate number on the PPSR website.
- REVS (Register of Encumbered Vehicles) check: This is another national database that allows you to check if a vehicle has any outstanding finance. REVS check is similar to PPSR check and it is also done by searching the vehicle’s VIN or registration plate number.
- Ask the seller: If you’re buying a car from a private seller, it’s always a good idea to ask them if there is any finance outstanding on the vehicle. They are legally required to disclose this information to you.
- Car finance broker: A car finance broker can also check if there is any finance outstanding on a vehicle. They have access to many different databases and they can also check the car’s history and check if the car has been stolen or written off.
What to consider when getting Gold Coast car finance
So how to finance car in the least stressful way possible? The first step is to do your due diligence by researching all there is to know about car loans Gold Coast.
Below are factors to weigh in when getting a first time car loan.
1. Interest rate
Interest rates determine the overall cost of the loan, and it can change over time. Best to compare interest rates from different lenders to get the best Gold Coast car finance deal for your circumstances.
2. Loan terms
A longer loan term means that you will pay more in interest over the life of the loan, which can significantly increase the overall cost of the car. Conversely, a shorter loan term means that you will pay less in interest and the overall cost of the car will be lower.
3. Fees and charges
Be aware of any fees and charges associated with the loan, such as application fees, early repayment fees, and ongoing fees.
Consider how much deposit you can afford to put down. A higher deposit usually means you get a lower interest rate and a smaller monthly repayment.
5. Credit score
Your credit score can have a big impact on the interest rate offered. It’s important to check your credit score and address any issues before applying for Gold Coast car finance.
6. Type of loan
There are different types of car loans available, such as secured and unsecured loans. It’s important to understand the differences to find the best option for you.
7. Lender’s reputation
Research the reputation of the lender you are considering. You can do this by reading reviews and checking their credit rating to ensure they are a reputable lender.
Get Gold Coast car finance with the team at Professional Lending Solutions
All in all, there are a plethora of things to factor in and think about before you even start looking at cars, let alone signing on the dotted line.
With Professional Lending Solutions by your side from beginning to end, you can rest assured that we will take care of everything for you. All you need worry about is which car color looks best on YOU!
Get started by giving us a call or visiting our website to get car finance pre-approval today.Speak with a car broker Gold Coast
Are you someone who’s keeping a close eye on Queensland real estate news?
If you want to participate and get into the property market this 2023, this article can provide some helpful intel on housing prices in Queensland. We will talk about the current state of the QLD real estate, recent property market trends across the country, factors that cold affect Queensland and Gold Coast property prices, and what lies ahead in the region for this year.
Feel free to grab a cup of tea (or perhaps something stronger), and settle in as we dive deep into what’s going on with Queensland housing prices in 2023.
The current state of the Queensland property market
In the later part of 2022, several unit and house prices in Queensland and across the country plummeted due to successive RBA cash rate hikes. The Gold Coast property market was second to Sunshine Coast’s in terms of having the highest fall in regional Queensland: 6.4% and 7.1% in the 3 months to October, respectively.
This put a significant damper on buyer confidence, which is a far cry from the FOMO-fuelled property market back in 2020 where we had the historically lowest cash rate of 0.1%.
But some suburbs in Queensland performed relatively better and seemed unmoved by the plunging house prices of its neighbouring states. As a whole, Queensland sustained the blows of increasing cash rates and managed to have increased in house prices by 1.9% over the last twelve months.
Change in dwelling values to end of December 2022 (per cent)
Past 3 months
Past 12 months
Past 3 months
Past 12 months
Annual change (per cent)
Springfield – Redbank
Forest Lake – Oxley
Recent trends in housing values across the state
Currently, Queensland has three of the ten most searched places in the RAI’s Regional Movers Index: Yeppoon, Rockhampton, and Toowomba. This goes to show that the state is still a very much sought-after destination for interstate migration.
Most probable reason for this is because Queensland housing prices remain attractive to those from capital cities seeking to have a sunny refuge that won’t hurt their pockets in the long term.
The state is also renowned for its gorgeous climate, beaches, and proximity to city facilities and resort life. Great deals for investment properties can still be found here for a fraction of what one would pay in other places.
