Refinance Misconceptions

Refinancing is the process of moving your existing home loan agreement to a new lender. Some common reasons why a borrower may do this is to achieve a cheaper interest rate, to structure their debt in a more suitable way, to consolidate their debt or look to release equity from your property.

With interest rates on the rise, many borrowers are taking action to research the market for a better deal however for some, there are still misconceptions holding them back which we will unpack below.

Myth #1 – I don’t have the time and it’s too complicated

This is where a good mortgage broker comes in to play and can break down any perceived complexities. Although the concept may seem like a time-consuming process, the thought and effort required to address your most important investment doesn’t take all that long. Here is a snapshot of some key stages that can quickly be completed under the guidance of a good Mortgage Broker:

  • Making the time to speak to your Broker
  • Assess the possibilities select the right path for you
  • Provide any documentation required
  • Sign and complete a loan application

When you consider the benefits and potential cost savings results, a small amount of effort can be well worth it.

Myth #2 – There are large fees involved in refinancing

Whilst there are common fees and charges in leaving an existing bank and setting up at a new bank, generally the overall costs are outweighed by the long-term benefits of refinancing. The costs will vary from lender to lender however some costs to be aware of are Discharge Fees, Applications Fees, Valuation Fees, Land Registration Fees, and ongoing Annual Fees.

Your Mortgage Broker will provide a breakdown of these costs and unless you are able to save money or achieve the new loan structure you require, you are better off staying with your current lender. Some lenders also offer cash-back refinance deals which provide an added incentive to receive a cash reward for moving lenders whilst at the same time secure a cheaper rate.

Myth #3 – Refinancing is only done by people wanting a better rate

As noted earlier, moving to a new bank purely to secure a lower interest rate isn’t the only reason why borrowers will refinance. Whilst this motive is common, there are other reasons why a borrower will look to refinance:

  • Access to better features and facilities such as an offset account
  • Release equity for investment opportunities, household projects or other acceptable purposes
  • Discharge a Guarantor
  • Consolidate debt

Engaging with 40 Forty Finance to enquire about your refinance possibilities is the first step in reviewing your existing debt position. We can help evaluate your position and work with you to research the market and identify alternative lenders that will suit your needs. Being proactive will help you save time and money. Feel free to get in contact with one of our friendly brokers to start your refinance journey.

The Journey of Home Ownership Using a Mortgage Broker

Are you planning to purchase your first home, next home or an investment property and wondering what’s involved when using a Mortgage Broker from 40 Forty Finance?

With 70% of all home loan applications facilitated by Mortgage Brokers in Australia, more and more borrowers are turning towards these lending specialists to help navigate the buying process and lending market. With home ownership often the biggest expense in one’s life, it is fundamental that the right guidance and support is provided from the outset.

Applying for a home loan can be complex, time consuming and daunting, especially if it’s your first home, so here is a summary or the major steps a prospective borrower will encounter throughout their journey of home ownership:

1. Connecting with 40 Forty Finance

Connecting with 40 Forty Finance can be as simple as reaching out to one of our brokers where they will arrange a time to speak to you. It is within this phone call that the broker will ask several questions relating to your goals and objectives as well as your current financial and lifestyle situation.

2. Assessing Your Circumstances

Once you have had initial contact with a 40 Forty Finance broker, you will be asked to complete a Privacy Consent Form and fill in an online Fact Find. It is within this Fact Find that you will be required to list your personal, employment and financial information which will be used to model up various scenarios and lender products that suit your needs. In addition, you will be provided with a list of documents to provide which will enable 40 Forty Finance to clearly assess your position.

3. Reviewing the Options

It is at this stage where a Zoom meeting will be arranged to run through possible options relating to your goals. 40 Forty Finance will present and recommended clear lending structures and strategies that are consistent with your objectives and requirements. This is a great opportunity to ask questions relating to specific lender requirements, assessment time frames or any other expectations.

4. Lodging your Application

Once you have decided on your preferred course of action, an application is made to your preferred lender. The application is filled in by 40 Forty Finance and you will be asked to sign application forms and provide any additional supporting documentation required for your submission.

5. Lender Assessment & Decision

Once 40 Forty Finance lodges your application, you will be given clear information as to the likely assessment timeframe at your preferred lender. It is during this assessment period that the lender may request further information which will be relayed back to you to source and provide. 40 Forty Finance with liaise between the lender and you to ensure the lines of communication is very clear. Once your loan is approved, 40 Forty Finance will complete the signing of loan contracts with you and guide you in preparing for settlement.

