Tag: Finance

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How to Refinance a Renovation

This topic came up recently when I was talking to a customer who was looking to refinance their mortgage and defined an outcome of having access to funds for a renovation of the back part of the house. Refinancing your assets to renovate a property is a significant decision that will hopefully improve your standard of living or add substantial value to your property. Refinancing isn’t as straightforward as you might expect – the type of renovation proposed goes a long way to dictating the loan required. If the wrong loan is chosen, you could be left with a pile of unexpected debt.

Know your Budget

The first step when considering how to refinance a renovation is to have a clear idea of your budget. If you underestimate your budget, you run the risk of getting knocked back from your lender. For example, homeowners who have estimated a budget of $100,000 to do renovations, only to discover it will cost a lot more, may have to reapply for the loan, which banks and lenders generally don’t like.

Be conservative with your projection. If you think you need $100,000, Astute St Leonards recommend applying for $150,000 just in case – if you can afford it. The key is stick to your budget which is both hard and critical! The next step is to speak to us to determine which loan will suit your needs and objectives.

Line of Credit Loan (Home Equity Loan)

Also known as an equity loan, to be eligible, a homeowner must be looking to make upgrades to the cosmetic domain of their property. Installing a new bathroom or kitchen, painting the interior or exterior of the house and other basic construction falls under a line of credit loan.

These renovations, more often than not, do not supersede the costs of structural changes, so homeowners can call on up to 80 per cent of their Loan-to-Value Ratio (LVR). A line of credit loan is a “revolving door” of credit that combines your home loan, daily spending and savings into one loan.

To calculate the value you can borrow, subtract your current loan balance from your property value and then multiply by 80 per cent. For example, if your property is worth $500,000, and you have $250,000 left on your loan, your home equity is $250,000. You then multiply this total by 80 per cent. If you’re uncertain of your home value, contact Astute St Leonards who can assist you in arranging an appraisal or valuation.

If you choose a line of credit home loan, it essentially works as a large credit card. You can use it to purchase cars, cosmetic renovations and other investments. However, the interest-only charge starts when the equity is drawn down. Keep in mind, line of credit loans provide you with money that can gather interest very quickly, so if you are ill disciplined with repayments or money, speak to us to define a plan that matches your unique circumstances.

Construction Loans

Construction loans are suitable for structural work in your home, for example, if you’re adding a new room or making changes to the roof. Construction loans give homeowners the opportunity to access larger sums of money, with the amount dependent upon the expected value of the property after renovations are completed.

The advantage of a construction loan is that the interest is calculated on the outstanding amount, not the maximum amount borrowed. This means you have more money available in your kitty, but only pay interest on the money you choose to spend. For this reason, our broker may recommend that you apply for just one loan, but leave some leeway in your borrowed kitty.

When applying for a construction loan, council approval and a fixed price-building contract are required, so it is important to work with a qualified and licenced construction company or builder. Your lender will appoint an assessor to value your construction at each stage of the renovation. This will happen before you pay your instalment. When construction is complete, speak to us as you may be able to refinance back to the loan of your choice.

When looking at both these loans, consumers can call on other property they own to boost their overall borrowing amount if they wish. Depending on the circumstance, they can use other property to get a line of credit and a construction loan, or they might get a typical construction loan if there is going to be an extensive framework change on the building.

Broker Advice

If you speak to a broker like Astute St Leonards, they will be able to determine which loan will give you the options you seek.  This advice is essential, as a poorly planned construction loan could cost you more down the road. Consumers should ask their broker, “What type of loan am I eligible for?”, because if you don’t get your construction loan right, you may be jeopardising your bank security.

While these specific options can be discussed with your broker, if they aren’t suitable, there may be other options available to you. We can show you how to refinance a renovation.

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Bringing Your Automotive Assets Back to Life Can Improve Your Health!

Over the weekend I attended the Sydney Harbour Concours held at the magnificent house called “Swifts” in the Eastern Suburbs. This was the third year in a row that this event has been held and showcases important cars from Australian owners ranging from the early 1920s up to brand new cars that have just been released – high end supercars. One year they had the first showing of the Ferrari Monza SP in the Southern Hemisphere and this year that honour went to the new McLaren Elva decked out in evocative Gulf Oil colours.

I went along because not only am I a Director of the Royal Automobile Club of Australia who were one of the sponsors, but also because through Astute St Leonards, we have developed finance packages to help owners of classic or vintage cars bring their vehicles up to roadworthy and even concours condition. Many of the cars at the event had only just finished a round of work within the last few weeks and were stunning.

1930s Delage – An Awards Winner!

Cars such as a 1920s Delage with an aeroplane engine, a 1930s Delage that not only won a Concours d’Elegance in the decade it was built, however it also won its class in the famous Le Mans 24 hour race. Both cars won awards at this event and were in immaculate condition – notably both are road legal and were driven to the event with the latter coming under its own steam from Melbourne!

Alongside these were 1960s Maserati, Mazda and Jaguars as well as 1970s Lamborghinis, Aston Martins and Porsche. All had been lovingly restored and this is the essence of why I created the finance packages for owners. Older cars are great to look at and they are a reminder of a time when they were individual and not common shapes. They are a tremendous source of joy for the owners and the general public when they are seen on the road!

Ferrari 246GT Dino

They can also be valuable assets for families and a reminder of past family members. The Maserati, for example, an early 1960s model, sold at auction during the event for $695,000! Several of the owners at the event spoke about completing work that their fathers had started and as such the vehicles were a homage to those relationships.

To that end I have partnered with two companies: Smart Restorations in Gosford and McCarrolls Classic in Roseville. Both of these companies are lead by highly skilled project managers who understand that a restoration is also a labour of love and must be done properly with no shortcuts and where possible using the original equipment and materials. They know the right artisans for the cars in bodywork, mechanical work, upholstery and paint and by helping owners get their cars back on the road, they are also saving some timeless skills that are lost in modern factories.

If you or your family have a classic car in need of work so that it can be enjoyed again, then give Astute St Leonards a call and we will facilitate an introduction and put together a cost effective finance package to enable these professionals to weave their magic!

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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.