Factors that could affect housing prices in 2023
Late last year, the Queensland government finally scrapped the controversial land tax reform. This was great news and a win for investors since this means they get to enjoy the benefit of the tax-free threshold (amounting to $600,000 for individuals and $350,000 for companies).
The announcement that Queensland will host the 2032 Olympics is also already delivering a positive impact on the real estate market in the region.
A positive outlook for Gold Coast and Queensland
With billions of dollars being invested in infrastructure, there is set to be an increase in development and construction projects in the state. This could lead to increased demand for local services and amenities.
In turn, there will likely be an increase in job creation and greater economic growth, resulting in higher property values. This could attract more foreign investors, driving up prices further.
Improved access to public transport services may help those looking for affordable housing by making commuting easier and reducing travel costs.
Brisbane being the host city will experience immense growth in housing prices. The average buyer will be priced out of Brisbane suburbs, and might start setting their sights on other cities like the Gold Coast.
With house prices dropping in the 2nd half of 2022, this has made buying a first home more affordable than it was for the average buyer during the prior year. This along with the First home low deposit scheme, Stamp duty concessions and first home builders grants will bring them into the market much sooner.
This just might ramp up the median house price in Gold Coast. So for those tuned in to Gold Coast real estate news, keep your finger on the pulse!
Plan your real estate goals with the brokers at Professional Lending Solutions
If you plan on formally entering the Queensland real estate market in 2023, now is a good time to plan how best to tackle this promising venture. Property prices in the region are projected to rise steadily throughout the year, so it’s best to get started with your research early.
Contact Phil and the team at Professional Lending Solutions today and let us help you achieve your real estate goals this year and beyond.
Are you a nurse or midwife looking to buy your first home or investment property? Anxious about rising prices and the intimidating obstacle of getting approved for a medical professional or nurse home loan?
Let me share with you some exciting news: we’ve got 90% LVR home loans for nurses and midwives available! And here’s the kicker: there is no LMI (Lenders Mortgage Insurance) required!
Yes – that does mean you can use less of your deposit savings for unanticipated costs. Keep reading to learn more about these unbelievable deals and how YOU can benefit from them today!
Benefits of 90 LVR no LMI home loans for nurses and midwives
For most borrowers of home loans Gold Coast, a minimum of deposit of 20% of the purchase price is required so you can borrow with confidence and without having to pay the
However, under the nurse and midwife packages, you:
- only have to pay deposit as low as 10% of the purchase price; and
- do not have to pay the Lenders Mortgage Insurance, which can save you thousands!
Eligibility for no LMI home loans for nurses and midwives:
Midwives, previously considered high-risk clients, are now eligible for the above benefits like most medical professionals. To be eligible for no LMI home loans for nurses Australia, you must:
- be an Australian citizen or approved permanent visa holders
- be a registered nurse or midwife
- earning a minimum $90,000 per annum (some lenders may accept 100% of your overtime income)
- have at least 10% deposit
- have genuine savings (amount or percentage depends on your lender of choice)
- borrow not more than $1.35 million for metro locations and not more than $1 million for non-metro locations
To apply for the no LMI home loan, you must present one of the following documents:
- Most recent Australian tax return; or
- Copy of Australian university degree or qualification; or
- Copy of registration with the Medical Practitioners Board of Australia or equivalent body (copy of print out from the following web page is acceptable provided the registration is current http://www.ahpra.gov.au/Registration/Registers-of-Practitioners.aspx).
Other no LMI home loan options
If you are not a healthcare professional, or are finding no LMI home loans for people you know, the below are options they could look into:
- Lawyers, accountants, engineers, and other high-income earning professionals may be qualified for LMI discounts and waivers with some lenders
- The First Home Guarantee makes it possible for first home buyers to buy their first home with as little as 5% deposit, no LMI needed
- The Family Home Guarantee lets single parent first home buyers kickstart their homeownership journey with as little as 2% deposit, no LMI needed
Get in touch with the mortgage brokers at Professional Lending Solutions
So there you have it, nurses and midwives. If you’re looking to purchase your first home or investment property, now’s the time! These incredible 90% LVR home loans for nurses and midwives with no LMI required will fast track your home owning goals without breaking the bank.
Reach out to the mortgage brokers at Professional Lending Solutions today and don’t miss out on these opportunities!