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How to avoid extra home loan fees

How to avoid extra home loan fees

Exit and early termination fees can put the brakes on plans to sell, to refinance, and to renovate or purchase an investment property. Here’s how to avoid them from the start.

Fees charged for the early repayment of variable-rate loans were phased out by government reforms in 2015. However, fixed-rate loans may still carry these fees, and both fixed-rate and variable-rate home loans taken before the reforms may still impose penalties for early repayments. Those pre-reform loans may now still be running.

“In most instances, for most lenders, fixed-term loans had a term of five years,” the finance broker explains. “That will be the case for most borrower’s pre-2015.”

If you took out a loan before 2015 and have decided to sell, it can be difficult avoiding early termination fees for fixed-rate loans, as they protect your lender against the loss of the interest they reasonably expected to earn on your finance.

You are able to receive a waiver or fee reduction, although you rely on the discretion of your lender to receive one. Having a good repayment history and being a long-term customer helps.

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Investing in a holiday house?

Investing in a holiday house?

Before you take the leap into a holiday-home investment, it is essential that you consider all angles. This means taking your heart out of the equation and giving thought to rental returns - which means location really is king.

When deciding whether or not to buy a holiday house or unit as an investment, you would be best served to consider location first. In fact, location has a great deal to do with the success of your investment property if you will be renting it as a holiday destination. You need to make sure that your property location matches up with market demand. Things to consider are travel time and expense, rent rates, local attractions and activities.

Deciding whether the investment holiday property you want will be as lucrative as you think often requires the advice of an expert, particularly for investors who aren’t as familiar with the area as residents may be, so investors would be well served to seek advice instead of taking a gamble.Contact us now!

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How do I know I'm getting a good deal from my lender?

How do I know I'm getting a good deal from my lender?

With so many products offered by various lenders, it can be quite perplexing trying to figure out whether or not you’ve scored yourself a good deal on your home loan.

While doing your research and comparing what’s out there in the market is one of the most obvious ways to find out whether you’re sitting on a good deal, it can be a time consuming practice and an overwhelming experience for those without specialist knowledge of the mortgage sector.

“It’s good to shop around, and yes you can use comparison websites, but because lenders call like products different names, it can get very difficult comparing apples with apples,” advises the finance broker. “Brokers know the special names and pricing, so it’s worthwhile working with one as not only will it save you time but you’ll also get a well-rounded understanding of the advantages of each product.”

That understanding of each product’s pros and cons is essential, because the best deal isn’t necessarily just the one with the lowest interest rate. It ultimately comes down to finding a loan that suits your plans - whether those plans are to pay the loan off as quickly as possible, to use it to fund renovations or investment down the track, or to pay the lowest total interest and fees over the life of a loan – and to finding a lender that will provide that loan at the level of finance required.

“Imagine you’re wanting to buy your dream home. Now, different lenders will lend varying amounts based upon the same criteria,” says the finance broker. “So that could mean that the lender with the sharpest rate may lend $200,000 less than the one with a slightly higher rate. If you really want that property, you’re going to have to go with the one with the higher rate, which may only make a few thousand dollars difference a year in interest repayments.”

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How can I secure cash fast?

How can I secure cash fast?

Small business owners know all too well that the unpredictable nature of the industry can sometimes mean that quick access to cash flow is needed.

Solution #1: equipment finance

For many small businesses, especially those in the hospitality industry, income and cash flow are heavily reliant on functioning equipment. So for restaurant owners who find their delivery truck has suddenly decided to call it quits, turning to equipment finance could be the best solution.

“Supported by most major and subsidiary lenders, rates are offered competitively at around five to eight per cent. Where a chattel mortgage, a mortgage on a commercial vehicle, is elected, borrowers own the asset from day one and can claim payments upfront, which enables greater cash flow within the business as well as interest and depreciation add backs,” says the finance broker. “Ultimately, I would recommend this solution as they are safe, structured and can have tax benefits associated with ownerships.”

