Frequently Asked Questions (FAQ)
- Why should you use Finance or Mortgage brokers when seeking for finance?
- What can you expect during the first appointment with your Finance or Mortgage Broker?
- How long does it take for your loan to be approved?
- Do I need to provide the bank with a copy of my building insurance?
- In what frequency should I make my mortgage repayments?
- What is the Loan to Valuation Ratio (LVR)?
- Do I need to pay mortgage repayments whilst my house is being built?
- What is the Mortgage Assessment rate?
- What is the difference between “Standard Variable Rate Loans” and “Basic Variable Rate Loans”?
- What you will gain by fixing your home loan?
- What you will lose by fixing your home loan?
- Can I change job or touch my savings while my finance application is under process?
- How can you increase your borrowing capacity?
- What is Lenders Mortgage Insurance?
- What are the documents required to evidence income and personal Identification?
- If you are refinancing your home loan, what are the other documents required other than evidence of personal identification and income?
- If you are a First Home Buyer, what are the other documents required other than evidence of personal identification and income?
- If you are an Investor, what are the other documents required other than evidence of personal identification and income?
Why should you use Finance or Mortgage brokers when seeking for finance?
Finance or Mortgage Brokers negotiate with banks, credit unions and other credit providers on your behalf to arrange loans. They specialize in home loans. They can offer you a variety of loan options and shop around for the home loan that is right for you. Whether you are in the market for your first home or building a portfolio of investment properties, Finance or Mortgage Brokers have access to hundreds of loans from Australian leading Lenders and manage the whole process through to settlement.
What can you expect during the first appointment with your Finance or Mortgage Broker?
During the first appointment, your Mortgage Broker will find out as much as possible about your financial circumstances and goals to see how we can support you. We will provide answers to all your questions that you may have about home loans and home buying. It’s best to bring as much information as you can to this initial appointment. The following basic information will enable your Mortgage Broker get an insight of your financial circumstances:
- pay slip or proof of income
- current bank statements
- your passport or driver’s licence (ID) or birth certificate
- tax returns or tax assessment notice
- copies of recent statements for other credit facilities such as credit cards or other loans
How long does it take for your loan to be approved?
The time frame for approval varies from one lender to another and largely depend on the Bank’s workload at the time the application was lodged.
Most banks on average take 1 week for pre-approval and another 14 days for unconditional approval provided that all required supporting documentations have been submitted.
However Keystart has a different time frame for approval. With Keystart, Pre-approval is normally granted within 1-2 weeks from submission of application. Unconditionally would normally be expected after another 2 weeks from Pre-approval as long as all required documents have been submitted as required.
Do I need to provide the bank with a copy of my building insurance?
For established properties, a certificate of currency will be required prior to settlement. For construction loans, the certificate of currency will be required prior to handing over of key.
In what frequency should I make my mortgage repayments?
You can nominate to make weekly, fortnightly or monthly repayments. However, when your home is being built, most banks will stipulate monthly repayments during construction period.
What is the Loan to Valuation Ratio (LVR)?
The Loan to Valuation Ratio is simply the loan amount divided by the value of your property. Most Lenders will require you to have Lenders Mortgage Insurance (LMI) or a Low Deposit Premium if they lend you more than 80% of the value of the property.
Do I need to pay mortgage repayments whilst my house is being built?
The repayment amount during construction period varies from one lender to another. Keystart, for instance will require a minimum monthly repayment of $200 during construction.
What is the Mortgage Assessment rate?
All lenders assess a home loan application using a mortgage assessment rate – which is a buffer of about 2 per cent added onto the current headline variable mortgage rate. The mortgage assessment rate varies between each lender and is designed to ‘stress test’ borrowers under higher rate scenarios. During the life of a loan, interest rates will rise and fall and when lenders assess a borrower’s loan application, they do so based on an inflated interest rate, as it gives both the lender and the borrower confidence that the loan repayments can be made without undue hardship.
As the mortgage assessment rate varies between each lender, this means that when you apply for a loan each lender will offer you a different loan amount. Added to this, lenders will use different mortgage assessment rates for each of their own loan products. This means that the amount the same lender can offer you will differ, depending on the home loan product you chose.
What is the difference between “Standard Variable Rate Loans” and “Basic Variable Rate Loans”?
