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Avoid These Refinancing Traps and Mistakes

It is a great time to look at refinancing your mortgages and home loans – with ever lower rates and increasing features being offered in a highly competitive market. The mortgagee is certainly in a powerful position with a market clamouring to be seen. Whether you’re after lower repayments or want to tap into the equity sitting in your home or investment, refinancing can offer a world of benefits. However, here are three refinancing traps and mistakes to be aware of so that you don’t find yourself hooked into a bad deal.

Don’t be fooled by the interest rate

Finding a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments. Worse still, when you come to refinance, you may be hit with huge exit fees because you thought you were being fiscally responsible! Astute St Leonards recently reviewed a refinance opportunity only to find the home owner would be charged $3,000 by their bank to leave, having put a little bit more into the loan each month even without a fixed interest period!

Honeymoon rates are just that

Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount. This is important to consider – with low rates today the savings might add up if you can use an offset account to make a bigger gain.

Be aware of the fees

One of the main purposes of refinancing is to lighten the financial burden, however, that doesn’t mean that it’s not going to cost you. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee and possibly mortgage insurance. You may also be subject to stamp duty depending on what state your property is located in. While these cannot be avoided, you have to ensure that the costs involved are not higher than the savings, to make the process worthwhile.

In Summary

While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better. Talk to Astute St Leonards and we will guide you through the process avoiding the refinancing traps and mistakes that can catch you out. We are here to help!

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Is One Phone Call Really All It Takes To Secure a Lower Interest Rate?

With official interest rates trending downward, shrewd mortgage holders may take the opportunity to call their lender to ask for a better deal. But when even a small interest rate reduction means potential savings of thousands of dollars, is a simple phone call really enough to get you there?

In 2021, ‘your interest rate should have at most a two in front of it’, is common advice for home owners considering the competitiveness of their loan settings. But while a number of lenders offer lower rates to new customers, it’s not always so simple for existing customers to secure the same outcome.

A leading mortgage and finance broker says that if people want a better deal on their mortgage, there are basically two options:

  • Call your bank and ask them to match the new rate, or
  • Contact your broker and vote with your feet.

And although the first option is commonly recommended, lenders aren’t always so obliging when it comes to rate-matching to get you a more affordable mortgage. As an existing client, it can be disheartening to see your bank offer new customers a lower rate to the one you currently have. However, they have provided that money from a pool that came with a rate to match the one the borrower has been given, therefore by providing a lower rate, the lender will be losing money – so they really don’t want to consider that!

Lenders regularly try to ‘win’ new customers by offering low rates. It is a great acquisition strategy, but if they refuse to match your current rate to this new offer, you should contact a broker like Astute St Leonards and refinance with a lender who is hungry to win your business.

Mortgage brokers, on average, have access to a panel of 34 lenders and this creates competition amongst lenders. A broker like Astute St Leonards are also in a position to offer you a more in-depth and customised level of service. This can allow them to find their customers a mortgage product that may suit their current needs, wants and circumstances.

For a confidential discussion, call Stephen on 0412 166 815 and we can help assess your position and the rate that suits.

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How to Speed up your Home Loan Approval

Asking how long it takes to get a loan approved is like asking how long is a piece of string. Every application is unique, so the time between your first contact with your broker and approval can never be predetermined. There are, however, some things you can do to help speed up your home loan approval.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is fairly straightforward in terms of employment, asset and liability position,” says Stephen Wells from Astute St Leonards. “Also, if a valuation wasn’t required due to a low Loan Value Ratio (LVR) and both parties were happy with the contract price, then this could speed up the time to approval.”

If you’re not prepared, it could take up to a month. The most common reason for a delay is a lender’s turnaround time to assessment, especially when some lenders have competitive offerings and experience larger application volumes, but a lack of preparation can cause this delay to snowball. “When there are delays and then a lender needs to organise a valuation or request further information, this can lead to a lengthy process time,” Stephen says.

A good finance broker will help you take all the necessary steps to ensure a fast home loan approval, but there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all Information

To avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker – Astute St Leonards will provide you with a list of these documents. Convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.

For more information have a read of our article entitled “My Broker Asks For So Many Documents“.

Skip the Valuation Queue

Not all applications require a valuation, depending on the property and lending institution, and forgoing this step can save a considerable amount of time. You can also save time by having a valuation completed prior to your application, as long as it’s accepted by your chosen lender – but check with your broker first. Astute St Leonards can recommend a good valuer should you need one.

To ensure your application avoids any unnecessary delays, speak to Stephen at Astute St Leonards, a trading name of Madison Wells Pty Ltd, who will speed up your home loan approval.

