How Do Guarantor Home Loans work?

When a potential home buyer lacks deposit funds to put towards a purchase a viable option can often be a family guarantee or guarantor home loan.

What is a Family Guarantee?

A guarantor loan is when a family member (usually a parent) offers security in their own home in lieu of the purchaser having little or no cash deposit. Not only will this assist the prospective new homeowner in obtaining their first home sooner, but it will also eliminate paying Lender’s Mortgage Insurance.

In most cases the lender will limit the guarantee to only the amount needed to keep the lending against the purchase at an 80% Loan to value ratio.

Once the guaranteed portion of the loan is paid down or the value of the purchased property increases so the loan to value ratio does not exceed 80% without the guarantor property as part of the security position, the guarantee may be removed.

What do you need to know before offering a guarantee?

There are, however, factors that need to be considered when choosing this path:

• If there is already a guarantee in place for another child, adequate equity must exist in the property.
• If the guarantor has a home loan of their own their must be adequate equity available and the existing lender must have a family guarantee policy.
• If existing lender does not have a family guarantee policy, the prospective guarantors must qualify to refinance to a lender that does.
• Legal advice is often a requirement by some lenders for guarantors to obtain prior to settlement.
• The guarantee will remain in place until the bank deems there is enough equity in the child’s property either through paying the home loan down or by favourable valuation.

Guarantees are a viable and common way to assist in purchasing a home when a deposit is lacking yet the capacity to pay a loan is evident. Talk to one of our experienced mortgage brokers for more information.

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How can I increase my borrowing capacity?

There are several factors that may affect your capacity to borrow and its imperative to be aware of them and how they may impact your next loan application.

Before you embark of your next home loan application take to time to consider the following factors to ensure you are on track to securing the loan amount you would like.

Living expenses

Lenders will reconcile the amounts declared in your application for your general cost of living with activity on your transaction statements so it’s imperative to ensure what you declare is honest and realistic. It may pay to ask yourself if there are any ongoing expenses that are not necessary, or you could survive without. For instance, do you use your gym membership? Do you have more streaming services than you need? Could you pare back the frequency of how often you dine out? The less your day to day outgoings are, the more funds you have available to service a loan.

Credit card debts and limits

Applicants often regard their credit card in terms of the outstanding balance rather than the total credit limit, but that isn’t how the lender sees it. Even credit cards with a zero balance that are rarely, if ever, used need to be declared as they still represent the potential of future debt. If you have a card you do not use, close it or if you do not need the entire limit you have, request your credit provider reduce it.

Personal Loans

Any other commitments such as personal loans or car loans will affect your capacity to borrow so if it is possible, work on paying them off as soon as possible. If you have a short amount owing, endeavor to pay it off and free up those funds for your home loan. Similarly, if you use services such as Zip Pay and Afterpay, look at clearing those liabilities as they also have a bearing on what the bank will lend, which many potential borrowers are not aware of.

Check your credit report

Your credit history may impact your capacity to borrow. If your credit score is compromised due to tardy conduct on previous commitments or from multiple credit enquiries, there may be an impact on your access to credit and how much you are able to borrow. It can therefore be prudent to obtain a copy of your credit file before applying for a loan to ensure there is nothing detrimental on there that may hinder your application.

If every dollar you can borrow counts when seeking a new loan, an audit on your current outgoings may result in lightening your expense load and being able to borrow more.

Want to know how much you can borrow? Contact one of our mortgage brokers today and we can let you know and give you guidance on where you may be able to trim some fat to get more out of your next loan application.

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What the rolling back of Responsible Lending laws mean for your finance

To encourage a more buoyant credit market and therefore boost the economic recovery from the COVID-19 induced recession, Treasurer Josh Frydenburg recently announced Responsible Lending laws introduced in 2009 will be relaxed. So, what will this mean?

Responsible lending guidelines were imposed in the wake of the 2008 Global Financial Crisis and were based on the guiding principal of “lender beware’ whereas the changes are now shifting back to the traditional “borrower beware” lending climate. This puts more ownership of responsibility back on the borrower, enabling banks to remove more stringent credit assessment processing that has impacted the ability for some to access credit.

Some of the major changes we expect to see include:

• Some of the responsibility of the borrower’s capacity to pay will shift to the borrower.
• Borrowers will need to take ownership to understand their finances to ensure a loan is right for them
• Increases in borrowing capacity may result.
• Less rigorous financial assessment may mean less paperwork and easier application process.
• Borrowers will have to be truthful regarding their position with the bank.
• Applicants that were previously unsuccessful to obtain credit may be approved with the regulations removed.

