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Is a family guarantee right for you?

Is a family guarantee right for you?

Entering the property market is no easy feat for a first homebuyer, but even parents who aren’t prepared to hand over cash for a deposit may help by being a guarantor on a loan. Before taking the plunge however, it’s crucial to be aware of the implications involved. Here are three questions to ask yourself to see if a family guarantee is right for you:

1. Am I financially fit to be a guarantor?

The very first thing you should be certain of is whether or not you are in a financially capable position to pay off the loan if the borrower finds that they can no longer do so. There can be many disruptions to an income, such as loss of employment or a serious accident, and some types of guarantor loans hold the guarantor legally accountable to ensure the mortgage is paid off.

“You need to be in a strong financial position and have enough equity in your property to be a guarantor,” says a finance broker. “Some banks even want to make sure that the guarantor can service the full debt as well, so it’s always advisable to get independent legal or financial advice if you’re considering it.”

 2. Do the benefits outweigh the risks?

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How to find the right lender for you

How to find the right lender for you

Every client has different requirements and circumstances - a mortgage broker can help you find the perfect match 

When Craig from CBM Mortgages met with husband and wife duo, Amanda and Mark, he was told that their vendor had requested them to waive their right to a cooling-off period.

“While Amanda and Mark had pre-approval with one of the major banks, they didn’t have formal approval, and this could only be effected after contracts were exchanged,” Craig explains. Unfortunately, their lender wouldn’t issue formal approval without conducting a property valuation first, and to do this, the lender required an exchanged contract of sale. It was a catch-22 situation.

While Amanda and Mark still had the traditional six-week settlement period to organise formal approval, they didn’t want to exchange contracts. If the bank decided at the 11th hour not to approve their loan, Melissa and Andrew ran the risk of losing their 10 per cent deposit.

They explained their situation to their lender, but the bank did not want to budge on its policy.

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Expert advice can lead to serious savings

Expert advice can lead to serious savings

 

Having a mortgage expert on your side can be the key to getting your finance over the line, and may save you thousands in interest and fees.

When Philip was offered the opportunity to purchase his mother’s property in Tasmania at a favourable price – just $180,000 for a house worth $350,000 – he wanted to take the opportunity to consolidate other debts. Using the equity available in his own property, he applied to refinance to cover both the debts and the favourable purchase, expecting to have all the loose ends tied up relatively quickly.

This was not the case. When Philip tired of waiting for the bank to sort out the valuation on the Tasmanian property and decide whether it would approve the loan, he visited an MFAA Approved Finance Broker.

“He said it was taking forever, so he came to see me,” says Philip’s finance broker.”

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Buying a house with HECS or HELP debt

Buying a house with HECS or HELP debt

 

Paying off your education is no reason to put off buying property.

You can remember it now: sitting in a chair at the back of the lecture theatre, chatting to your friends and ignoring the debt that each day at university was plunging you into.

But now you’re older and wiser, and reality has set in. You want to buy a property, but you’re unsure how your student HECS/HELP debt could impact your ability to take out a loan.

When you apply for a home loan, you’ll need to reveal information about your liabilities, poor credit ratings and any other debts you have. This is where your student debt can affect things.

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SMSF Loans

SMSF Loans

Sabrina was quite financially savvy. She managed her own super fund, and had approached her bank for a loan to purchase a property through it. Thinking the finance was sorted out, she made an offer.

The bank, which didn’t specialise in SMSF lending, had approved the loan in Sabrina’s personal name. Unfortunately, the property was being purchased by the super fund and the borrowing entity needed to correspond with that – not be under her own name.

After 12 months working towards a loan and to iron out the details, and six weeks before the property purchase was ready for completion and settlement, Sabrina was told that the bank couldn’t actually assist with SMSF loans as this was not a type of finance they offered.

Sabrina’s settlement agent recommended that she consult a finance broker who specialised in SMSF lending. At their first meeting, the MFAA accredited broker presented her with a handful of lenders who were able to assist with SMSF loans.

“I was upfront from the beginning, outlining the various fees, costs, pros and cons of each lender, and their available SMSF product,” the broker explained. “Having enrolled in the MFAA SMSF Specialist Course and having SMSF loan experience of more than four years, I was able to help my client with this very specialised loan transaction.”

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When was your last home loan health check?

When was your last home loan health check?

Circumstances can change, leaving your home loan less suitable than it was originally. A home loan health check can reveal if you’re paying too much or if there is a product better suited to your requirements.

What’s involved?

Your finance broker can do a full home loan health check for you either in person or over the phone. They will check if your loan is still competitive and still suited to your individual needs.

Having an expert do this for you can also take the stress out of the process for you. It is advisable to get this check done at least once a year, or whenever your circumstances change.

Questions to ask

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How to avoid paying Lender's Mortgage Insurance ("LMI")

How to avoid paying Lender's Mortgage Insurance ("LMI")

Lender’s mortgage insurance (LMI) is required in many instances when a loan is worth more than 80 per cent of a property’s purchase price, as well as in some other circumstances. In very basic terms, when a lender considers a loan to carry a high risk, LMI is likely payable. Here’s how you can avoid paying the costly premium.

Save for a higher deposit

The purpose of LMI is to protect lenders in case the borrower fails to make repayments and, when the loan-to-valuation ratio (LVR) exceeds 80 per cent, so the loan amount is more than 80 per cent of the value of the property being mortgaged, the risk of a lender not recouping their costs should the borrower default is increased. A higher deposit means a smaller loan amount, so will decrease the LVR and the perceived risk, and may be the key to avoiding paying LMI.

Get a guarantor

If you don’t have the financial capacity to meet a 20 per cent deposit but still want to avoid LMI, you do have the option of getting a guarantor on your loan. Normally a close relative, such as a parent, guarantors can use the equity in their property to help you secure yours. In some instances, having a guarantor on your loan may mean that you won’t need a deposit at all.

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5 Simple ways to increase loan repayments

5 Simple ways to increase loan repayments

Paying off a mortgage can seem relentless – every payment counts of course, but it can seem to be taking forever to make a dent. Here are some simple ways you can increase the amount you pay off and own your home sooner.

Reducing the principle on your mortgage as quickly as you can means paying less interest, so your future payments are going even further towards reducing that principle.

To find the ideal balance between the extra repayments you can afford to make and the time this will shave off your mortgage term, use a mortgage calculator <http://www.mortgageandfinancehelp.com.au/category/calculators>.

For example, on a $350,000 loan at six per cent interest, a monthly repayment of $2100 will see a total term of 30 years and a total cost of just over $750,000, while paying just $500 per month on top of that will bring the loan term down to just under 19 years and the total cost to just over $580,000.

Boosting these monthly payments by a further $400 to $3000 will see the loan paid off in less than 15 years – halving its term.

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