6. Settlement

Preparing for settlement is where 40 Forty Finance will liaise with your Conveyancer or Solicitor to ensure your purchase goes through smoothly. Most of the work is done well before settlement day so there is a little stress as possible on the actual day when the property becomes your home.

7. Home Ownership

After settlement has successfully gone through you can now enjoy your new property. Now that you have a home loan in place, 40 Forty Finance will provide ongoing updates and loan reviews annually to ensure your needs are met and your home loan product remains the most competitive option for your circumstances.

If you are looking to start your home ownership journey or wish to discuss anything about homes loans then click here to get in touch with one of our friendly brokers.

Mortgage Broker vs Bank: Who should you approach to obtain a home loan?

Whether you are buying a property for the first time, looking to upgrade your home or purchase an investment property, you might be wondering if you should use a Mortgage Broker or go to a bank directly.

Both avenues offer their own unique advantages, so here are some considerations to help you make the choice:

Mortgage Brokers

A Mortgage Broker is a home loan specialist who acts as the intermediary between a borrower and a lender. With access to a panel of multiple lenders, brokers can research and identify the most suitable home loan product for a borrower’s given position. With 68% of all residential loans now being written by Mortgage Brokers, more and more Australians are turning to brokers to navigate the complex world of the lending market.

In addition to identifying and comparing lending products, brokers also play the key role in educating and determining the borrowing capacity of borrowers as well as handle the time-consuming paperwork relating to the loan application. Furthermore, once a loan settles a broker then performs the important role of ensuring you continue to have a competitive deal while also assisting you with any future lending needs.

Typically, most Mortgage Brokers won’t charge any fees to borrowers. Brokers are remunerated by the lender through commission earned after the loan settles.

Benefits of using a Mortgage Broker:

  • Provide guidance to borrowers through calculating borrowing power and guiding you through the important stages of the purchase process
  • Offer a broad product range
  • Identify the most suitable lending solution, resulting in fewer applications and a stronger credit score
  • Project manage and process the entire loan application
  • Have a single point of contact throughout the entire process, no matter which lender you apply to
  • Review your home loan post settlement, answer any future questions and ensure your deal is still competitive
  • There is no additional cost to the borrower

Direct to the Bank

Going direct to a bank is still an option in obtaining a home loan. This can be done by simply showing up at your local branch and requesting a home loan. Alternatively, most lenders have the option now to chat through options over the phone with a lending specialist. Going direct is a very different approach to using a Mortgage Broker as you will only be offered a product from that given lender and no comparison will be made against other lenders.

Benefits of going direct to a Bank: 

  • A lending specialist from a specific bank will have intimate knowledge of the current products and policies
  • Could be faster due to the lender process the loan application directly rather than going through a Mortgage Broker
  • Some borrowers might find the convenience and comfort of turning to a bank that they have dealt with for many years more favourable

The good thing is that as the borrower, you have a choice and ultimately it will come down to what your preference is. Whether you opt to have the guidance and support from a Mortgage Broker or if you prefer to go direct to a bank, at the end of the day there isn’t a right or wrong way.

With a house purchase typically being one’s biggest expense, more and more are turning towards the guidance and support of a broker. If you wish to discuss what may be possible at no cost then be sure to get in touch with the team at 40 Forty Finance.

Why should you use a Mortgage Broker

With many home loan options and products available to everyday consumers, it’s not uncommon to be confused as to which lender might be the perfect fit for you. With strong competition amongst banks, it is important to know that certain lenders may be more favourable to one’s given position as opposed to others.

How do I know who the best lender is for me?

This is where a Mortgage Broker can help. A Mortgage Broker is a financial professional that specialises in finding the very best lending solution for their clients. Their role is to represent the client and be the intermediary between the consumer and the lender. In Australia, more than half of the home loans written are from Mortgage Brokers and with more products coming on to the market each year, the role of a Broker has never been more important. Mortgage Brokers are accredited with multiple home loan providers, and with the increase of second tier lenders amongst the big four (CBA, NAB, Westpac and ANZ), consumers are broadening their scope in the search for the most suitable lender.

So why should you use a Mortgage Broker?

Ensuring you’re getting the best deal

Walking into your local bank branch may be convenient but how do you know if the product they are offering you is the cheapest and most suitable. Mortgage Brokers are accredited with various different lenders and have scope to compare many home loan products against one another. This gives you a platform to make an informed decision that is right for you instead of being subject to one home loan option.

