Q: I would like to buy my first property in the next few years. Should I aim for a 10 or 20% deposit?
A: Hi Marc. You will need at least 12% minimum. 5% to cover deposit and another 7% or so to cover stamp duty and compulsory Lenders Mortgage Insurance (LMI). If your parents are willing you could avoid costly LMI by taking a Family Pledge loan with a limited guarantee against their home.
These are quite common now. Let me know if you have any questions about this.
Q: I took out an investment loan in 2011 and soon after moved in 2012, I recently realized that my loan type did not change to home owner loan, so therefore I have been paying a higher interest rate, am I entitled to a rebate or refund for the past 4 years ?
A: Hi Theo. I really wouldn't bother. I cant recall a bank ever considering this type of request. You would need to prove in court that the bank was at error and it doesn't sound like they were. i dont want you to waste time and energy plus the fact most major bank rates were the same for both purposes until late last year.
Q: I have a property and need to build on it a house in the future, if i needto borrow money from the bank when the repayment has to start, is it after finishing the construction an what normaly happen do they give the money to me or I gove them the invoice?
A: Hi Sam.
the bank will most likely pay the builder in stages. There are between 5 and 9 stages on a building project. At each stage you will begin making monthly, interst only repayments but only on the total amount paid to the builder. Eg. you get a loan for $400,000. The first stage is completed and the bank pays the builder $60,000. You then make an interest only repayment on $60,000 next month- etc.
Q: When you get pre-approval from a lender, how long is this usually valid for?
A: Hi Bill. 3 months is the norm. However, if your financial situation changes you need to check with your broker or lender about it as it may make a difference one way or another.
Q: Should I go for a fixed or variable interest rate on my homeloan?
A: Hi Pru. Good question and one that I get asked a lot. Mortgage Professionals like myself are not allowed to advise you one way or the other. Only people with Financial Advisor credentials are permitted to do so.
Fixing gives you peace of mind that repayments are set for a fixed period but you also run the risk of missing out on rate cuts if and when they happen. The other thing to consider is if you fix you cannot discharge the loan in the fixed period without paying some kind of financial penalty which varies in each instance .
I can say that banks are always looking to maximise profits and if you see an attractive fixed rate the bank has factored in that it will be profitable for them so does that mean their forecasts are for future rate cuts?
If only we knew. :)
Q: How do I pick the best homeloan for me? What do I need to be looking out for?
A: Hi Pru.
That is a tough question. In my 16 years of experience there tends to be a core requirement of a low rate, option to pay extra and redraw as well as fix if and when required.
Other than those you probably need to ask the question to yourself because that is one of the very first questions I ask when I sit down with a client.
The days of heavy penalties to discharge a loan are long gone so there is far more flexibility among lenders now who all offer similar products based on the core requirements listed above.
Happy to chat in more detail at no charge or obligation when you like.
Q: What are the best options for entering the home market with a low deposit without being locked into high interest fixed loans?
A: Hi Graham.
fixed rates are actually optional. It is totally up to you whether you choose fixed or variable. As a Lending professional we are not authorised to advise you either way.
The decision you make will depend on your personal situation in regards to income and what you have planned for the future. EG kids, starting own business, etc.
Having a low deposit does mean you may pay higher fees like Lender's Mortgage Insurance (LMI) unless you have parents willing to put forward a limited guarantee for you.
Please let me know if you want to know more.
Q: Are there any free workshops available in Sydney that provide information on how to set up and run a small business?
A: Hi Lauren.
Not my area of expertise but many local councils have information of this type to help you.
While not free TAFE offer a number of quality courses that are well worth a look.
Q: Is it right the banks are offering different rates for interest only loans compared to principal and interest on investment loans?
A: Hi Joseph. Unfortunately this is now the case with many lenders. However, if you have both owner occupied and investment properties some lenders will allow you to load the owner occupied side of the loan up to its value meaning a lower rate.
As you may be aware every type of scenario needs to be looked at closely and the best way is to make an application.
Q: What percentage do I need upfront for my first homeloan?
A: Hi Pru. He reality is you will need about 10 -12% of the purchase price.
You will firstly need a 5% deposit.
Then you will need roughly 4% for stamp duty.
Finally, if you borrow more than 80% of a property's value you will have to pay Lender's Mortgage Insurance (LMI). This can be around 2 - 3% of purchase price depending on the size of your deposit. The bigger the deposit the smaller the LMI premium. There are ways to avoid LMI in some cases involving helpful parents so please let me know if you want to know more.
Q: Is there an ideal time to refinance a home loan?
A: Hi Justin.
There is an old saying that says when the pain of changing becomes less than staying the same people change. As a borrower myself I refinanced as soon as I felt my bank did not value my business. That being when another lender offered a rate well below what my current bank had offered me.
Changing is always painful. It is human nature to avoid change. As an experienced broker I try my hardest to get as much information as possible up front from my clients to make the process as seamless as possible. In an ideal world a refinance would take 4 weeks but in reality it takes closer to 8 weeks.
The reasons for this are as varied as the number of lenders out there.
Using an experienced broker will make the process faster but you need to be willing to listen to them and provide everything they ask for.
In some cases a borrower may feel that a lender wants information that seems unnecessary but the end result is that if you provide as much information as you can up front there will be less questions during the approval process.
When is the right time to refinance? If you haven't reviewed your loan in the past 2 years the time is probably now.
I hope this helps.
Q: Is the Sydney housing market likely to plateau or decline in value?
A: Hi Stewart. I am not authorised to give that type of advice, I'm afraid. What I can point you to is the historical evidence of Sydney house prices over the past twenty plus years.
In areas like the inner west, eastern suburbs and north shore there has been constant growth. Other areas have had some fluctuations.
Occasionally I have had people say they were going to wait for prices to drop before buying and since I have been in this industry it has only meant that those people have paid more for a property than they could have.
I hope this helps.
Q: I have a personal car loan and interest free store cards, shall we consolidate with our home loan? Or continue to pay all separately?
A: this depends on what you want to achieve. consolidating to your mortgage means instead of paying the personal loan off in 5 years it may take 25 or 30. the negative being you will pay more interest over that time.
the benefit is a single monthly repayment via your home loan and usually a little more cash in your hand each month.
with interest free store cards the trick is to take the full advantage of the interest free period and pay it off before interest charges begin. an even smarter method is to make regular repayments on the interest free loan but pay in to your mortgage to save on interest then dump the lump sum in the interest free loan a few days prior to the end of the I/F period.
I hope this helps
Q: We have recently had some bad luck and have ended up falling behind in our mortgage. I've tried talking to our bank, but they don't seem very interested in coming to the party on some type of plan. Will I be able to re finance and consolidate other debts?
A: Yes you will. There are specialist lenders out there with products and rates similar to the major banks. Each situation tends to be unique so the more information you can give to a specialist lender the better the outcome usually is. it is important to be honest up front, remembering that these specialist lenders have heard every possible situation. this is no guarantee of an approval but I hope this helps. please let me know if you have other questions.