Don’t however think that with the abolition of Responsible Lending laws, you can expect an climate of “Irresponsible Lending“– that’s far from the case. In February 2020 legislation for the Best Interests Duty for Mortgage brokers passed in both houses of parliament. This is a statutory obligation for mortgage brokers to act in the best interests of consumers, prioritizing their interests when it comes to credit assistance. Interestingly, this legislation is not applicable to banks.

If the proposed relaxation of Responsible Lending does pass, the changes are set to come into effect by March 2021. So, if you are finding it difficult now to access credit, there may be scope with the impending removal of current tight lending restrictions.

For more information or to see what you may potentially be able to borrow, contact one of our mortgage brokers today.

 

 

 

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P&N want to fix your home loan worries – at less than 2%

This is a rate we never thought we would be telling you about, but here we are. P&N Bank have recently announced a one-year fixed rate of just 1.99% *. Yes, you read that correctly, and the catch? There isn’t one.

With their lowest ever fixed rate ever offered hitting the market, P&N have sent a clear message that they are open for business and keen to help you save money on your home loan. But the low rate is not all smoke and mirrors, as the product does come with a range of great features to help you bank smart.

Here are all the details:

• Its available for NEW owner-occupied borrowings up to 80% of the property value.
• Can be for either principal and interest or interest only repayments.
• Suitable for loan sizes starting at $20,000 up to 80% of the property value.
• There is the capacity to split a portion to remain variable to retain flexibility.
• Flexible repayment options including monthly payroll deduction, auto transfer, direct debit and Bank@Post.

P&N are not only committed to offering a competitive home loan experience, but their customers benefit from convenient every day banking options and smarter ways to pay. Having Digital Wallet facilities available you can make secure contactless payments with your mobile via Apple Pay, Google Pay and Samsung Pay.

This really is a low rate and a great all-round product to consider if you are looking to save money on your home loan. If you are interested to find out more information about this product or any other home loan options, contact us today.

(*Comparison rate 3.70%)

 

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Should you fix your home loan?

With great deals on “fixed rate” products peppering the market place, it’s a great time to look at whether or not a fixed rate product is right for you.

With great deals on “fixed rate” products peppering the market place, it’s a great time to look at whether or not a fixed rate home loan is right for you.

Why Fix Your Home Loan?

Most mortgage holders who choose to fix do so primarily to have the peace of mind of the certainty of what their repayments will be. During the fixed rate period there is no need to be concerned about rate fluctuations as these are irrelevant on a fixed product. Furthermore, in the current climate fixed rate products have grown markedly in popularity due to the current competitive fixed rates available, so saving money is at the forefront of customers’ agenda when they are deciding to fix.

Why NOT to Fix Your Home Loan?

Fixed rate loans have always been generally less flexible than their variable counterparts with limited ability to offset, pay extra or redraw additional funds paid into the loan. These restrictions are beginning to ease for some lender’s fixed products but as a general rule you can expect to not have the freedoms associated with a variable product.

Another consideration to bear in mind is that by paying the loan off early you may stand to be charged an early exit fee. Therefore, if you don’t expect to have the property by the end of the fixed rate expiry then this product may not be suitable.

Why Not Both?

Why not indeed. We see many of our clients opting to split their loan so that they have the full benefits of both fixed and variable rate loans. Whether it be a full refinance to another lender or just splitting up your current lending with your existing bank, your Blackburne Mortgage broker will be able to help you decide what product and structure is right for you.

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Lender Speed Dating: What the banks are currently doing well.

There are many lenders in the market now having a dizzying array of different products all with varying policies and niches. So, we thought we would give you a snapshot of what different banks are doing well right now to show you some highlights.

BANKWEST:

What are they doing?  Lending up to 95% plus lenders mortgage insurance for construction loans.

Why we are loving it:  Not all lenders are in the construction space let alone will allow such a high LVR. This is ideal for anyone with a low deposit looking to build at a great interest rate.

KEYSTART:

What are they doing?  Low deposit home loans with no mortgage insurance.

Why we are loving it:  Keystart is a viable option helping those wanting to get into a home when a lack of a deposit is an obstacle.

RESIMAC:

What are they doing?  A great option for anyone with credit impairments or for those whose scenario does not fit into mainstream lending products.

Why we are loving it:  Resimac work particularly well in the space of find solutions for those who fall outside typical banking and mortgage insurance guidelines.

ANZ:

What are they doing?  Require only one year of financials for Self Employed applicants.

Why we are loving it:  With the standard being a solid two years of financials required when self-employed, this policy is helping people with limited financials get into the property market sooner.

CBA:

What are they doing?  Require only three months’ salary credits for casual applicants to verify income.

