6 Reasons Why You Should Use a Mortgage Broker

Firstly.....What is a mortgage broker?

So what is a mortgage broker? Basically a mortgage broker is a loan expert who assesses different loans and helps pick out the one best suited for yourself. Considering that a loan or mortgage is going to be your biggest expense, it pays to have a professional assist you through the process. In fact over 52% of all home/ investment loans are now written by mortgage brokers. Here are some of the reasons why people should use them as opposed to going directly to a bank.

1: A mortgage broker can save you time

The choices now available in the mortgage market can seem limitless and completely overwhelming. There are now over 100 banks/lenders in Australia. To try and research even a few lenders’ products and compare them together can take a considerable amount of time. Mortgage brokers do it for a profession and thus have a very good understanding of what is available in the market place and should also have computer software to compare current loan products so as that you are comparing ‘apples with apples’ (so to speak!)

2: Mortgage brokers give you choice

All mortgage brokers will have a panel of Lenders from which they recommend a loan. Most will have anywhere from 20 to 30 lenders on their panel. Before they can offer a loan product a broker must be accredited with every lender on their panel, and are required to keep up-to-date with their latest offers.

3: A mortgage broker can help find the right loan

The best deal is not necessarily the cheapest rate. A good mortgage broker will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth the right way.

4: Most mortgage brokers don't charge you

Most mortgage brokers don't charge a fee for their service as the lenders pay them a commission for the loans they write. Most lenders offer the same rate via the mortgage broker as they would if you went directly to the bank. In some cases the broker may be able to secure a better rate than if an individual applied directly to some lenders as the broker does have the ability to request discretionary discounts on rates over and above what is being offered to the general public.

5: Mortgage brokers can help you avoid certain loan pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. A mortgage broker can help you avoid taking out a loan you might later regret.

6: Mortgage brokers do all the legwork

A broker will be the one who will collect the relevant documents and information from you and then do all the work in regards to researching the loan products that will be appropriate/ putting the deal together/ following up with the lender’s assessment team and back office staff/ communicating with your lawyer and generally taking care of you as well (for many people, buying property can be a very stressful experience, but with the right broker helping you, it shouldn’t be!)

The only finance broker to deal with: MFAA members

A good mortgage broker can save you time and money, and give you peace of mind. But, remember, only work with mortgage brokers who are members of MFAA - they are the Essentials of Borrowing.

How Can Credit Card Limits Affect Your Borrowing Capacity?

How Banks Look at Credit Cards

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

When a bank looks at your liabilities it’s obvious that a lender will consider your credit card debts and the monthly repayments on those when you apply for a mortgage. However, what many people do not realise is that credit cards with nothing owing on them can still impact a lender’s assessment of what you can afford to borrow.

Quite often I will sit down with clients and they will tell me that they have a credit card limit of say $10,000 - $20,000 (and sometimes much higher!) and that they pay it off every month so in their mind they’re thinking “why should the bank consider that as it’s always paid off in full every month”. Well  the logic from the bank’s perspective is that there is no stopping you from racking up debt on your credit card to the max. the day after your loan is approved….say, on lovely furniture to fill that new house!

Most lenders take into account three per cent of the total credit card limit, regardless of what the applicant owes so if you had a $10,000 limit but only owe $1000, then the bank will still have to expense your credit card out at $300 a month and for some people that can reduce their borrowing capacity by a considerable amount.

To ensure you can increase your borrowing capacity a good plan is to lower your credit limit or cancel your credit account altogether. End of the day, the larger amount of liabilities you have will lower your ability to borrow the monies you need to purchase that dream property…whether it be in the Northern Beaches or any other part of Sydney

At HORIZON MORTGAGES we’ll sit down with you and work on the best strategy to get you into your next property!

What is an LVR and how does it affect my ability to purchase different property types??

For prospective buyers of property many understand that they require at least a 5 to 10 % deposit to purchase a property. However, what I generally find upon sitting down with a new client is that most aren’t aware that ALL lenders look at the various types of property (also referred to as ‘security’) and rate them with different LVRs. Now what exactly is an LVR? It stands for ‘Loan to Value Ratio’. In a nutshell the way you get a LVR rating is to divide the loan amount by the property’s value. So for example if you have a loan for $800,000 secured by a property worth $1,000,000, then the LVR is 80%.

