Factors that Can Affect A Home Loan

A Home Loan is no small thing. It is a  long term commitment that usually stays with you 15 to 30 years of your life. Because of this, so many important things have to be thought about and planned for and so many factors will decide whether you will get a Home Loan or not.

These factors can be divided into two. The first one would be those that you need to think about before applying for a Home Loan and the second would be the factors about you that lenders have to consider before approving your Home Loan.

Let's first consider you.

Before you can choose the mortgage for you, you have to review your financial situation and project if your housing needs might change in the future with your Home Loan. You can ask yourself these questions to help you with this:

How long do you think you plan to stay in your house?

- Are there expectations for your financial income to increase over time which could allow you to pay more off your Home Loan?

- What do you think are the significant expenses you might make in the future that could affect your capability of paying your monthly payments? School fees, starting a business, starting a family, etc are examples of things that may affect your financial situation.

The next step is to assess the level of risk you are ready and comfortable in taking. Remember a Home Loan takes a long term commitment. Decide on what mortgage rate you think you can work with. Variable interest rates can be risky since interest rates change and can vary where as with fixed rate home loans can be a safer option if you like to know what your payments will always be.

The third step is to determine the term of the loan you want.   Most terms are 15, 20 and 30 years. Usually, a shorter term means higher monthly payments. This is good for people whose incomes are higher than average and are stable. But, most average income earners go for long term periods because aside from a smaller monthly bill that can fit their budgets.

The last step is to assess the closing costs of a Home Loan and the lowest interest rate that you can get.

Now, let's consider the factors that might affect the approval of your Home Loan from lenders. There are ten of these which are the following:

1. Credit report. When you apply for a loan the credit provider can take your credit history into account when deciding whether to give you a loan.  Credit history reports are available from Veda Advantage (previously known as Baycorp Advantage), Dun and Bradstreet, and Tasmanian Collection Service.  For more information about Credit Reports click here

2. Credit Cards. Always be sure to keep your credit card payments on time as poor credit card history can affect your chance of getting a home loan.  Some banks may require you to reduce your current credit card limit. 

3. Outstanding Credit. Pay off as many if not all credits before applying for your home loan.  The less you owe the better.

4. Income. The steadier your income the better.  Avoid changing jobs before applying for a Home Loan.  The longer you have been in your current employment the better it is.

5. Available funds. Make sure that you do not make purchases that could consume your available funds before buying a home. Aside from a down payment, you have to consider other expenses such as legal fees, stamps duty etc.

6. Deposit.  The bigger the deposit the better! 

7. Interest rate. Interest rates fluctuate all the time and if you have a variable loan your payments will also fluctuate an will determine how much you will have to pay each month.

8. Price Range. From your current financial assessment of your situation and by figuring out your debt-to-income ratio, will determine how much you are able to borrow . A lender will not approve a Home Loan with payments you can't meet.

9. Lender. Know your lender and inquire about the statistics concerning those Home Loan applications.  This is where dealing with a mortgage broker has it's benefits.  A mortgage broker will know which lending providers will best suit your financial needs.

10. Your honesty. Be honest when filling out all the paperwork involved with your home loan application and the lender requires from you to  process your loan  application.

For more information regarding Home Loans contact the team at Equity Access Australia call 1300 655 616

Relocation Loans: How do They Work?

Firstly what is a relocation loan? There are a number of variations, but essentially they are most commonly used if a purchaser has entered into a contract to purchase and are relying on proceeds of the sale of another property, with later settlement date. The financial institution lends the client the funds required to purchase the new property using both properties as there security for the loan. Once the other property is sold the loan is either paid out or reduced to what is referred to as the residual mortgage.

The loan is used to bridge the period between settlements, using the client’s equity in their existing property. These types of loans also have the name ‘bridging finance’, which is not as popular a term, as it brings back memories of expensive loans with high interest rates.

Most modern day loans are much more appealing, as the interest rates are in most cases the same as the standard products the institutions offer. The loans generally allow for a six to twelve months bridging period, but can vary depending on the institution. Interest over this period will be charged on the full mortgage, however most lenders only require that repayments during this period be calculated on the anticipated residual mortgage. At settlement unpaid interest is paid and the loan is reduced to the residual mortgage or paid out in full.

This type of loan often appeals when there is a shortage of good property for sale. Many people are reluctant to sell if they have not found a new home to purchase, particularly if prices are rising. If there is good equity in your existing property this can become a viable option. The most attractive feature of these loans is that most institutions base their affordability calculations on the residual mortgage, the benefit being that you can qualify without income if you are not left with residual mortgage after settlement.

Whenever considering a relocation loan it is most important that you have a very realistic appreciation of the value of the property you wish to sell. I say this, as many people do not realise that you can control the price you pay for a property, however you can only achieve the best price the market has to offer at any given time when selling. Remember, the longer the selling period, the more interest accumulates at peak mortgage level.

Relocation loans are an excellent product if used appropriately. A realistic expectation of your property value and a comfortable residual mortgage repayment could make this a very viable option.

Please feel free to call us with any questions you may have regarding any type of loan you may be interested in or to find out what loan is right for you.

Equity Access Australia Phone 1300 655 616

Knowledge is power.

What does the future hold?  With increasing inflation and the Australian dollar value who knows whether the spate of interest rate rises the country has been perceptible to, is over.  No body knows.  It is likely that there could be more interest rate rises on the way.  Although there are many economists predicting rates to stay on hold for at least the remainder of this year. 

What can we do to protect our selves against the increased burden of interest expenses and living costs?

Know your position.

• Firstly sit down and assess your asset and liability position.  If you are not sure how to do this, then please call us, and we will be happy to assist you with this.
• Then work out your budget.  Include all income you receive (Net of Tax) and include all your current expenses.  Set yourself a budget that is realistic and workable for you and your family.
• Work out all your commitments eg. loans and credit cards and find out what interest rates you are currently paying on these facilities. 
• Then I recommend calling a professional mortgage broker to see what can be done to reduce your cash flow by either consolidating your debts, restructuring your lending or fixing a portion of your current lending. 
• Once you have seen a professional mortgage broker, then assess your new commitments and ensure that the restructure or consolidation will in fact save you money each month. 
• Be wary that you are not encouraged to refinance your home loan without being aware of the cost involved to refinance, eg, break costs from current lender.  It may be best to increase or restructure your facility with your existing lender to avoid costs. 
• To ascertain whether refinancing is a viable option for you, please ask your mortgage broker to work out how much you will save on an annual bases by refinancing your home loan. 
• Some lenders are offering rebates on refinancing costs should you change lenders which can offset some of the expense of doing your refinance.  Ask your Mortgage Broker which lenders will offer you a rebate. 
• Lastly make sure know you have a goal to strive for, whether that be reducing your mortgage by a certain amount each year or maintain your current debt level until children are a certain age so then your can start your debt reduction program. 
• In this current environment please try to avoid missing home loan payments or neglecting to pay phone or credit card accounts, see a professional before there is a problem.  Missed payments or credit defaults will seriously impair your options, and negate strategies which may assist your cash flow in times of need.

Please call our office if you need any help or advice in managing cash flow and working towards your goals for the future.

Equity Access Australia – Home Loan Specialists Phone: 1300 655 616