Mortgage Brokers represent the consumer and provide education on products and processes

A Mortgage Broker can be a great sounding board as well as an excellent resource for navigating the complex world of banking. For those that may not necessarily have a lot of experience within this space, a Mortgage Broker can break down the complexities and provide education on the most suitable home loan. In addition to providing information on home loan products and solutions, a Broker’s role is to also ensure that their client has the confidence and knowledge in the purchasing process.

They make the home loan process easy

Mortgage Brokers take the legwork out of time-consuming home loan applications and the complexity that comes with it. The detailed paperwork and requirements by the lender will be explained thoroughly and ensure the client is fully aware of their selected product.

Provide complex lending solutions or alternative lending options

If you wish to utilise some of the equity within your home for renovations, purchases or a holiday then a Mortgage Broker can be used to access these funds. Refinancing to another lender offering a better interest rate is also an important aspect of the day-to-day tasks of a Broker. Interest rates and individual circumstances change frequently so having a Mortgage Broker in your financial team will allow you to be up to date with market rates and options.

With a high level of lending knowledge behind them, Mortgage Brokers should be considered a key member within your financial services team. If you are seeking to purchase a home or thinking about refinancing to another lender, then contact the team at 40 Forty Finance to ensure you have the knowledge and support behind you.

 

When is the right time to buy?

Deciding when the right time is to buy property can be exceptionally overwhelming and challenging. In a world where information and social pressures are never too far away, the decision about when to buy is typically made more confusing and complex than what it really is. The extensive amount of information and influencing factors can not only lead to stagnation and stress but also hinder progress through the purchasing journey.

For those deciding about when to purchase their first home, there are some key considerations that need to be understood when embarking on this process.

Buy when you are financially ready

Investing in property is typically the greatest expense in one’s life so being aware of the monetary outlay and ongoing commitments is critical in determining whether you are ready to buy or not. It is exceptionally difficult to predict future market conditions, interest rate changes and property growth so if you are in a position to buy, and you have been Pre-Approved, then look to make an offer if you have come across a desirable property. If you feel any hesitation in the outlay then you may not be financially or psychologically ready to make the leap. It’s a common occurrence where social pressures of friends and family expectations can push someone into thinking they are ready to purchase when this might not be the case. Buying in your own time is the key to ensuring you are entering the market at comfortable time in your life.

Property is for the long term

Adopting the mindset that property is a long-term game is a sensible approach. The large outlay of initial fees such as stamp duty, settlement fees, pest and building inspection fees need to be considered when planning how long you intend to hold on to the property. Property is not a ‘get-rich quick’ scheme and most often you will have to wait several years before capital growth breaks even to the initial financial outlay. Having a five-year minimum approach allows enough time for the property to grow in value and for also personal circumstance to change requiring an upgrade.

Market rises and falls

Be careful not to be overly analytical when trying to time your purchase with current market conditions. This is because the property market tends to operate in cycles of rising and falling. Economic changes are inevitable so minor fluctuations in market ups and downs tend to even out over time. Historically, the performance of property has shown tremendous results so adopting a ‘buy when ready approach’ is a far better method than trying to time the market.

Purchasing a property takes a lot of financial and emotional investment so being comfortable and certain that the timing is right for you is key when looking to buy. If you believe that you may be in a position to buy your first home then be sure to get in contact with the team at 40 Forty to map out a home loan and purchasing plan.

Should you borrow as much as you can?

Applying for a home loan to purchase a property almost always comes with the question of how much should be borrowed. It is important to know that although a bank is willing to lend you an amount of money, it may not necessarily be within your best interest to take on that amount. In the eyes of a first-time buyer, borrowing a large amount of debt may be required to break into a competitive market but does that mean it’s the right approach. In recent years, we have witnessed a Banking Royal Commission, Federal Election and some of the lowest interest rates by the Reserve Bank of Australia (RBA).

To prevent mortgage stress is recommended that mortgage repayments are around 30% of total household income. Due to the rapid rise of housing prices and competition, many buyers have turned to borrowing more in order to break into the market. If you have very few other debts (credit cards, personal loan, car loan, HECS) then justifying going to 35% is possible, but much further than that and you place yourself at risk of not maintaining your repayments.

Don’t rush!