For most standard residential suburban homes/ apartments, banks will generally lend on LVRs anywhere from 90 to 97% (inclusive of any Lenders Mortgage insurance). However, there are many properties that are regarded as being more risker to the bank and are referred to as non-standard securities. Consequently, the maximum LVR the bank wants to be exposed to is less. Below is an example of just some of the restrictions on LVRs for different property types:

Small Apartments/ Bedsit/ Studio

An apartment greater than 40 sqm but less than 50sqm of internal space (and this excludes the balcony and car spot), will see many lenders refuse to lend on these properties altogether. However, those that do, range diversely in the maximum LVR they’ll go to. Some will go to a maximum of 60% whereas there are few that will go up to 95%. If you do find a property that has less than 40 sqm, there are only a handful that will consider the deal and often it is assessed on a ‘case by case’ basis with a low LVR applied.

Serviced Apartments/ Student Accommodation

Of the lenders that will consider these securities, the maximum is normally around an LVR of 60% to 70% regardless of the size of the property.

Over-55 Complexes

At the moment, it’s hard to find lenders out there that will consider these properties due to the fact that if the bank had to sell the property because of a borrower’s default on repayments, then the bank is heavily restricted in who they can sell it to recoup their money. Areas such as the Northern Beaches of Sydney are getting more and more of these complexes so it will be interesting to see if banks change their thinking on this form of security as the Australian populace ages.

Rural Properties

Lenders have varying LVRs when it comes to the assortment of property types available in rural/regional areas. For example if the residential property is 10 hectares or less, is located in a serviced rural/ country town, is connected to power, a landline, sewage, and road access then you can possibly go up to an LVR of 95%. If you are looking at a hobby farm that is between 10 to 50 hectares then some lenders will go to LVRs between 60 to 90%. Over 50 hectares and less than 200 hectares is limited to only a few lenders who may go as low as 50% on the LVR. In most, if not all cases, the rural property cannot be used for commercial income purposes other than renting out the residence to a tenant.

Company

These forms of title are generally restricted to older styled apartments which predate 1961 when strata title was introduced. Since 1961 most apartments have been registered as strata title. It’s in Sydney’s eastern suburbs where the majority of company titled properties are located in NSW. Whilst many lenders won’t lend to these sorts of properties, those that normally do, lend to a maximum LVR between 70 and 85%.

In Conclusion!

When it comes to financing a property purchase it is always best to engage the services of a qualified mortgage broker who is able to help advise you on what you need to know when it comes to selecting a non-standard security.

Conveyancers versus Solicitors

A conveyancer is a solicitor, but just deals with property, right? Wrong. The two are different, and it is important to have the right one on your team, in order to avoid paying too much while still getting the advice you need.

Whether you're buying property in Perth, Melbourne or the Northern Beaches of Sydney, it's bound to be one of the biggest decisions you will make in your lifetime – so it’s something you want to get right. Every Australian state and territory has different laws, regulations, forms and taxes associated with purchasing property, so having either a solicitor or a conveyancer will help the whole process run smoothly.

For a straightforward property purchase, a conveyancer can do the job. Their main responsibilities include giving advice and information about the sale of property, preparing documentation and conducting any settlement processes.

Although there is a licensing process for conveyancers, they do not have to be legal professionals. As a result, they are generally cheaper to hire than solicitors. However, they can only provide information relating to property, so if you do have additional legal questions, then you will need to consider a solicitor.

While conveyancers are limited to advising on your property purchase, solicitors can provide you with a wide range of legal advice in addition to your conveyancing needs, and this may be necessary if your property transaction isn’t straightforward. For example if there are other matters that affect the transaction like family law, asset protection, asset structuring, tax law or estate planning, you normally will not be able to receive this sort of advice from a conveyancer.

In a nutshell, if you simply need an expert to guide you through your purchase and require nothing else, then a conveyancer may be a cheaper option, whereas if you need them to do extra legal ‘leg work’ associated with the transaction, you’re probably best off with a solicitor.

If you’re unsure, you can always ask your mortgage broker who can steer you in the right direction and should be able to recommend either a good conveyancer or solicitor

How Do Lenders Look At Loan Applications?

Here Are Some Pointers!!

So what exactly do lenders look for when it comes to giving pre-approval/ approval to a loan application. Well in order to decide whether or not to provide you with a loan, lenders will generally assess you against four qualities.

