Tag: Home Loan

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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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What to Look for When Choosing a Broker

Astute St Leonards, the finance broking arm of Madison Wells recently published a small series of videos and the second in the series explains what to look for when choosing a broker. There are many many brokers out in the market and not all of them are suitable. Watch this video to see what you should be testing for so that the broker you choose is aligned to your needs, requirements and importantly, ethics.

You can watch the first video in the series here: 5 Great Reasons to Use a Broker.

Astute St Leonards is focused on your needs and requirements. We will always test to see that the loans recommended are suitable for your current stage of life and forward into the future. We are accredited with over 17 different lenders and have a compliance process that provides you with a documented reason as to the choices provided and our recommendation. The ultimate decision is always yours.

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Buy Now Pay Later: The Hidden Dangers

The Buy Now Pay Later (BNPL) sector is winning-over the youth demographic with the promise of instant gratification. However leading mortgage brokers are warning that with every sugar-high comes the risk of a corresponding low.

‘Buy Now Pay Later’ providers such as AfterPay, Zip Pay and Pay It Later have experienced massive growth in popularity. The number of users jumped from 400,000 to approximately 2 million between 2015 and 2018 and have continued to rise. With COVID, many more shops have signed up in an attempt to persuade more buyers to spend with them.

Driven by a simple proposition whereby the BNPL provider pays the merchant, allowing the customer to obtain the goods or receive a service immediately while subsequently paying off the debt generally through instalments, Buy Now Pay Later presents a tempting offering. However, this is no different to using a credit card – with less governance!

But as the sector’s breakneck growth continues, mortgage professionals are warning users – particularly in the younger demographic – to be cautious of overdoing it as this could risk affecting their chances of securing a home loan further down the track. “It’s the layby of our day but in reverse. It’s your forward credit for an item, which I don’t agree with,” said one leading mortgage broker.

In theory it makes sense. A consumer gets the item or service and pays it off over instalments, so they’re actually pushing forward the liability. In some cases it means paying a higher interest rate than a credit card with additional monthly fees. This might be OK for someone that manages their money well, if they pay off the item on time and use their mortgage offset account correctly. This way they are delaying the expense and offsetting more of their savings against their home loan.

Buyer Beware

However there’s probably one per cent of people doing that and the rest are spending beyond their means. As a result, there may be a stigma associated with using BNPL schemes rather than paying up-front or using a fully vetted personal loan from an established lender. Utilising a Buy Now Pay Later method may send the wrong message to a bank. If a lender sees many BNPL transactions showing frequently on a client’s bank statements, that will trigger more questions about their spending behaviours. Ultimately this may mean the bank chooses to decline the application.

We would much prefer to see our clients save for smaller value items, utilise personal loans for bigger purchases and demonstrate good financial habits. If you are concerned about your level of expenditure or your ability to secure a home loan, a conversation with Astute St Leonards could set you on the right path.

It’s important to appropriately manage your expenses well in advance of applying for a home loan. That way you can show that you can save and afford to service a mortgage when the time comes.

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Don’t Forget the Extra Costs of Buying a Home!

When taking out a mortgage, don’t forget the extra costs of buying a home – consider the associated fees and expenses that you will incur. Here are some of the extra costs that you’ll need to consider when you get a home loan:

Home Loan Application Fees

Most lenders charge a home loan application fee. This can range from loan to loan, and covers:

  • Loan contracts
  • Property title checks
  • Credit checks
  • Attending a settlement
Mortgage Fees and Costs
  • Mortgage establishment fees – Lenders generally charge a mortgage establishment fee – a fee for setting up a mortgage.
  • Property valuation – A third party – chosen by the lender – is appointed to determine the value of your land and improvements.
  • Mortgage registration – Your mortgage deeds need to be registered with the Government.
  • Mortgage stamp duty – Some State Governments charges stamp duty to register your mortgage.
  • Lenders mortgage insurance – If you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay  for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.
Property Fees and Costs
  • Building, Pest and Electrical Inspection fees – It’s wise to have your new property inspected for any structural or electrical problems and for pests (e.g. termites).
  • Stamp Duty – Governments charge Stamp Duty to transfer the ownership of a property.
  • Registration of Transfer Fee – The new owner of the property must be registered at the Land Titles Office.
  • Legal fees – You generally need to pay a Solicitor of Settlement Agent to handle the transfer of ownership of the property on your behalf
  • Home & contents insurance – Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc. Lenders will insist that your property is insured while you have a mortgage.
  • Life and income protection insurance – Borrowers should consider protecting their incomes and themselves while they have a mortgage.
  • Utility costs – Connecting electricity, gas and telephone can attract a fee.
  • Council Rates – Your local council charges rates to cover garbage collection and a host of other services.
  • Water Rates – The water corporation charges rates for the supply and upkeep of water to your property.
  • Body corporate fees – If you buy an apartment or Strata Titled property, body corporate fees will be charged. Some buildings can have very high feed – particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc) or if there are lifts, pools and other communal facilities. This should be a key question to ask before agreeing to buy an apartment.
  • Maintenance costs – Don’t forget to make provision for regular maintenance on your home – even if you decide not to undertake significant renovation.

There is a lot to consider when you are ready to buy a new home – especially if this is the first time you have bought a home in Australia. Our advice is to talk through these when you are reviewing the options for your home loan – in some cases it may help your loan application if you have a plan to cover the ongoing costs of ownership.

Make sure that you don’t forget these extra costs when buying a new home – talk to us at Madison Wells Pty Ltd t/a Astute St Leonards to help with your planning! We are here to help you through the process.

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Why is Lenders Mortgage Insurance a Good Idea?

While some view Lenders Mortgage Insurance (LMI) as being exclusively beneficial for lenders, we explore the value for first home buyers and why it is a good idea.

Not to be confused with mortgage protection insurance (which is designed to protect the borrower), LMI is the insurance that covers the lender’s risk within a residential mortgage transaction should the loan go into arrears and the borrower is unable to resolve the situation satisfactorily. LMI is a fairly common practice within the industry, particularly for new home buyers who may struggle to save a deposit. It allows an additional fee to be paid by the borrower and usually applies when the loan is more than 80 percent of the purchase property’s price.

The purpose of Lenders Mortgage Insurance is to ensure security for the lender in case the borrower fails to make loan repayments. Even though the actual house acts as security, the nature of the property market, like any investment class, means there is a chance that its value could decline, resulting in a financial loss for the lender.

The cost of the premium is dependent on several factors, such as the loan size and property value, and most insurers are flexible when it comes to the method of payment. It can either be a one-off upfront premium payment or that premium could be included in the overall cost of the loan and included in monthly repayments. It is not transferable, which means a new loan may require a new fee depending on how much equity the borrower has.

What’s in it for me?

While it may appear that it is exclusively favourable to the lender, there is value to borrowers in paying the premium. Opting for LMI means it allows a borrower to independently purchase a property sooner than they otherwise might. LMI is the alternative to using a guarantor or having to save for a bigger deposit, both of which are not feasible options for many first home buyers.

A deposit of at least 20 per cent of the desired loan amount is required for a borrower not to be deemed ‘high-risk’. If you consider that the average price of a home in Sydney is around $650,000, that would mean a deposit of around $130,000 is required. The beauty of LMI is that it buys time, which means borrowers with smaller deposits are able to enter the market sooner rather than later.

The major benefit of LMI is that it allows the dream of homeownership to become a reality for a lot of first home buyers. To see if this is the case for you, give us a call at Astute St Leonards, we are happy to help.