Standard Variable rate loans carry flexible features such as offset facilities, redraw, extra repayments and the ability to split the loan. In order to access these features, however, the borrower generally pays a higher interest rate.
Basic Variable rate loan generally carries cheaper rates, because they lack the above-mentioned extra features. A basic variable loan is perfect for first homebuyers who wish to keep their costs down, and those borrowers who want a simple mortgage product without any bells and whistles.
For those who require a little more flexibility, such as property investors, a standard variable rate is often a better choice. This is because the ability to redraw money from the loan, or put their extra cash in an offset account.
If in doubt, please call us on 0431240731!
What you will gain by fixing your home loan?
Fixed rate home loans are usually for a set period of time – often 1, 3 or 5 years.
Here are the advantages of fixing your loan:
- Makes budgeting easier – You know exactly what you’re repaying. Whereas with a variable rate loan your repayments can ‘vary’ as rates change.
- Rate rises don’t matter – If interest rates rise above your fixed rate, you will be happy knowing you are paying less than the variable rate.
What you will lose by fixing your home loan?
Here are the disadvantages of fixing your home loan:
- Rate drops will annoy you – If rates go down below your fixed rate you will be repaying more than the variable rate and you won’t benefit from the rate drop.
- Can you make extra repayments? – Extra loan repayments are often not allowed if you have a fixed rate, or may only be allowed with a fee. Variable rate loans usually allow you to make extra repayments at no cost.
- Break fees – Fixed rate loans may also have a break fee if you change or pay off your loan within the set period e.g. if you sell your home.
Can I change job or touch my savings while my finance application is under process?
It is not recommended to change jobs whilst your finance application is under process. It is also not advisable to touch your savings while the bank is processing the finance application. Please contact us to get further clarifications.
How can you increase your borrowing capacity?
- Consolidate unsecured debts into your mortgage
- Reduce excess credit, especially credit cards
- Keep financial records up to date
- Select the right loan product and the right Lender
- Shop around
- Split your liabilities with your partner
- Use your properties as cross collateral
- Extend the term of your loan
Please contact us on 0431240731 for further clarifications.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance (LMI) is a one-off insurance payment which protects your mortgage lender against your default. LMI is commonly paid when the Loan to Value Ratio (LVR) is 80% or more. This occurs when more than 80% of the value of the property is borrowed from the lender by a buyer.
What are the documents required to evidence income and personal Identification?
Personal identification
- 100 points of ID are required. A current Passport or Birth Certificate = 70 points. Drivers Licence = 40 points. (Please note if these documents are in your maiden name, you will also need to provide a copy of your Marriage Certificate.)
- Other documents that help build up 100 points include: a Medicare card, Credit card, ATM/Debit card, Council Rates Notice, Pensioner Concession card, Health Care card, Tertiary Student ID card.
Income details
- The two most recent payslips from your employer.
- The most recent Group Certificate from your employer.
- Rental income statements or bank accounts showing rental income for any investment properties
- Proof of share dividends or interest earned
- Centrelink letter confirming family tax benefits
- Centrelink letter confirming permanent government pensions
- Private pension group certificate or statement
- Proof of any other regular, ongoing income.
- The Last two year’s personal and business tax returns and ATO Notice of Assessments (For self- employed applicants).
If you are refinancing your home loan, what are the other documents required other than evidence of personal identification and income?
- Documentation on your existing loan including the date the loan commenced, loan period and any financial penalty payable if you exit the loan early.
- Statements for the last six months for any existing home loans being refinanced.
- The most recent Council Rates Notice and building insurance policy on the property or properties being offered as security.
If you are a First Home Buyer, what are the other documents required other than evidence of personal identification and income?
- Statements for the last six months to show your savings/investment history. This could include share certificates, term deposit statements, etc.
- If other funds are being used for the purchase, evidence showing where the funds are held.
- If other funds are being given to you, which are not already in your bank account, you will need a Statutory Declaration from the person giving you the money.
- Copy of the Contract of Sale for the property being purchased.
If you are an Investor, what are the other documents required other than evidence of personal identification and income?
- A copy of the tenancy lease.
- A Council Rates Notice.
- Copy of the Contract of Sale for the Investment property being purchased.
- A letter from a property manager indicating likely rent for the new property.