 1: Your capability to repay the loan. This is pretty straight forward! To establish your capacity the lender will look at your employment history and salary to evaluate whether you have enough cash coming in reliably to pay the loan over the agreed loan term.

2:  What deposit will you be contributing if you are purchasing a property. Assessing your ability to put down a percentage of the value of the property being purchased up front is standard. The percentage varies though, and some specialist lenders may approve a five per cent deposit. However, many lenders will require you to put down at least a 10% deposit plus cover the associated costs too (ie. stamp duty etc). A mortgage broker is best suited to letting you know what a lender requires in this area.

3: The property valuation. Since the property is used as collateral the lender will want to ensure the property is an appropriate security. In regards to a purchase some lenders will accept the Contract of Sale as being good enough, however, if the property is over a certain amount then the lender may request a valuation be undertaken (normally at the bank's expense)

4:Your financial history. Your credit rating, expenses and debts will help the lender assess your reliability as a borrower and whether you are worth the risk.

  In helping clients all over the Northern Beaches, Inner West and the North Shore areas of Sydney, at Horizon Mortgages we ensure through appropriate consultation with you that we match you with the right loan choice at the best possible interest rate! What's even better is that you don't pay for our services as the banks pay us a commission to introduce you to them.

Fixed Versus Variable Loans Fees

Loan Penalty Fees

A common question I'm always asked by clients from all over the Northern Beaches, Inner West and North Shore area is what bank penalties will I be exposed to if I pay out my loan early. Well in a nutshell, it depends on what type of loan you take out. It's basically a case of Variable vs Fixed loans.

Variable Home/Investment Loans

Let's firstly look at variable loans. Prior to 2011 many banks charged customers a penalty fee if they paid out their variable loan generally within a four year period of settlement. So if you had taken out a loan in 2007 and paid it out in 2010 because you sold the property or refinanced it to another lender, then the bank would probably have charged you a potentially high fee to leave them. Fortunately, since 2011 government reforms have seen this practice change so now you can take out a variable loan and pay it off without being hit with a large penalty fee....even a month after settlement if you were lucky enough to win the lottery!! However, keep in mind that the lender will still charge a basic fee to have you leave them, regardless of the amount of time the loan has been open, and this is referred to as a Discharge Fee and these are normally in the $150-$350 range.

Fixed Home/Investment Loans

Now in regards to fixed loans whereby a customer wants to lock in an interest rate for one to five years, the rules are different. Since the bank has sourced out the money to fund your loan at a set price, they expect you to honor the fixed repayment agreement so they can meet their obligations as well. To pay off the loan entirely within the fixed loan term will incur what they call "Break Costs" and these fees can be potentially large and prohibitive for some people. There is no set Break Cost fee as every lender uses different mathematical formulas to calculate what the fee will be. Some of the information that will be taken into consideration to work out the fee includes the loan amount, how much time is left on the fixed rate period and how different is the fixed rate on offer now compared to when you took it out.

Also when it comes to making extra repayments on top of the minimum amount required on a fixed loan, lenders vary as to what they will permit on an annual basis. For example some lenders will allow you to pay off either an extra $5000 annually or 5% of the loan balance - whichever is the smaller amount. On the other hand there are some lenders that, no matter what the loan balance, will permit $10,000 to $20,000 extra to be paid off annually. So what happens if you pay off more than you’re entitled to. Yes that’s right….they’ll hit you with a penalty fee. So it always pays to check with the lender as to what you can and can’t do with a fixed loan.

So when deciding between a variable vs fixed loan make sure you consider your future goals. Do you have plans to move city or change your job? Sell the property in the next few years? Are there any foreseeable disruptions to your financial circumstance likely to take place during the space of your fixed-term rate? Are you about to come into money in the near future which you wish to throw on the loan? Maybe splitting the loan amount into a variable loan and fixed loan is more appropriate?

So to avoid being caught out by extra bank charges, it always pays to sit down with a mortgage broker (HORIZON MORTGAGES is a great place to start!) who can advise you properly on all your options and the pros and cons of every loan scenario. 

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

You Know You've Earned It

New Car Loans With Horizon Mortgages — You Know You've Earned It

With another busy week rapidly concluding, I still had too many thoughts fighting for attention in my mind, though one seemed to be winning — TGIF. Hmmm, can I say TGIF on a professional Mortgage Broker Business Blog? Too late, the phone started to ring again, back to work.

