Refinancing a loan can take advantage of lower interest rates to bring down the overall cost of servicing a loan. But it’s not always the best, or the only, option.

There are many different factors borrowers need to consider when thinking about refinancing a loan.

The first step is to speak to an expert about your needs and whether you can afford to service a different loan structure.

At this point, CBM Mortgages will also need to find out about your existing loan, repayments and the structure of the facility.

The current value of the property is also taken into consideration, so the Broker will have access to current data that will indicate what the asset is worth.

It seems like a no brainer, right? You are buying a home, so you’ll pay off your credit cards to reduce your debt, but keep them active so you can buy some furniture or deal with emergencies even when you have a mortgage to pay. Wrong.

It’s obvious that a lender will consider your credit card debts and the monthly repayments on those when you apply for a mortgage. But what many people do not realise is that credit cards that don’t have any balance owing can also impact a lender’s assessment of what you can afford to borrow.

If you have a high credit limit, you also have a high debt risk in the eyes of your lender. As the logic goes, there is no stopping you from racking up debt on your credit card the day after your loan is approved. Say, on lovely furniture to fill that new house.

“We have to take account of three per cent of the total credit card limit, regardless of what the applicant owes,” says the finance broker.

“If they had a $10,000 limit but they only owe $1000, we still have to assess $300 a month and that comes directly out of their liability. It does make quite a difference” , says the broker.

Stamp duty is a charge which is applied by state governments in Australia  on transactions relating to the transfer of land or property. It is paid upfront and needs to be budgeted for in addition to your loan deposit.

The amount of stamp duty you are required to pay differs in each state, however there are three factors, along with the value of the property, that determine how much stamp duty you will pay. Contributing factors include:

whether or not the property is a primary residence or investment property;whether or not you are a first home buyer; andif you are purchasing an established home, a new home or vacant land.

There are a number of stamp duty calculators available online (including one here on cbmmortgages.com) that take the guesswork out of budgeting for a property. Factoring in this additional cost cannot be overlooked when you are considering your capacity to repay a loan.

However, in a bid by state governments to stimulate home ownership and growth, there are a range of tax concessions available to reduce stamp duty.

Again exact amounts differ across each state, but those who benefit the most are first home buyers and those opting to buy a new home.

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.”

If you apply for a home loan, particularly if the loan is for more than 80 per cent of a property’s value, you’ll more than likely have to prove to lenders that you have a satisfactory amount of savings. This is to demonstrate your ability to funnel a portion of your income into repayments.

Although it can differ, in most cases lenders generally look for consistent additions to savings over a period of at least three months and preferably a year or more. This means that the following are not considered genuine savings:● a cash gift● an inheritance● casino/other gambling winnings● proceeds of the sale of a non-investment asset ● government grants and other finance offered as incentives

Can I still get a loan without genuine savings?For those who don’t have any genuine savings but still want to obtain finance, there are options, these include:● Guarantor loans - Having a guarantor on your loan may mean that no deposit is required, with the equity or asset the guarantor stakes standing in for a deposit.● Other significant assets such as shares, managed funds and/or equity in residential property - Depending on your chosen lender, cash isn’t the only thing accepted as genuine savings. There are even situations where the sale of a vehicle can be considered as genuine savings if proved that it was owned for three months or more.● A strong rental record may see a lender allow you to forgo the genuine savings route - Some lenders will waive the requirements if a letter can be produced from a licensed real estate agent confirming that rent has been paid on time and in full for the preceding 12 months, as it highlights your ability to make repayments on time and on an ongoing basis.

“I regularly write loans for customers who do not have genuine savings using the aforementioned policy exceptions,” said the finance broker. “It’s just a matter of looking at their full situation and knowing which lender is going to have the policies to suit what you’re trying to achieve. This knowledge can only be achieved through experience and keeping in constant communication with lenders to know what their policy niches are.”Contact us today!