Solution #2: unsecured business cash loan

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What comes first: the property or the loan?

What comes first: the property or the loan?

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.

Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.

But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.

“First and foremost you need to determine if you’re eligible to borrow money from a lender,” says the finance broker. “Your ability to repay the loan will need to be assessed – you don’t what to find out after you’ve made an offer that your credit history or deposit is not up to scratch.”

Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.

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An expert solution to credit debt

An expert solution to credit debt

Diana and Paul put everything they had on the line to start a family, including their credit and home loan. With the expert advice of a finance broker they were able to start fresh for their baby girl.

Diana and Paul had professional careers and a new home, but needed help from a fertility clinic to make their family complete. The expensive treatments delivered a beautiful baby to the couple, but their credit was suffering as a result.

They were living off credit cards, nearly $70,000 in debt and spiralling as they took out new cards to bring others into the black. Paul had been to nearly all the local banks and none were able to offer a viable solution.

It was then Paul met with their expert Finance Broker, who rolled up his sleeves to see what he could do.

“We worked out that Diana and Paul were paying above and beyond what was necessary on their home loan, and so we decided to switch the repayments to interest-only while they focused on getting their credit card debt in line,” the finance broker explains.

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Where there’s a will, a Credit Adviser can find a way

Where there’s a will, a Credit Adviser can find a way

There are many paths to successfully financing a property purchase. Recently, an expert finance broker helped a young couple, who had nearly given up hope, realize their dream.

If at first you don’t succeed, ask more questions. That’s the motto of finance broker, who doesn’t let a history of refusals stand in the way of securing the right loan.

Recently, Jim and Jenny Stewart, who were keen to buy their first home but had had their loan application rejected twice already, were referred to him.

“They didn’t think they had a chance of getting the amount they wanted, and I wasn’t sure I could get them approval either, but I started asking questions,” says the finance broker.

“It’s not enough to gather only the information required to submit an application; it’s important finance brokers know what borrowers’ plans for the future are, whether they plan to renovate or rebuild, for example, and what their background is.”

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Three things you need to ask your partner before you apply for a home loan together

Three things you need to ask your partner before you apply for a home loan together

Before you apply for a home loan with your partner, there are a few discussions that you need to have that go a little beyond what you may know already.

You’ve found someone you want to spend your life with (or a significant chunk of it, at least) – the hard part is over, right? Wrong. You know each other well enough to know whether or not you each blow the budget every month, but you probably don’t know each other’s complete credit history. So, before you buy a property together, there are plenty of discussions you need to have. Here are three of them.

Have they defaulted on any payments?

He or she might be relatively debt free now, but has this always been the case? One bad mark on a credit file, such as a late car payment or a default on a credit card, will change the approach you need to take when applying for finance.

It doesn’t mean you can’t secure finance, but it may mean you need to apply to a specialist lender for an alt-doc loan. Your finance broker can help you find the right lender and craft an application to avoid the heartbreak of continual rejection.

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Save your legs and call a loan expert

Save your legs and call a loan expert

How do you match a loan and lender to your needs? Rather than running around finding out the details of each and every lender and loan, draw on the expertise of a Finance Broker.

One of the benefits of working with a finance broker is the extensive menu of loan options they have at their fingertips. But given such a wide choice, how does your adviser narrow down the options to find the right loan for you?

Mortgage finance broker sometimes have access to more than 30 different lenders. These include the big four banks, which offer loan options for people who may not meet the lending criteria of the top banks.

When it comes to making loan recommendations, a credit adviser looks at a number of different factors.

First they’ll talk to the client about their goals. This might be to pay off the loan as quickly as possible, or to find a loan with the lowest interest rate possible. They may want a loan with a fixed term, or they may want a facility with a low fee structure. Each client is different.

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Tiny houses

Tiny houses

It’s easy to understand why we look for the largest, most prestigious properties we can afford – we are constantly urged to define our success by our possessions: bigger, better, newer, faster, shinier. A relatively recent counter-movement, however, urges lower impact, fewer goods and less consumption, and at its core nestles the tiny house.

