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How to avoid paying too much for a home

How to avoid paying too much for a home

Knowing what a property is worth is central to avoiding paying too much for it.

Set a benchmark

Comparing nearby properties that have sold recently is the best way to assess an acceptable price for the property you are looking at and provides a valuable bargaining tool when you are negotiating with a seller or agent. Make sure the properties are comparable, with a similar land size and number of bedrooms, for example, so you aren’t measuring apples against oranges.

“Your mortgage broker can give you a list of sales in the area and then you can drive around and look online to do a quick comparison. If you can find one or two similar properties then you can be sure of what the property is worth,” advises the finance broker.

Keep in mind current market conditions

The property market is always changing, so doing this research once and sitting on it for a few months will offer little help. Going to open homes and auctions regularly will give you an insight into the current state of the market and how much certain properties are going for.

Expand your search

“My number one tip is to look at properties in the suburb next to the one that you want,” says the finance broker. “We find that first-home buyers in particular usually end up buying in the more affordable suburb next door to the one that they first wanted to buy in.”

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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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Steps to Buying an Investment Property

Steps to Buying an Investment Property

Step 1: Speak to an expert Finance Broker

When considering an investment property, your first port of call should be your finance broker.  An expert finance broker can help you achieve your investment property goals.  They will review your assets and liabilities to determine how much you can borrow, which will, in turn, give you a general idea of your target price range, so you can narrow your property search within your purchase budget.

Step 2: Budgeting

Just like buying your first home, when purchasing an investment property, it’s essential to budget.  If you’re unsure of the best way to budget for an investment property, speak with your mortgage finance broker, they can help you to get on the right path. Step 3: Important conversations

Your mortgage finance broker will discuss your plans and your circumstances with you to determine what you can afford.  Your broker will also provide statutory documentation to initiate the lending process and work out for you what loan products will be appropriate in your circumstances.

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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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How to invest on a low income

How to invest on a low income

While you may not need a six-figure salary to invest in property, those who earn a relatively low income will require a little more creative thinking to start a portfolio. Here are some tips to help you get started.

Find an investor-friendly loan

The challenge for low-income earners, explains the finance broker, is the time taken to save for a sufficient deposit. Some lenders require a higher deposit for an investor than is required for an owner-occupier, so seek out a lender and loan that is investor friendly, or consider living in the property for a period after the purchase before converting it into an investment property as your portfolio grows.

In any case, having at least 10 per cent of the property’s purchase price as a deposit will not only increase the likelihood of loan approval, it will also increase your borrowing capacity and lower the risk that you will have to pay lenders’ mortgage insurance (LMI).

Prove your financial discipline

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Property can be a challenge

Property can be a challenge

A home is the biggest purchase most people will make, so it’s never simple. Throw in renovations and investment properties, and you’re certainly in need of expert advice.

If you have a really great credit adviser, he or she will be prepared to work with you over the long term to find the right property and lock in finance for the purchase.

Justin Myers, recalls working with one client over three years, from obtaining initial pre-approval for a loan and helping the client successfully bid on a property, to arranging a construction loan for renovations and then helping unlock equity for property investment.

In cases such as these, a bank branch’s loan officer just might not cut it.

“When the client contacted me, he was dissatisfied with the experience he had had dealing directly with banks, who were focused on selling him a loan at the lowest rate, rather than setting up a loan that really met his needs,” says Justin.

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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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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 Mortgage Finance Broker can help you find the right lender and craft an application to avoid the heartbreak of continual rejection.

That savings balance, where has it come from?

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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 look for at an open house

What to look for at an open house

There’s an old saying that you should never judge a book by its cover, and this is true for houses – after all, who would buy one having never seen more than the front door? Open inspections are opportunities to really flick through the pages, and here’s how to take full advantage.

Use your sensesSniff, peer, listen and feel as much as you can. Your nose might pick up a mouldy or musty smell that may mean damp. You might spy small or hidden cracks that could mean structural issues. That clattering sound when water is running? That can be a sign of serious plumbing problems.

Don’t be distracted by the beautiful blingAnyone can invest money in pretty cushions and lamps to set off the house. Or bake some cookies just as the open inspection starts so the house smells cosy and homey. But when buying property, you’re buying the sausage not the sizzle, so look past the perfectly presented and lit lounge room to the size, shape and placement in the floorplan of the actual room, and imagine how you will use it.

Look upThat means checking the roof on the way in and looking at the ceilings in the rooms. Damp and leakage issues are costly and notoriously hard to fix. And once the rot sets in, it’s there to stay.

That kitchen and bathroom advice It’s true what they say. If these two rooms aren’t how you would like them to be, are you prepared to live with it or spend the money required to transform them? Bathroom renovations will be upwards of $10,000, and probably a lot more.

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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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No deposit? No worries!

No deposit? No worries!

If you have a stable income but don’t have the cash for a deposit, an expert can help find a way to turn your dreams come true!

Kelly and Natasha had a good, solid income but they didn’t have a sufficient deposit to be able to buy a property. They had been knocked back after visiting various lenders, but, when they went to see their local mortgage finance broker for help, it turned out that they just hadn’t been given the best advice.

Their finance broker suggested that they take a different approach and use family equity in place of a deposit. This meant including the value of the parent’s home in the total property valuation for the loan to bring their loan to valuation ratio (LVR) up to the required 80 per cent.

As for the parent’s concerns, the finance broker was also able to explain the implications and the flexibilities they had in terms of selling their property or downsizing. He allowed them to understand that they could still help out without carrying a large financial burden or altering any plans they had.

Kelly and Natasha’s application was approved, so they no longer had to delay and miss out on their purchase. They also avoided paying lenders’ mortgage insurance (LMI). Four years later, they have been able to refinance, eliminating the family property from their home loan arrangement and maintaining the loan on their own. With the equity in their home, they are now working with their finance broker on a plan to purchase an investment property, which they would never have thought was possible four years ago when they had been told they couldn’t buy even one.

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When should I find a finance broker?

When should I find a finance broker?

When saving a deposit to buy a home, many people have a goal amount in mind that they need to save before they meet with a mortgage broker who will help them secure the finance.

If this is you, you’re doing it wrong. From day one, when you first think ‘I could maybe buy a house if I worked hard and saved a lot’, you’re ready to have a mortgage broker on your side.

A mortgage broker’s knowledge of the loan and property market will help you work out how much you will be able to borrow, which determines the size of the deposit you will need to save.

They will also be able to help you develop a realistic timeline to save your deposit and find ways to pay down debts faster, and provide creative solutions that will help reach your goals sooner.

You may also be pleasantly surprised to find that you are closer to your goal than you thought. The tools in a mortgage broker’s belt that can help you realize your dreams more quickly and efficiently include lender’s mortgage insurance, specialist lending products, land loans and, for investors predicting significant rises in property prices, interest-only loans.

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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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