What is a mortgage broker?
A Mortgage Broker is an intermediary between the borrower and the lender who uses their knowledge and network to source competitive rates and facilitate a smooth process to settlement. The Mortgage Broker acts in the borrower’s best interests at all times and is their mortgage project manager, handling all the steps in the process and reporting back to the borrower at the various stages.
Why use a mortgage broker?
With such a wide range of mortgage products out there it can be confusing to try and compare them all. A Mortgage Broker will help navigate through the options by explaining the differences between products and help the borrower choose a loan that suits their specific needs. Once a product is chosen, a Mortgage Broker will make sure things happen on time and the borrower is fully informed every step of the way.
Why choose Bang On Investments?
What makes us unique when it comes to home loans, vehicle and business loans is our approach to service. At Bang On, we pride ourselves on the relationships we build with our clients. Not only are they genuine, they are also long-lasting, with our clients always feeling they can call us for a chat, to ask a question or just to check in. So if it’s a personalised service you are after, look no further than Bang On.
Does Bang On charge fees?
We do not charge a fee for our service. We are paid a commission by the lender you choose which is fully disclosed to you at the outset (government and Lender fees and charges apply). Initially, your Mortgage Broker provides you with our Credit Guide, which outlines how we are remunerated generally. When you choose us to arrange your finance, we will provide our Credit Proposal Disclosure document which details the specific sum your lender will pay us after settlement of the loan.
What happens in my first meeting with Bang On?
Usually prior to our first meeting I would have requested some information regarding your financial position and understood your primary objective for financing via phone and email. Following assessment of your financial situation, I would prepare a tailored solution to meet your objectives.
We will organise a face to face meeting at a location and time that is most convenient for you. At our meeting if you are satisfied with our solution and give us the go ahead, we will prepare the home loan application. There are no obligations to proceed and our service is free of charge.
Why use a mortgage broker?
We don’t forget you after your loan has settled. We will continue to be there for you to answer any questions and perform modifications to your loan such as fixing or switching products.
Each year your broker will also review your loan to make sure it still suits your needs. We will also compare it with those on offer from other institutions and negotiate with your current lender for you, to see if we can secure a better rate from them for you.
How much do I need for a deposit?
A First Home Buyer needs to save at least a 5% deposit* but, the more that is contributed now, the less interest is charged in the long run and the lower the repayments. If the deposit is less than 20% + the stamp duties, lenders mortgage insurance may apply. If you are purchasing a subsequent home or refinancing, it is likely you will have more equity so we recommend you put down at least 20% + the costs.
*It is possible, with the help of a Parental Guarantee, to avoid paying lenders mortgage insurance, there is a section on that below also.
What other costs are associated with securing a mortgage?
Bang On Investments do not charge a fee but you will likely pay Lender and Government fees in the course of arranging and settling your mortgage. In a property purchase, common Government charges can include Stamp duty, Land Transfer Registration, Registration and Discharge Registration. You may also pay a loan application fee or lender legal charge, although it is your broker’s role to keep those to a minimum! You will also have to allow for Conveyancing and Coucil Rates / Body Corporate. When refinancing you don’t need a conveyancer and there’s no Stamp Duty or Land Transfer Registration so would only pay Registration and Discharge Registration plus any Lender fees, if applicable.
What is Negative Gearing?
We highly recommend seeking the advice of a suitable industry professional when it comes to tax matters but at Bang On we can provide a basic explanation of the elements that pertain specifically to your Investment Property Loan. Basically, Negative Gearing is when the rent does not cover the deductible property outgoings such as mortgage interest, agent fees etc. The loss incurred at the end of the year may be tax deductible, subject to the advice of an accountant.
What is Positive Gearing?
The opposite to Negative Gearing is Positive Gearing. Put simply, it is when the rental income received on a property more than covers all the deductible property expenses. This would mean you have a surplus at the end of the financial year, which may be taxable, once again, subject to the advice of an accountant.
What is a pre-approval?