With the price of property ownership creeping skyward across most parts of Australia and leaping into the stratosphere in others, a big home isn’t always affordable to buy. Add the cost of energy and living, and big isn’t always affordable to maintain, either.

With the boom of environmentally friendly housing and a return-to-basics design mentality, a trend for micro housing has cropped up, producing some positively diminutive living arrangements.

Whether it’s a one-room cabin with a loft for a bed space, a tree house or a converted shipping container, the trend in minimalist shelter has well and truly skyrocketed.

Despite how innovative those ideas are, there is no denying that they aren’t suited to everyone. What could apply broadly, however, are their lessons in downsizing. Not only can people save money, but they can save time and energy, too. It’s a good idea to consider the following benefits of smaller housing before buying the biggest home you can afford.

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Finance made simple

Finance made simple

When a busy doctor who had worked with banks to set up finance for her investment properties visited a mortgage finance adviser, she walked away with three more properties and a newly simplified finance structure that saved her money.

Lisa Collins*, a doctor who had purchased six investment properties while working with bank loan officers, called on a mortgage credit adviser to help her streamline the loans attached to the assets.

“As I started working more closely with her, I discovered there was a complex web of loans attached to the portfolio,” says the credit adviser. “So it made sense to try to rationalize and simplify the loan structures. At the time, she had loans with three different banks and didn’t know which properties were used to secure individual loans.”

Each time Collins bought a new property, she took out a new loan. As a result, there were multiple loans attached to each property, as she had accessed the equity in the existing properties to purchase additional properties. As well, many of the properties in the portfolio were cross-secured, creating a very complex arrangement.

“The problem we faced was that any refinancing would almost certainly have involved a massive exposure to lenders’ mortgage insurance,” says the credit adviser. “But she had a huge plus in her favour: as a doctor, she was able to take advantage of a benefit some lenders give doctors so they don’t have to pay mortgage insurance.”

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What to do when your loan is declined

What to do when your loan is declined

If you don’t receive approval don’t give up. Speak to a professional mortgage adviser and keep your dream alive.

Connie Collins had found her dream home and made an offer, which was accepted. Now all she had to do was get her loan approved and she would be on her way to settlement.

Connie approached a lender directly to gain approval for finance. Her application took three weeks to process but, in the end, was declined. Not wanting to give up, Connie went to her local Mortgage Credit Adviser for help.

With the finance clause on the property expired, Connie was in danger of losing the property. Rather than requesting an extension for her finance, her credit adviser opted to lodge the application with a different financial institution that she was confident would approve it fairly quickly.

With a deep understanding of the financier’s polices, Connie’s credit adviser was able to present everything that was needed with the initial application to get the loan across the line. He submitted the loan application for Connie at 8.30am and, by 11am that day, the loan was approved.

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A home of one’s own

A home of one’s own

Are you flying solo and starting to think that buying a property will never be possible? There’s really no need to wait for a knight, or lady, in shining armour to come along, as securing finance on a single income does happen.

Of course, just as if you were a couple, your borrowing capacity will depend on your income and commitments. But there are some differences. A single will probably have different requirements of a property than a couple would. So consider: are you looking for a residential or investment property? What kind of deposit are you considering? Do you have dependents or children?

You may also need to take extra precautions without a second income to fall back on. A mortage adviser recently helped a single first-home buyer who wanted to live in the eastern suburbs in Sydney. She decided to downsize from her large rental and buy an affordable studio in which to live.

 “We looked at how much she’s paying in rent and what she’s currently saving. Then we looked at what was a good, comfortable spend for her and worked backwards from that,” the credit adviser explained. 

 “It wasn’t as if she had to sacrifice everything, she just went smaller. As a single person, she decided she’d be happy in a studio, as opposed to a bigger apartment in a location she wasn’t as happy with.”

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Refinancing a business

Refinancing a business

Does your business need refinancing or restructuring? As this tale of a business with urgent liquidity problems shows, having a credit adviser managing the project can be the key to success.