When deciding about purchasing a house, buyers shouldn’t jump at a perceived bargain or feel rushed. In a competitive market and social pressures on numerous fronts, buyers need to critically analyse their financial situation, goals and future outlook when taking on debt. A house secured from a high level of debt in a falling market can quickly turn sour, especially those that have leveraged themselves to a high point. On the other hand, borrowing high levels of debt when the value of a property is increasing and paying off the loan can strengthen your financial position. This is when borrowing big makes the most sense…. But how confident are you of picking the market?

Awareness and sound judgement of position

Buyers need to be aware of their budget and stick to a plan that works for their given situation. Taking into consideration all lifestyle variables, potential future changes and aspects that may affect your cash flow is important when thinking about how much debt to take on. For any debt you need to be absolutely certain that your loan repayments can be met in addition to all of your other expenses.

If you are looking to understand more about borrowing debt and the costs involved then contact the team at 40 Forty Finance to undergo an assessment.

Buying vs Renting: What is right for you?

Taking the plunge and entering the property market or choosing to rent is a decision many encounter throughout their lifetime. The age-long debate of whether it is better to buy or rent can be a confusing and complex decision for some. With recent housing affordability challenges, some believe that the great Australian Dream of owning your own house is a bridge too far. It is now that this debate couldn’t be more relevant as many ponder their options and future.

Ultimately the decision comes down to each and every individual situation and the first step is to work out whether renting or buying suits your own financial and personal situation.

Here are the pros and cons of each option as well as the main things to consider if you are considering to buy or continue to rent.

Renting

Pros:

  • Flexibility to live in different suburbs and properties
  • Allows for potentially greater savings and diversification of investments
  • Live in an area that you couldn’t necessarily afford if you were to buy
  • Cheaper monthly outgoings of rental payments as oppose to mortgage repayments
  • Avoid costly maintenance and rates that are to be covered by the landlord

Cons:

  • You never stop paying rent as opposed to those that pay off their mortgage in the long-run
  • Cost of renting steadily increases due to inflation
  • Restrictions to what you can and can’t customise within the rental property
  • Reduced stability and uncertainty with landlords having the right to put their property on the market at any time. This may impact your need to be living in certain school zones or close to transport links to work.

Buying

Pros:

  • Sense of stability and freedom to create a world around your home and make changes to the property to sure your particular needs
  • You can add value to the property and access equity within your home for other investment or lifestyle needs
  • Based on historical property prices, it is likely your property will increase in value over time

Cons:

  • Large financial outlay and utilisation of savings
  • Paying interest for the life of the loan
  • Restrictions on lifestyle costs as most of the money can be tied up in the loan repayments
  • Responsible for maintenance, council rates and any other costs associated with keeping the property in a liveable state

The truth is that what works for someone may not necessarily work for another. Understanding and deciding what works best for you is the fundamental question before you commit to either option. Additionally, it may be that for the next 5 years it is better for you to rent, then look to buy at a later date…. Or the other way around.

If you would like to understand fees and charges involved with purchasing property, or you wish to find out more about your capacity to apply for a loan, then contact the team at 40 Forty to arrange an appointment.

Why your mortgage broker is calling you

You’ve scored the home of your dreams and you’ve just popped the bubbly to celebrate.

When the bottle’s empty and you’ve settled in to your new home, you’ll notice your finance broker is still in your life, and you might wonder why – after all, they got you the loan and it has since settled so why would they still care about how you are going?

The simple answer is that we genuinely care about your finances in an ever-changing landscape and are motivated to ensure your lending continues to suit your needs. We know it’s a good idea to touch base at the 1, 6 and 12-month mark to ensure that everything is going according to plan. After that, annual reviews are really important to ensure the long term plan is stuck to.

A financially savvy individual will build a relationship with their finance broker, similarly with their accountant, to ensure they have and maintain a solid plan for the future. My goal with every client is to stay on top of their personal situation to ensure any new products or lending strategies can be capitalised upon.

Life changes may impact your mortgage such as welcoming a baby into your home, receiving a higher salary, deciding to get married, coming into significant inheritance or having your income temporarily reduced. All of these events can trigger a need to revisit your lending situation.

Other situations like refinancing to a better a deal, consolidating debts, accessing equity for renovations or removing a guarantor from a loan are all reasons for having a mortgage broker within your financial team.

Even the most seasoned of investors benefit from staying in touch with their broker, who can help them maximise returns later down the track.

I pride myself on creating a client for life mentality and endeavour to be proactive in meeting every client’s needs as they change during their lending lifetime.

Signs you could be closer to buying than you think

For some, owning a home has been portrayed through various media channels as a bridge too far however you may be closer to owning a property than you think.