A pre-approval is confirmation from the lender they are happy with the scenario your broker has prepared and submitted, providing their conditions are met. There may be specific conditions requested but there are some that are standard as follows:
- • A satisfactory valuation result
- • Employment check
- • Formal acceptance from the mortgage insurer (if applicable)
A pre-approval usually lasts for 90 days, at which time your broker will be in touch to renew, if you haven’t made a purchase by that time.
What happens when I buy a property?
When you sign a contract to buy, your broker converts the pre-approval to full approval. They will collect a copy of the fully signed contract and Section 32 which is then sent on to the lender. A valuation is often ordered. Once the valuation is accepted and all other conditions are met, the lender issues an unconditional approval and a formal loan offer for signing. Another appointment is scheduled so that your broker can fully explain the loan offer, and you can sign it.
How do I get to settlement?
Within 3 or 4 days of receipt of the signed loan offer, the lender moves your file to their settlements area who liaises directly with your conveyancer to book a settlement time on the agreed day.
A week or so before settlement, your conveyancer calculates the precise amount of council rates / water rates and lets you know the exact shortfall you need to contribute by way of a bank cheque or transfer from your account. On settlement day the conveyancer liaises with the lender on your behalf and arranges to transfer ownership of the property into your name. All you have to do is collect the keys from the agent!
Do I need a Conveyancer?
We highly recommend the use of a Conveyancer because they specialise in property, that is all they do so they can fully focus on your property purchase to ensure the process is smooth. The Conveyancer will perform all the necessary property checks and handle the actual settlement for you.
What is a Section 32?
Also called the Vendor’s Statement, the Section 32 contains details about the property such as planning permits, building approvals, title copies, council rates charges and subdivision plans.
What is Lenders’ Mortgage Insurance?
Mortgage insurance is usually required when a lender provides a loan that covers more than 80% of the purchase price or valuation, whichever is the lower. It is designed to cover the lender for their risk and protects them in the event that the property needs to be sold. If the lender suffers a loss on the sale, they claim payment from the mortgage insurance company. The insurer then pursues the borrower for the amount they paid the lender. The insurance offers the borrower no protection whatsoever and is a once off charge which can be added to the loan amount in certain circumstances. The price of the premium depends on the loan to value ratio of the property purchased.
Can a guarantor help me avoid Lenders’ Mortgage Insurance?
An immediate relative* is able to help avoid the cost of lenders’ mortgage insurance by offering a portion of their home equity to reduce the risk for the lender. The standard comfort zone is where your loan does not exceed 80% of the property value so your deposit is combined with equity in the immediate relative’s home or investment property (your broker will explain how it all works!).
*Your immediate relative must seek independent legal advice to have their rights and responsibilities as guarantors explained to them fully.
What is the difference between buying by Private Sale and Buying at Auction?
A Private Sale is where you negotiate a price face to face with the agent. Bang On usually recommends an offer subject to finance because the valuer will scrutinise more closely the sale price due to the fact negotiations are normally a closed room deal. In an auction, all the bids are called out in public, at a private sale those bids are sealed so you could end up paying much more than the nearest bidder offered. Subject to finance then gives us time, usually 2 weeks to get a valuer through and have the bank accept that. You can also make a private sale subject to building and or pest inspections.
An Auction can be a more transparent way to buy a property because all interested parties are usually in attendance and the bids are called out in public. The result of an auction is final though, you can’t add conditions to your offer after the hammer has fallen so you need to do your due diligence prior to the auction day. You should obtain a copy of the Section 32 for scrutiny by your conveyancer. If you wish to get a building and or pest inspection, you must do so before auction day because the sale is unconditional, you can’t pull out later because you found a problem with the structure.
If you are the highest bidder but the agent tells you the reserve price has not been met, you will be invited in to negotiate further. Please note you still can’t add conditions to your offer and you need to be careful not to go too much higher than the highest bid because the valuer may think you have overpaid. If you do feel the need to go considerably higher, wait 4 full working days and you can add a subject to finance clause for your protection, in case the valuation comes back lower than the price you paid.
* Legal advice should be sought for your individual circumstances
* Please note that every client’s situation is unique and terms and conditions apply. Contact us to initiate a full application assessment for you to determine an outcome.
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