Finished that call, only now I have another thought. That was a car loan enquiry which got me thinking Car Loans. Interestingly, when I do stop and think about it, many of our local Sydney Northern Beaches / Inner West / North Shore clients have become repeat clients. All those loans we have arranged over the years, First Home Buyer loans and new Home Loans, yet most of our Car Loans are new clients. Why is that? Perhaps it was time I posted about Car Loans on our blog to ensure our clients actually know we do them.

Private Car Loans, Business Car Loans, the bottom line is you're no doubt working hard, so if it's time to replace your car, make sure we talk. We work with the leading lenders to ensure we match the best lender to your needs and financial situation, the one that really works for you.

• NEW CARS
• LOW RATE CONSUMER VEHICLES
• LOW DOC CARS
• CAR REFINANCE

If it’s time for a new car give us a call, even if its Friday afternoon, we'll still pick up that ringing phone and help — Reuben

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

Help Is At Hand For First Home Buyers Of Sydney

Help Is At Hand For First Home Buyers Of Sydney

We recently had an uptick in First Home Buyers looking for help to enter the housing market. Yep, time for a short post to help clear the muddy waters around first home buying and show that with some good guidance from your friendly Mobile Mortgage Broker [HORIZON MORTGAGES for example] it can be fine sailing.

So your are ready to buy your first home! It’s exciting, but there’s a lot to get your head around. How would you feel if you had someone who would arrange your home loan, answer your questions and be there to help – from start to settlement and beyond?

• OFFER INVALUABLE ADVICE AND GUIDANCE

Starting out in the property market can feel overwhelming. HORIZON is there at every step providing the expert guidance and answers you need to feel confident about your decisions.

• MAKE EVERYTHING EASY TO UNDERSTAND

We'll walk you through different scenarios and clearly explain how much you can borrow, all the costs involved, and what to expect at every step towards buying your home.

• HELP YOU GET LOAN PRE-APPROVAL

If you're still hunting for your dream home, HORIZON can help you organise pre-approval so you know exactly how much you can spend.

• FIND AND SECURE A BETTER LOAN FOR YOU

We listen to your needs and future plans then compare options from the leading lenders and negotiate on the one that really works for you – so you never lose sleep wondering if you missed out on something better.

• APPLY FOR FIRST HOME BUYER INCENTIVES

If you're eligible for the First Home Owner Grant [FHOG] we can lodge the application and all supporting documents for you.

• DO EVERYTHING FREE OF CHARGE

That's right. You don’t pay us anything for our expert service and running around because lenders pay us a commission when a mortgage is settled.

We have been helping young families, couples and individuals around Sydney Northern Beaches, Inner West and North Shore find the best home loans. If you are looking to buy your first home why not give us a call and let us help you too — Reuben

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

It Pays To Wipe Out Debt

It Pays To Wipe Out Debt

As a passionate [yes I actually enjoy helping people with home loans :] Mobile Finance Broker who has helped hundreds of families around Sydney Northern Beaches, Inner West and North Shore find the best home loans, I was a little surprised this week when I had an enquiry for a Low Doc [low documentation] loan. Obviously not simply because it was a Low Doc Loan enquiry, but the conversation that transpired. It was screaming to be my next Home Loan Information blog post. The conversation started with "We want to borrow about $80,000 to renovate our family home".

With just a few questions I discovered the [pending] new client and his wife had more to consider. They have a home loan of $470,000 and an $17,000 credit card debt. When I asked how they wanted to restructure their existing loans [house and credit card] they said they didn't, they simply wanted to borrow the money for the renovations and had heard about Low Doc Loans. With no disrespect intended, I must say I was rather surprised.

While each persons situation is different, so no one solution fits all, we would still typically suggest it pays to wipe out credit card debt first. With some credit card interest rates over 20% it is far better to pay them out first before making additional home loan repayments. If that is not an option for you, perhaps its time to look at refinancing your home loan. There are many different loan options available and we are only too happy to sit with you, review your needs and plans and then negotiate the best loan with the banks, on your behalf — Reuben

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

Mortgage Reducing Tips for First Home Buyers

There's More To a Home Loan Than Interest Rates

I guess as a Mobile Mortgage Broker it's not so strange I found myself thinking about home loans this morning. Contemplating our local Sydney Northern Beaches, Inner West and even North Shore real estate market and the hard-working Australian who just wants a good loan deal, perhaps even as a first home buyer.

