There are some important things that you need to know before you are ready to apply for a new home loan.
1. You need to be virtually Debt Free. It is very difficult to show an ability to pay a new Home Loan if you have to pay a lot of Cards, Personal Loans or car loans as well. The less Debt you have the better.
2. You need a deposit. You will also need enough money to pay your legal fees and Stamp Duty. First Home buyers schemes can help here. Aim for at least 10% of the value of the home you are looking to purchase. The more deposit you have the less in Mortgage Insurance you will pay and the better the Interest rate you can get.
3. You will still need to have shown a capacity to save. You must demonstrate that you can pay and live on the income you have. The combination of your rent, payments to any loans you have finished paying off and the amount you have been saving, must add up to at least what your Home Loan repayments are going to be. This Demonstrates your ability and willingness to pay a Home Loan. This is often referred to as Genuine savings.
4. The property you propose to purchase will have to be in a location the bank or Lender is comfortable with. Rural areas and out of the way locations can be very difficult to find a funder. You will need to be buying a correctly valued property. A bank or Lender will be looking at what they can resell a property for quickly, to recover money they have lent on a loan. When things go wrong this protects you too.
5. For the best loans, your credit report must show a good history of on time payments.
But in saying all that, there is still a lot of variation between banks and lenders. Some banks have a very high serviceability benchmark (that means they allow a bigger margin of safety on your repayment ability) or demand a huge deposit. Some are easier to deal with than others.
Some will work on lower deposits. They will differ in how they treat board, living costs, rental income, commissions, overtime and casual pay. They differ in how friendly they are for being self employed or the reason you may need the money.
Just because you get one knock back don't be discouraged. If your plan is to buy a new home, it may just be a matter of finding the right lender.
If you want to get off the rental treadmill, call us to see what you need to do and a plan to get there.
There’s a fair bit of information required. Start collecting information and statements. Check if you are set up to obtain statements from bank accounts and loans digitally. If you are not you may need to ask for them manually.
Here we have a link to the form that we will go through with you, when you apply for a Home Loan. It contains the questions we must legally ask and the information Lenders need. Feel free to download and start filling it out to get a head start. We will go through the form with you in our first meeting and explain things as we go.
Refinancing your Home Loan can save a lot of money and pay it off quicker.
As your home loan reduces and hopefully your properties value increases, the percentage you own of your home increases. You will normally be able to obtain a better rate once you own 20% of your home. Better again at 30% to 40%.
You may have taken your loan out when your credit report wasn't as strong as it is now ,so it may be worth having a look to see if there's money to be saved if that was the case.
Sometimes just having a free review with Money Buckets can find you a lower Interest rate. Be careful about Mortgage Insurance though. Make sure that you are not paying more in fees than you are going to save. We can help with that.
Sometimes rates just drop or become super competitive. If you haven't reviewed your home loan, the value of your home and credit rating, how would you know? It will pay to review your situation regularly.
Consolidating debts can be a good way to get things under control. Especially if you have started to get a few too many Credit Cards or Loans. The Interest Rate is generally much higher on cards and personal Loans than a home loan, and if it becomes a significant amount, you will be really paying a lot of Interest. We have encountered situations where clients have been paying nearly as much interest on their secondary debt as their Home Loan.
Sometimes you may need your overall monthly payments dropped, so that your budget becomes more manageable. Whilst the home loan payment rises a little, there is a significant reduction in the overall monthly repayments. We can go through the calculations with you.
Once again if your financial situation starts to become uncomfortable it is better to act sooner rather than later. If things start to run late it can prevent you from borrowing at a Prime rate.
Things that may stop you from being able to consolidate with a Mainstream Lenders are -
If things are getting a little tight, it is better to plan things out early whilst your credit is still good, cards are under limit and payments are still on time. It will save money.
When considering an investment property, your first port of call should be Money Buckets Budgets. We can then review your Budget, Assets and Liabilities to determine how much you can borrow, which will, in turn, give you a general idea of your target price range, so you can narrow your property search to within your budget.
Put all the costs into the budget that you know will be generated by your property. Also include Rates, Water, Maintenance etc and of course the expected Rental Return. We also need to look at your affordability if there is tenant problems or vacant periods.
We can then look at Lenders that will be suitable and see what sort of deals they are offering.
Specialist Lenders are quite competitive in the Investment space, so it will be handy to look at all the options.
Customer Enquiries: 1800 825 010
Admin Office: 0243696287
Post: PO Box 6100, Kincumber, NSW, 2251
Money Buckets ™ is a Trademark of Starlight Home Loans T/as Fast Debt Help
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