The seven steps in obtaining a mortgage

BMT team — Tue, 14 Nov 2017 01:00:18 +0000

For most, getting a mortgage goes hand in hand with buying a home. But you just have to look at the number of products and lenders in the market to know that obtaining a mortgage is not always a simple task. While mortgages vary between lenders and based on individual circumstances, there are seven basic steps in obtaining a mortgage. Here we outline these steps and considerations to help you on your way. 1. Determine your budget First things first, you need to sit down and carefully map out your budget. Consider income versus expenditure and account for everything, including any regular fees or payments, additional forms of revenue and any shares or assets you hold in addition to everyday expenses. When you have carefully calculated your monthly or weekly budget, you should know exactly how much you will be able to put towards loan repayments. Don’t just consider how much you can afford now, but over the life of the loan should your circumstances change. For instance, if you or your partner takes time off work to raise a child, will you still be able to cover your mortgage repayments with this reduction in income? You should also factor in the other costs of buying a property when making your budget. These include stamp duty, legal fees, insurance and other associated costs, which can add up to approximately five per cent of the home’s sale price. Remember to account for the cost of the deposit and Lender’s Mortgage Insurance (LMI), which will be an additional ongoing cost should you require it. LMI is a requirement from most banks if your loan is greater than eighty per cent of the property’s price (i.e., you don’t have enough for a twenty per cent deposit). 2. What type of loan do you want? Mortgage type and features Next you must decide what kind of loan you want. Whether it’s a fixed rate loan, a variable loan, principle and interest, interest only or a combination of fixed and variable, whichever you choose should best suit your own individual circumstances. You must also consider what type of features you want in a home loan, such as redraw facilities, a 100 per cent offset account or free additional payments, as this may direct you to a certain type of loan and help inform your decision. 3. Choose a lender Once you have an idea of what you can afford and what type of loan you want, you need to shop around and do some research. When you consider the thousands of products on the market from a variety of lenders, it’s easy to see how this is can be a time consuming process. However you should make sure you shop around to compare and get the best deal. If this is a little overwhelming, you can always enlist the help of a Mortgage Broker who will do this comparison and find you a suitable product and lender. Either way, pay attention to the interest rate being offered (that’s the big one) as well as any other features such as zero establishment fees or frequent flier points. 4. Submit your application Once you’ve found a lender you want to go with, you’ll need to submit your application and attend an interview. You’ll be required to supply relevant documentation such as ID, bank statements and proof on income. From here the bank will assess your situation and decide whether you are a suitable candidate and meet their criteria. This criteria generally includes proof of stable employment and income, your ability to meet loan repayments and your real savings. For example, most lenders like to see that you have at least five per cent of a home’s value in real savings in your account, as this shows you have the ability to save and manage your money. 5. Mortgage pre-approval If this bank is satisfied you’re a suitable candidate, they will issue you with a certificate of pre-approval. This basically states that you have been approved for a loan when you do find a home (often subject to valuation). They will state what the amount is that you’ve been approved for, so you know the price point you need to be looking at in your property hunt. A pre-approval certificate is usually valid for a certain period of time, usually six to twelve months. If you’re getting close to or at the end of this period, you may need to re-apply or request an extension. 6. Get house hunting Now that you’re been given the green light from the bank and know how much you can spend, the search for your dream property begins. It helps to research the average prices in different suburbs – with the amount you’ve been approved for in mind – so you know which areas will be suitable to look in. 7. The buying process and finalising the loan While the buying process itself can be complex and time consuming, here we’ll stick to the process in relation to your mortgage. Once you’ve found the house you want and have made an offer, you need to contact your chosen bank to finalise the loan. This is why getting pre-approval is a better idea than finding a property you want first and then applying for a loan. If you’ve already been approved, you don’t have to wait around while the bank reviews your situation and potentially miss out on your dream home. Once the loan has been finalised and the property settles, it’s all yours! And you have decades of mortgage repayments to look forward to. As always, it can help to speak to a financial advisor when dealing with money matters, especially if you’re purchasing a property as an investment.

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Which home loan lenders will issue a rate cut and when

Bessie Hassan — Thu, 12 May 2016 05:26:46 +0000

It’s been one week since the Reserve Bank decided to trim the cash rate to a historic low of 1.75 per cent, and with just thirty eight home loan lenders announcing a rate change since the board meeting (03/05/16), a large proportion of the market have not made a move and are keeping their cards close to their chest. According to the finder.com.au database, which comprises seventy four lenders, thirty eight lenders including the big four banks, have made announcements regarding variable rate cuts to owner-occupier home loans. However, nearly half (49 per cent) are yet to communicate a change. A total of twenty six lenders have honoured the full 0.25 per cent rate cut, while twelve have not. Some of the lenders that did not issue the full rate cut include ANZ which reduced its standard variable rate by 0.19 per cent and ME Bank who announced a rate cut of just 0.05 per cent. It’s surprising that nearly half of the market has not made an announcement regarding their stance on rate changes, so you need to be proactive. If you haven’t heard from your bank, get in touch with them directly to find out what’s going on. You can also monitor the media section of your lender’s website as your lender will most likely issue a statement in the days to come. Additionally, if you’re not satisfied with your lender’s decision or if your lender isn’t providing the full rate cut, then you may want to refinance your home loan to opt for a better rate. In a low interest rate environment, a new benchmark has been set so you can secure rates under 4.0 per cent if you’re prepared to do some groundwork. For the majority of lenders, the new variable rate becomes effective towards the end of this month, while a total of ten lenders will introduce the new rates prior to 20 May 2016. However, two lenders are not passing on the new rate until June including Your Credit Union and Australian Military Bank. A borrower can pocket approximately $67 each month or $805 each year on a standard $500,000 home loan with a lender that provides an average rate cut. You can stay up to date with rate announcements and changes here. Bessie Hassan is the money expert at finder.com.au which is one of Australia’s largest comparison websites.

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The seven steps in obtaining a mortgage

Which home loan lenders will issue a rate cut and when