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My Broker Asks For So Many Documents. Why?

No one likes paperwork, however, providing your broker with the right documentation will save you time and money. It will speed up the time to find you a loan that suits your requirements and this is why brokers ask for so many documents.

What information will your broker ask you to provide?

When you ask a broker like Astute St Leonards, they will probably ask you for the following documentation:

  • Identification, including photo ID such as a driver’s licence.
  • Income verification documentation such as recent payslips.
  • Birth certificate, if you are applying for a government funded first home owner grant.

Depending on the lender or bank you would like your broker to apply to for your loan, you may also be asked to provide:

  • A recent Pay As You Go (PAYG) summary.
  • A notice of assessment from the Australian Taxation Office.
  • Tax returns.
  • Proof of your contribution toward the transaction, such as savings or deposit statements.
  • Purchase contracts for a home loan, including building contracts, or plans if building a new home.
Why is this information important?

While it may seem that you are climbing the Mount Everest of paperwork, we will ask for all of this to ensure that we are protecting you and that we get the best possible deal for you to accept.

“Gathering various forms of documentation allows brokers to do a fact find, which is an important part of the loan process,” explains Lending Specialist Stephen Wells from Astute St Leonards.

This is the process by which brokers ensure that they match a client with a loan that helps them achieve their property goals, whether that is buying a home to live in, one to renovate and sell, or a long-term investment, and one that matches their financial positions. “Astute St Leonards does not want to put prospective loan clients into a situation where they cannot afford to repay their new loan commitments,” says Wells.

Will a bank ask for the same documentation?

If you apply for a loan with a bank that you do not currently have an account with, they will require much of the same information as the broker would. By having collated it for our compliance processes, Astute St Leonards can then speed up the settlement by having these documents to hand.

Although borrowers may be able to avoid the paperwork by applying for a loan with their current bank (which will already have a lot of information on file), this means being constrained by the products that the bank offers and risking missing out on a great deal.

“The benefit a broker has compared to an individual bank, is the broker – in our case Astute St Leonards – has access to over 30 different banks and lenders across Australia,” Wells said. “Lending policies and pricing vary greatly across the lending market and some clients don’t realise this, so why waste time going direct to a bank?” It is also likely to mean missing out on having a broker match a loan to longer-term goals, rather than just a purchase price and interest rate.

Saving you time and money

Using efficient and connected systems, Astute St Leonards can usually tell a client within 10 minutes whether they have a chance of obtaining loan approval.

Brokers have access to bank loan affordability and serviceability calculators, which show clients’ potential borrowing capacity. Depending on the size of the funding required and the loan to valuation ratio, these days the banks are extremely competitive, and Astute St Leonards can quite often get a better price deal than advertised.

If a client is not yet in a position to obtain a loan or has a credit issue on their file, such as a default, having a broker on-side can be invaluable. Brokers can guide the client with a view of getting defaults removed, or waiting until the default drops off the client’s credit file. Most brokers are accredited to gain access to client’s credit files these days, which is an extremely important issue due to the banks’ risk scoring.

In a nutshell, Astute St Leonards will shop around to get the best possible package for you, the client. This is why brokers ask for so many documents.

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Don’t Worry: Are you Concerned about Servicing your Loan?

After a very difficult 2020 where many people lost their jobs, were furloughed or simply had their hours reduced, many home owners have been under increased worry and stress. If you are concerned about servicing your loan, reach out to Astute St Leonards for help.

As Australians everywhere take a close look at their financial circumstances and consider what could happen in 2021, mortgage brokers like Astute St Leonards stand ready to lend a helping hand.

Whether experiencing financial hardship through job loss, a reduction in work hours, or business disruption, an increasing number of Australians may be struggling to balance their books as a result of the Coronavirus, and in many cases are wondering how they will continue to pay the bills.

Difficulty with Repayments

According to research conducted by Finder last year, about one in five mortgage borrowers, or about two million Australian households, were struggling to make repayments, despite record low interest rates. With the challenging circumstances that have emerged since – despite lockdowns and restrictions easing, it is anticipated that these pressures will only increase this year forcing more people to require financial assistance.

Financial Relief Strategies

In this difficult time lenders responded by announcing financial relief strategies to deal with the initial income loss and many have kept these in place as State Governments bounce between lockdown and freedom. In an official Australian Banking Association (ABA) statement, CEO Anna Bligh said, “Banks stand ready to support customers and if anyone is in need of assistance, they shouldn’t wait but come forward as soon as possible”.

Different lenders have different assistance options. These may include waiving fees on early term deposit withdrawals, interest rate freezes on loans, options to defer or restructure home loan repayments and emergency credit card limit increases. Above all, with record low interest rates, a simple refinance may be a great option.