As everyone with even the slightest interest in securing a home loan would know, the interest rate significantly impacts how much total interest you pay over the term of your loan. So what else could really make that much difference? Quite a few aspects actually!

For those of you who initially went with a 30 year loan term, there are still big savings to be made on your home loan if you can accelerate your repayments. By accelerating your repayments on a home loan by just 8 percent or $220 extra each month, you can save around $70,000 in the long run and repay your loan by as much as 6 years earlier! Does a $70,000 saving sound worth considering? Now perhaps the word "budget" is rushing to the forefront of your mind. Don't stress your budget too much, but if you do have the extra funds, or can adjust your budget somewhat, putting it towards paying off your home loan sooner will greatly benefit your financial future.

There are many aspects to consider other than just the obvious interest rates when applying for your first home loan, which is why many home buyers now seek out an experienced finance broker. An independent mobile broker [HORIZON MORTGAGES for example] to guide them through the process and negotiate the best possible loan suited to their personal circumstances.

If you have questions or are considering a new home loan or refinancing your existing home loan, why not give me a call as I would love to help — Reuben

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

First Home Buyer Home Loan Maze

Home Loan Information — Clarifying Banking Terms

I recently had a request to clarify LVR. As a finance broker who has been helping buyers in the Home Loan and First Home Buyers market from Sydney Northern Beaches to Inner West to Sydney North Shore, it's easy to forget some buyers may feel a little lost in the maze of banking terms. This lead me to thinking perhaps a quick post on typical home loan terms may be helpful, particularly to those in the First Home Buyers category.

• LOAN TO VALUE RATIO (LVR)

The LVR refers to the size of your home loan expressed as a percentage of your property's value. For example, if you borrow $100,000 to fund an asset worth $125,000, the loan is said to have an LVR of 80% ($100,000 is 80% of $125,000).

• EQUITY

The difference between the amount owed on your home loan and your home's value.

• EXTRA REPAYMENTS

Allows you to use extra cash to reduce the outstanding principal and interest on your home loan. This is a great way to pay off your loan faster.

• FIXED RATE

An interest rate that allows you to lock in to a specified rate of interest, with fixed monthly repayments, for a given period of time.

• INTEREST ONLY

A type of loan that requires repayments on the interest only and, as such, leaves the loan principal untouched.

• CREDIT LIMIT INCREASE

Increasing the amount of money in your home loan. Note that stamp duty applies.

• OFFSET ACCOUNT

Some lenders offer an 'offset' account, which is a savings account linked to your home loan. It can be a great way to save on interest costs because interest charged on the home loan is calculated on the difference between the balance of your loan amount owing and the balance in your savings account. For example, if your balance on your home loan is $250,000, and you have $10,000 in your savings offset account. Instead of being charged interest on the full value of your home loan, interest will be charged on a balance of $240,000 - being the difference between the balance of your loan and the money in your offset account.

• PRINCIPAL AND INTEREST

A type of loan where each repayment is comprised of interest plus a reduction in the loan principal.

• REDRAW

This loan feature lets you withdraw any additional repayments you have made on your home loan. It is a useful way to reduce your interest while providing access to your funds.

• SWITCHING

Changing from a variable loan to a fixed rate loan. Can be useful if you are concerned about a possible rate rise.

• SPLIT LOAN

A loan that combines a fixed rate portion and a variable rate portion.

• VARIABLE RATE

An interest rate that will vary in line with changes to official interest rates.

• VARIATION

A change to the home loan agreement.

If you are thinking about a loan, we would love to help — Reuben

HORIZON MORTGAGES — Reuben Brown

SYDNEY BASED BROKERAGE PROVIDING MORTGAGE BROKERING SERVICES — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS

HORIZON MORTGAGES Refinance Loans

START HERE → Refinance Loans

RBA Interest Rate Unchanged — Time to Refinance?

The Reserve Bank has left interest rates at a historic low of 2 per cent once again after the central bank board meeting. The decision was expected and is good news for business and households. For anyone looking to reduce their monthly repayments perhaps it's time to refinance.

HORIZON MORTGAGES Car Loans

START HERE → Car Loans

HORIZON MORTGAGES Low Doc Loans

START HERE → Low Doc Loans

HORIZON MORTGAGES First Home Buyers Loans

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HORIZON MORTGAGES Tailored Home Loans

START HERE → Home Loans