When a cotton grower in central Australia lost his financier during a period of aggressive expansion, he was facing a liquidity crisis and approached a mortgage broker who approved equipment and commercial credit to help restructuring the business and securing a new backer.

“His current financier was shutting down its operations across the state. Not only had he lost his account manager, he’d also lost his whole direct line of resources to his business, right at a critical time,” explains the finance adviser.

“It was quite a complex business. It had multiple entities with multiple assets and private investors, and had a lot of moving parts in addition to the expansion plans. So there was a lot of due diligence and lot of work in terms of understanding the client’s current business structure and requirements, and creating the structure that would be required going forward to satisfy all parties, including new banks.”

Before putting the business out to tender, the credit adviser and his client worked on creating cost efficiencies and were able to turn a critical situation into a foundation for growth.

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Buying a property with friends

Buying a property with friends

There are many considerations when buying property jointly, so speak to an expert early to make sure you’re doing it the right way.

If you’re looking for a creative way to overcome being locked out of the property market by rising prices, buying a house with a group of friends may be a solution. It can also be a minefield though, so here’s how to avoid a blast.While the excitement of banding together in such a life-changing moment can put everyone on a bit of a high, you need to plan for situations in which things might go wrong.

It’s essential you have all been completely upfront from the start about what you want to achieve by purchasing property together, as well as your personal expectations about timelines for purchasing the property, paying it off and selling it. And all of this must be documented in a co-ownership agreement.

Your mortgage finance broker can refer you to a solicitor of conveyancer with experience in working on co-ownership agreements, who can advise and create yours and make sure it is suitable, providing the necessary legal protection for everyone involved.The big question will be what structure your ownership takes. There are two options: joint tenants and tenants in common. Joint tenancy is the most common ownership structure in Australia, as it is how most family homes would be owned. However, because friends are less likely to share assets and long-term debts than a couple, and less likely to will their assets to each other, the ‘tenants in common’ model would usually be more suitable for this situation.

Under this model, each person owns a specified share of the property’s value. These shares may be equal, but need not be. So, if you are willing to contribute $500,000 to the price of a property, but your two friends are not quite at that stage and only comfortable contributing $250,000 each, you could own a 50% stake while they each own a 25% stake. Keep in mind, each stake is in the property’s value, not control of the property. Legally, under this model, each owner has the right to full access to the entire property.The co-ownership agreement created in collaboration with your conveyancer should set out how the costs of maintenance and insurances are divided, as well as how sale proceeds will be divided.

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Six ways to fund a renovation

Six ways to fund a renovation

Any renovation project, large or small, can be all-consuming in terms of your energy, time and money. Here are six loan types that can help you.

Considering transforming your home but lack the funds to support your major makeover? Never fear, we’ve rounded up a few different home renovation loans to help you turn your dream into a reality. Whether you want to make a few finishing touches to your home with the help of a paint job or completely turn your home into something magical, there’s an option to suit your needs.

1. Home equity loanThis is probably the most common way people borrow money when they want to renovate. It involves borrowing against the current value of your home, before any value-adding renovations. You won’t be able to borrow the full value of your home but, without mortgage insurance, you can usually borrow up to 80 per cent of its value if you own it outright. One potential problem is that the cost of your renovations may actually be higher than the equity you have available.

2. Construction loanThis is similar to a home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be given the full loan amount upfront, but in staggered amounts over a period of time.

3. Line of creditThis may be ideal for ongoing or long-term renovations. When you apply, you can establish a revolving credit line that you can access whenever you want up to your approved limit. You only pay interest on the funds you use and, as you pay off your balance, you can re-borrow the unused funds without reapplying. However, care must be taken not to get in over your head in terms of serviceability – make sure you can make repayments on the line of credit that will reduce the principle.

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5 things first-home buyers need to know

5 things first-home buyers need to know

Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home.