Why we are loving it:  Most lenders require extensive verification for casual applicants such as group certificates and 6 month’s salary credits.

P&N:

What are they doing?  Will lend up to 95% including Lender’s Mortgage Insurance for refinances.

Why we are loving it: This is a fantastic option for Keystart mortgage holders who wish to refinance to a lower rate but usually are light on when it comes to equity.

NAB:

What are they doing?  Will accept one day employment history for applicants.

Why we are loving it:  Most lenders will want to see stability in employment history and many not favourable if an applicant is on probation.

ST GEORGE:

What are they doing?  Helping First home buyers by offering $1 Lenders Mortgage Insurance for applications up to 85% loan to value ratio

Why we are loving it: It gives First Home buyers a little extra wriggle room by eliminating this charge which can sometimes be in the several thousands of dollars.

WESTPAC:

What are they doing?  $2K per property rebate when refinancing over to them

Why we are loving it:  It helps cover the fees associated in moving lender plus a little extra as a bonus.

MACQUARIE:

What are they doing?  One day turnaround for assessment plus competitive rates.

Why we are loving it:  When time is of the essence it’s a great option to know your deal will be picked up fast, with the added advantage of low rates.

CITIBANK:

What are they doing?  Offering no Lenders Mortgage Insurance up to 85% for refinances

Why we are loving it:  Often mortgage holders will not refinance to a cheaper rate if an LMI charge is going to eliminate the benefit of doing so. This mitigates such a limitation.

AFG HOME LOANS:

What are they doing?  Operate under five different funders broadening options available.

Why we are loving it: Having a range of options means that many more lending scenarios are going to be  serviced.

SUNCORP:

What are they doing?  No annual fee is payable for the life of the loan for First Home Buyers.

Why we are liking it:  It is always great to see lenders offering a little extra to first home buyers to help them get ahead.

Are you happy with your current lender or do you think you could get much more love elsewhere? For more information on any of the above lenders contact us and see what potential savings you may be missing out on.

 

 

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The Power of the Right Valuation

Loan applications are often reliant solely on the security valuation returning at a certain amount. With the current real estate market still volatile and some types of properties or some locations being affected more than others it’s important to get the valuation right.

A Valuation is not always “one size fits all”

A full valuation report includes information gathered about the subject property as compared to sales evidence against similar properties. It is, however, somewhat subjective as it is prepared by a person who at some level is also presenting their opinion – albeit based on information and sourced evidence. Each lender has a panel of valuation companies that they engage to deliver valuation reports, however not all lenders use the same firms, or may allocate your valuation to a different firm than another lender.

What does this mean?

As a valuation requires a human element there is the capacity for variances across different firms. For example, a report received from the valuer assigned from Lender A may be different from the report received from Lender B as the valuers preparing the reports may see them slightly differently. In theory there should be little difference, but it is not uncommon for valuations to vary from one lender to the next.

How to use this to your advantage

When you need the maximum valuation amount possible to be able to proceed with a new application there is the ability to order upfront valuations. Your mortgage broker can obtain several valuations from prospective banks to verify “where” you have the highest equity position. There are four different types of valuations your lender may request:

Full valuation: Where the bank requires the valuer to examine the property and provide detailed commentary about the property along with internal and external photographs.

Kerbside Valuation: Where the bank requires the valuer to attend the property but merely inspect it from the outside without gaining access.

Desktop Valuation: Where the valuer determines the valuation of the property by looking at the property description as against online evidence without attending the property or inspecting it.

Modelled Estimate: This is a computer-generated valuation whereby the property details are evaluated by a property estimator based on the property configuration against current sales evidence.

Your lender may initially request a Modelled or Desktop valuation which may return an unfavorable result. Your broker may then request that a Full Valuation be ordered if you believe the figure does not accurately represent the property. Sometimes renovations that have been completed or unique features that can only be verified by access to the property warrants a full valuation.

What if the valuer gets it wrong?

In the unlikely event that the valuer assigned to your property returns a figure that you categorically disagree with and impacts negatively on your application, there is the capacity to dispute it. It is an involved process that requires you to provide concrete evidence to warrant an adjustment of the valuation. While in theory there is the capacity to challenge a valuation, disputes rarely result in an amendment to the valuation unless its evidently clear that the valuer got it wrong.

Want to know what your property is worth?

If your equity position has been the mitigating factor in holding you back from proceeding with a new application remember your Blackburne Mortgage Broking team can order a valuation for you at any time. Let us know if you wish to get an idea of how much your property is worth because the value returned may not only be in the property itself but in what you may be able to save by a simple refinance.

Contact us at any time for more information.

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