It is important to remember that mortgage brokers have the knowledge, experience and relationships necessary to assist people experiencing or expecting to have trouble paying their home loans as a result of changing circumstances. In times like these, the importance of mortgage brokers in assisting customers with hardship and facilitating access to credit cannot be overstated. For many Australians – particularly those in rural or regional areas – brokers may represent the only source of assistance. 

Expertise of Brokers is of Critical Support

Brokers’ expertise in helping customers navigate the complex home lending market – and their intimate understanding of their customers’ personal circumstances – means they are uniquely positioned to provide critical support for people when discussing hardship and available options with lenders.

If you are concerned about servicing your loan, need further guidance on hardship assistance, or have other questions about your loan arrangements, give Astute St Leonards a call on 02 8912 2139. We are hear to help!

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Everything you Need to Know about Exit Costs when Refinancing

Exit Costs when Refinancing

Here at Astute St Leonards, we have just completed a refinance for a client where we moved two fixed rate loans into a cheaper package. This raised the issues of exit costs and break fees because refinancing can be a great way to save money if you believe you are paying too much for your loan. However, there is more to it than just finding a loan with a lower interest rate and making the change. Before making the switch, ensure the savings you could make outweigh the fees involved. Here are the different exit costs to consider when refinancing:

Exit Fee

Although loans taken out after 1st July 2011 are not subject to deferred establishment, known as “exit” fees, those taken out prior may still be subjected to this fee. Also known as “early termination” or “early discharge” fees, they can sometimes be paid by your new lender but are normally applied to an early contract exit. We will assess whether your loan has exit fees applied or not.

Establishment Fee

Also known as “application“, “up-front” or “set-up” fees, these cover the lender’s cost of preparing the necessary documents for your new home loan. They are payable on most new loans, and the alternative to not paying this particular fee is being charged higher ongoing fees or even a higher rate for the life of the loan.

Mortgage Discharge Fee

Covering your early legal release from all mortgage obligations, this fee is not to be confused with an exit fee. Also known as a “settlement” or “termination” fee, its purpose is to compensate your lender for the revenue it may lose due to the contract break.

Lender’s Mortgage Insurance (LMI)

This non-transferrable premium means that if you hold less than 20 per cent equity at the time of your refinance, you may have to pay LMI even if you paid it on the original loan. Extra care is also needed here because, whether or not you hold 20% of the original valuation of the property, you may not if the property’s value has decreased and while LMI may not have been a consideration at all in the original loan, it may be payable on the refinance.

Stamp Duty

If your purpose for making the switch is to increase your loan amount – maybe to fund renovations – then stamp duty will apply only to the difference between the original loan amount and the refinanced loan amount. Different rules apply in different States, so it’s worth speaking with us to see if this charge applies.

Other Government Charges

Fees are applied for the registration and deregistration of a mortgage so that all claims on a property can be checked by any future buyers. Varying from State to State, these can potentially add up to $1,000 or more, so it is important to review the whole package before making the decision to refinance.

Break Fee

If you were on a fixed rate loan, your lender is likely to charge you a fee for ‘breaking’ out of the loan term. This fee varies depending on the amount owed, the interest rate you were locked into, the current interest rate and the duration of your loan. Each lender will have an algorithm to define this fee and it may not be easily defined without help.

In Summary

Although some of these fees can be negotiated by a broker, the total cost can be substantial. At Astute St Leonards, we can ensure that refinancing will help you achieve your goals while maintaining your capacity to service the debt. We will ensure you are only paying the relevant fees for your unique circumstance.

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Get Your Finance Broker Working for You!

Madison Wells Pty Ltd, trading as Astute St Leonards, has created a series of short videos to highlight how and why to use a finance broker for your home loans, cars loans or even a musical instrument or another asset! This video will show you how to get your finance broker working for you, especially if you are refinancing an expensive loan to a lower rate.

You can watch the other videos in the series here:
5 Great Reasons to use a Finance Broker
What to look for when Choosing a Broker
5 Key Ways a Finance Broker can help you

For more information and a free quote on any loan please give us a call on 02 8912 2139 or contact us through our Astute St Leonards page and you can get your finance broker working for you – i.e. us!

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A Buyer’s Agent Will Help you Purchase a New Home

aerial overview of port jackson

Buying a house, whether it is your first time, or something you have done several times in the past, is always a stressful period in anyone’s life. A buyer’s agent will help you purchase a new home and take the stress out of the process – especially if they have a network of professional services behind them to sort out all the niggling problems that arise.