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

2. Research potential properties and loans.

Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

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How to buy a home when you’re self-employed

How to buy a home when you’re self-employed

Many lenders offer loans for self-employed borrowers who can’t hand over payslips and employment records. This means that, rather than the usual documentation, you prove your ability to service a loan using bank statements, declarations from your accountant and financial records.

Self-employed borrowers come up against the challenge of not being able to simply present payslips and tax returns to back up their loan applications. But this need not stop you buying your dream home.

Of course, as with any mortgage application, you must still prove that your income outstrips your spending and you can service the loan. Getting this right is more than presenting a lender with a few quick sums on the back of a napkin; it can take a solid six to 12 months of preparation.

Here are some quick tips:

reduce debt: pay down credit cards and personal loans, and be sure to lower the credit limits as they are paid down, as lenders assess the total credit available to you as a potential debt level, not just the amount you owe;cancel credit cards that you don’t need (this will affect credit scoring);speak to a credit adviser about how the structure of your business and your taxable income will impact your ability to borrow;do your taxes when you should, and always pay your tax assessments on time;save: saving a deposit is obviously important, and showing your ability to live within your means while saving is too. This is key to serviceability – you want to show at least a six-month history of high income and low expenses; andask your Mortgage Approved Credit Adviser, rather than a bank. Credit advisers have access to specialist lenders that assess applications on a case-by-case basis and tailor their products to self-employed borrowers and contractors, while bank lenders do not.

Loans to the self-employed do differ from standard loans in a few ways, apart from the application process. Lenders offset the extra risk they are taking when lending to a self-employed borrower or contractor by charging slightly higher interest rates and placing some extra rules on loan-to-value ratios (LVR) and insurance requirements.

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Don't have savings? We could help you buy your first home!

Don't have savings? We could help you buy your first home!

Young couple John and Kim were keen to start paying off their own home rather than paying rent, but had no savings. Here’s how they bought their first property.

John and Kim Wright were wondering why they were paying off their landlord’s mortgage instead of their own, but they didn’t have the savings or financial history to convince a lender to give them a mortgage.

After being declined by two lenders, one a big bank and the other a smaller lender that they thought they would have luck with, they contacted their local mortgage finance broker.

“During my initial discussions with John on the telephone, I asked him several questions to help me put the pieces of his jigsaw puzzle together,” says the finance broker. “And, on paper, it certainly didn’t look like a deal.”

As well as the lack of savings, the couple had a couple of other problems standing between them and a strong application: John had recently changed his employment and he had a small, paid default on his credit file.

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What should I ask my Mortgage Broker?

What should I ask my Mortgage Broker?
Start with 'Are you a member of the MFAA or FBAA?'

A good accredited mortgage broker can help guide you through the mortgage market to find the home loan appropriate to your situation. But, before you start working with a residential mortgage broker, there are a few questions you should ask.

Are you a member of the MFAA?

The Mortgage & Finance Association of Australia (MFAA) is the peak industry body in Australia and the one the majority of mortgage brokers are accredited with, representing more than 12,500 mortgage & finance professionals across the country. To be accredited by MFAA, credit advisers must satisfy rigorous criteria on education, experience and ethics. So if you want to work with an accredited residential mortgage broker in Sydney – someone you can trust – the first question you should ask is, “Are you a member of the MFAA?”.

Mortgage Brokers: education & experience

To help you negotiate the complex mortgage market, you need someone with knowledge and experience. So ask your mortgage broker about their credentials.

What fee is your mortgage broker charging?

Since most mortgage brokers receive a commission from the lender, they generally offer their service free of charge to the borrower. But don't assume this. Ask your mortgage broker if they charge a fee, and if so, how much.

What commission is your mortgage broker being paid?

Don't be afraid to ask a credit adviser what they are being paid for their home loan recommendations. The MFAA's Code of Practice requires its credit advisers to reveal the commissions they are being paid by a lender on a particular home loan product or any other products they may offer. To borrow with confidence, only deal with an MFAA or FBAA accredited mortgage broker. Talk to CBM Mortgages today. Find out how we can help you buy that first or next property.

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