Here are the key factors to consider if you wish to take the next step on your property journey:

Stable employment status

Buying a home and being granted a mortgage means you need income to meet the loan repayments. To make these repayments, lenders need to be confident that your income is stable and consistent. There are many ways in which employees are remunerated (base, bonus, commissions…) so every individual’s case is treated differently. Additionally, different lenders have different policies that will make them view your personal position more or less favourably. Simply put, if you have a consistent ongoing income, then there is a lender for you.

Saving a Deposit

Previous generations of first home buyers have always purchased with at least a 20% deposit. With the average house price rising sharply in proportion to average wages, getting to this 20% figure is harder than ever. Lenders have many products for borrowers that have a 10% deposit… in fact, the smallest deposit you would need would be just 5% in some instances.

Consistency, consistency, consistency

Another sign that you may be closer to buying than you think is that you can prove how you have saved the deposit. Having a consistent and transparent savings history is a sign to a lender that you have been diligent and can demonstrate genuine savings. This is looked upon favourably by lenders as you can show that you are not only responsible with your money, but also able to save the equivalent of the repayment per month.

The understanding of debt and being smart about it

Having a sufficient deposit is one thing however being aware of the way lenders view debt is another. Debt such as credit cards and car loans can directly influence a bank’s decision about granting you a loan. Lenders understand that debt such as these are necessary for some however being financially savvy can help you set in motion decisions on either keeping or paying off these debts prior to purchasing a home. This takes careful consideration but can certainly be a factor in placing you in a more favourable position of purchasing sooner than you think. A well maintained repayment history on an existing debt wont harm your application, however an existing debt where you have missed or made late repayments will.

Property is for the long run

Having a stable income, being aware of existing debt and proving you have a sufficient deposit saved are all very important factors when deciding to buy. Understanding that property is a long-term investment and that the first property doesn’t have to meet all requirements is the difference between a savvy buyer that makes the most out of opportunities as oppose to a unconfident buyer looking for endless reasons why not to purchase.

A discussion with the team at 40 Forty Finance can analyse your existing financial situation and provide information on potential barriers within your application.

We’re having a baby… does this impact our ability to get a home loan?

Expecting a child whilst simultaneously applying for a home loan can be a tricky and confusing process to understand. The excitement of a new addition to any family brings challenging barriers in the eyes of lenders with several factors influencing the loan decision process. It is therefore important for applicants to be aware of certain requirements and policy that will impact the final decision by the banks.

Here are some areas of consideration to be aware of:

Serviceability Challenges

Any addition to a family brings an extra mouth to feed and consequently an increase in living expenses. It is no surprise that the additional expenses and a reduction in income through maternity or paternity leave will directly impact your serviceability capacity for a home loan.

Banks will use different formulas to estimate cashflow to make a loan decision based on several factors involving, existing living expenditure, likely outflow once the baby has arrived and any predicted changes to your household’s income.

The banks are aware that although parental leave may be paid by the employer, it traditionally doesn’t last for the entire leave period. This means that there is likely to be a period of time where your household income will not sufficiently ‘service’ your commitments.

Is there a way?

Although it is more challenging for banks to approve a loan while on parental leave, it is still possible to secure finance. The easiest way to provide lenders with the confidence you can meet your household cash flow needs and maintain your mortgage is to show you have enough cash reserve available to cover the serviceability shortfall while on parental leave. For example, if your annual mortgage repayments is $20,000 and you will be off work taking unpaid leave for 6 months, then the banks would want to see cash reserves of $10,000 plus half of your household’s general living expenses in cash.

While some banks try to be flexible by considering the income on the applicant on leave, not all banks will do the same and therefore deem that applicant as unpaid or unemployed during this period. It is therefore an option for some to demonstrate employment through a letter by their employer outlining their role, return date and income that can be utilised in the decision process. This can help prove to lenders that the financial obligation will be met by the applicant when they return to work.

Already have a home loan?

If you already have a home loan in place and are expecting a baby then as long as you have been diligent with your repayments and can manage your finances then there will be no issues. It is important to plan well in advance to ensure your cashflow is managed and you can cover your existing repayments on top of the new addition to the family, particularly while household income is lower than usual.

Differing policies and lender requirements it can be confusing and challenging in understanding the options when applying for a loan whilst expecting a child. 40 Forty Finance can point you in the right direction through this challenging and complex process to ensure the right product is selected and necessary steps are implemented to put forth a strong application.