A buyer’s agent is a licensed professional that will do the hard work on your behalf – the searching, evaluating and negotiating during the purchase. The key is that the Buyer’s Agent is on your side whereas a Real Estate Agent is focused on getting the best result for the seller, so in some cases they are caught in the middle wanting to help both sides of the transaction. Clearly the money will come from the seller, so the Real Estate Agent will always swing towards the sale, not the purchase!

Why use a Buyer’s Agent?

1st question: Who should use a buyer’s agent? Well, the answer is everyone!

Think about the process of buying and moving home, firstly, once you have decided on the area to live in, you need to start looking and figuring out the market and where your preferred facilities are, e.g. schools, churches, public transportation etc. All this takes time and effort, which you may need to cram into evenings and weekends thus reducing your downtime and costing money to travel to look at properties.

When you have found the property you want, you then need to start negotationg with the Real Estate Agent to get the price you want – or you have to get into the melee at an auction! Time is a big issue, especially if you have a family to raise and have commitments around their school and sports activities.

2nd question: Why should I use a buyer’s agent?

Clearly the first reason is that it will reduce the amount of time you spend doing all that research. Many buyer’s agents specialise in a handful of closely connected suburbs and they already know what is there and where the best streets are located. They have the local knowledge and can guide you through the whole process.

Buyer’s agents can also get access to the off-market properties, can get more accurate valuations and can access the latest market data, giving you the advice quickly – something that would take months to collated on your own.

Importantly, the network supporting the buyer’s agent can bring independant professionals to the process so that you are always getting accurate information and a quality service.

Jain & Co

Astute St Leonards recognises the value and power of using a buyer’s agent and we have partnered with Jain & Co to help our customers find their dream home. The Principal, Adil Jain, is focused on finding the best property for you, sifting through the clutter and acting as your representative at the auction or negotating the best price.

If you are looking to buy a property on the Lower North Shore (Mosman, Cremorne, Neutral Bay, Willoughby, Castlecrag, Middle Cove, Artarmon, Cammeray, Northbridge, Chatswood, North Sydney), the Northern Beaches (Manly, Freshwater, Balgowlah, Manly Vale, Dee Why, Brookvale, Avalon, Palm Beach, Collaroy) or even Sydney CBD and the Inner West, then give Adil a call on 0415 234 656.

A buyer’s agent will help you purchase a new home, so give Astute St Leonards a call to get a matching loan to help Adil buy your next home!

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5 Key Ways a Finance Broker Can Help You

This video is #3 in a short series of videos highlighting 5 key ways a finance broker can help you save time and sometimes money by finding a range of loans that you can choose from. Remember, when looking for a home loan, don’t let your Bank tell you what to do – this is a major decision and therefore you need as much information as possible.

Watch the first two videos here:
#1: 5 Great reasons to use a finance broker

#2: What to look when choosing a broker

Learn more about Astute St Leonards here or go to our Facebook page here. We hope you enjoy these 5 key ways a finance broker can help you and would be happy to have an initial discussion on your requirements.

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Make Your Meeting with a Broker a Productive One

If you’re looking for a home loan but are inexperienced with finance brokers, attending your first meeting with a broker like Astute St Leonards can be a nervous experience. Getting a home loan, after all, can be quite complex for anyone let alone a first-timer. There are lots of brokers like Astute St Leonards and there is a lot to learn. However there are many steps you can take to be confident that your appointment with us will be a success. Read on to see how you can make your meeting with a broker a productive one!

A good starting point is to familiarise yourself with the expectations of the first appointment between a broker and yourself. We will ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take lets you participate more actively in the conversation. This means you can better articulate your needs to us and ultimately make the right decision for your requirements.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask us. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information. Astute St Leonards will always document the answers in an email, so that you have a record of the information.

It is common industry practice, too, for a broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions.  To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

Research, Research, Research – do your homework!

The other preparation you can do to make your meeting with a broker a productive one, is to research your broker – check us out and make sure we align with you. Read more of our content on our web site and see us on social media either as Astute St Leonards or our parent company Madison Wells Pty Ltd. This can give you a good indication of our knowledge and expertise and highlight topics you can discuss with us. You can also determine if we specialise in any types of loans that match your needs, where we are located and our panel of lenders – 17 and counting! Finally, you should investigate their qualifications and the brokerage that supports them.

Brokers should also be accredited because we are held to higher standards. By verifying they are accredited, you can approach the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

We are here to not only be your finance broker, but also a partner in helping you to plan your future asset purchases. To that end, we would be happy to collaborate with your accountant or financial planner so that we are all working as a team for you. Our view is that you should be in cotrol, after all you are the decision-maker, so it is important that you make your meeting with a broker a productive one.