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Application & establishment fees, stamp duty + more.

When taking out a mortgage, many people forget to consider the associated fees and expenses. Here are some of the extra costs that you’ll need to consider when you take out a home loan.

Home loan application fees

Most lenders charge a home loan application fee. This can range from loan to loan, and covers:

• Loan contracts
• Property title checks
• Credit checks
• Attending a settlement

Mortgage fees and costs

Mortgage establishment fees – Lenders generally charge a mortgage establishment fee – a fee for setting up a mortgage.

• Property valuation – A third party chosen by the lender, is appointed to determine the value of your land and improvements.
• Mortgage registration – Your Mortgage deed needs to be registered with the government.
• Mortgage stamp duty – Some State Governments charges stamp duty to register your mortgage.
• Lenders mortgage insurance – If you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay  for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.

Property fees and costs

• Building, Pest and Electrical Inspection fees – It’s wise to have your property inspected for any structural or electrical problems and for pests (e.g. termites).
• Stamp duty – Governments charge Stamp Duty to transfer the ownership of a property.
• Registration of transfer fee – The new owner of the property needs to be registered at the Land Titles Office.
• Legal fees – You generally need to pay a Solicitor of Settlement Agent to handle the transfer of ownership of the property on your behalf
• Home & contents insurance – Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc. Lenders insist that your property is insured while you have a mortgage.
• Life and income protection insurance – Borrowers should consider protecting their incomes and themselves while they have a mortgage.
• Utility costs – Connecting electricity, gas and telephone can attract a fee.
• Council Rates – Your local council charges rates to cover garbage collection and a host of other services.
• Water Rates – The water corporation charges rates for the supply and upkeep of water to your property.
• Body corporate fees – If you buy an apartment or Strata Titled property, body corporate fees are charged, and some fees can be significant – particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc) or if there are lifts, pools and other communal facilities.
• Maintenance costs – Don’t forget to make provision for regular maintenance on your home – even if you decide not to undertake significant renovation.

To learn more about the hidden costs of buying a home, and discuss how we can help you, get in touch today.

Negotiating the best property price isn’t a matter of swindling a seller. It’s about doing your homework, knowing what you want, knowing the market and making sensible offers.

When you are buying property, getting the best price can mean the difference between being able to afford it and having to settle for second best. And, of course, a purchaser is often negotiating with a seasoned professional, so any time spent brushing up on negotiating skills is well spent.

But we’re getting ahead of ourselves. For a first-class property price negotiation, the homework starts well before you even let the agent know you are interested.

The first thing to do, says buyers’ agent Shelley Horton, is get a good understanding of your requirements and circumstances. Aside from the location and type of house you are looking for, this understanding involves finance, of course.

“One of the first things I would be wanting to find out is whether a purchaser will be borrowing to finance the property, and how much they are looking to borrow,” Horton explains. “If someone is relying on finance as part of the property purchase process, I would always recommend they go and get preapproval, because if you don’t have preapproval, it doesn’t really put you in a strong position against the rest of your competition.”

Aside from meaning that when you do eventually make an offer it will be taken seriously by the seller or their agent, having finance sorted out means that you can be sure of what your stamp duty and associated costs are, and exactly what price range you can consider.

“We can start to work out what an offer range might be, and then it’s just a matter of ascertaining the market,” Horton says.

“This means doing lots and lots of research – seeing the prices other similar properties are listed on the market, checking recent sell prices for other properties that fit the criteria, comparing as much as we can like for like, so then you know that you’re not paying too much.”

Horton initially looks at online resources such as realestate.com.au or Domain. She also uses RP Data reports, but notes that the general public doesn’t usually have access to these (agents, valuers and finance broker usually do).

“The reports give us a little more insight into properties that have sold, and background on the circumstances and situations leading up to a property coming on the market, how long they’ve been on the market and whether they have switched agents,” she says.

Above all, the best thing a buyer can do is get out and look at properties, and speak to the agents to build contacts.

“I inspect properties and go to auctions just to keep in touch with the area, to see what the market is doing,” Horton says. “If you go to an auction and there was a lot of hype around the property, but then you find that there was really only one person interested in bidding, it tells a different story.”

Once you have your finance sorted and you’ve found that special property, get the building and pest inspections done as soon as you can so that if you do make an offer, you are prepared to move quickly. This can give you the edge on your competitors.

“If you have your homework done – your due diligence reports, your finance – you know exactly the position you’re in and you’re ready to go, and letting the agent and vendor know that is actually a good thing,” says Horton. “An agent wants to look for all those signs to see who is the most serous buyer. So being able to make an offer, possibly with no cooling off, will put you ahead of anyone else, because the agent knows that you’re going to start talking about dollars and, once you agree, it’s a done deal.”

Finally, it’s time to talk dollars, and you are well armed by the time you reach this point. Most agents will make buying guides available at inspections, so you will have a good idea of the vendor’s expectations; you will have a certain budget in mind because your finance is locked in; and you will have a good idea of the value of the property from all the preparation you have done (if you are still unsure here, you can have a professional run a valuation or engage a buyers’ agent).

So what should you offer?

“I tend to not start too low because the agent won’t take you seriously,” Horton says. “You have to get that balance right. You might want to start five per cent below a realistic opinion of the value of the property, and go from there. It also depends on your budget. Certainly start below your maximum, and work up to that. Every dollar you get the property under your budget is a bonus for you.”

One exception to this is when a property has been on the market for a long time and there is not much interest in it. “That might be the case where you can get something at a heavily discounted price because the property is stale,” Horton says. The key to knowing whether this is the case, of course, is all that thorough research you’ve done.

Ready to make the deal? Get in touch today to see how we can help you get your finance sorted.

The Best Interest Duty (BID) for mortgage brokers came into effect
1 January 2021.

The Best Interest Duty and related obligations ensure that you
receive advice that meets your objectives, financial situation and
needs, and that we act in your best interests when providing this
advice.

What does that really mean for you?

In short, it means that your mortgage broker (us!) must legally
comply with the BID to ensure that you secure the best home
loan product that is most appropriate for your situation.
It also means that not much will change for us because we have
always put our clients’ interests first.

More about BID

The Best Interest Duty guidelines state that while price will always
be a determining factor, in some cases the cheapest price may
not be the best outcome.

Some circumstances may mean that the benefits provided by
certain features might outweigh the importance of cost.

Some clients may have a strong preference for a loan feature that
may not be in their best interests. For example, someone may
insist on an interest only loan, when in our view it is not in their
best interest.

In this case, we are expected to make reasonable efforts to
explain why these features may not be appropriate or offer good
alternatives to help them make an informed decision.

Other home loan considerations where we will act in your best
interests include:

• When refinancing – “the consumer may benefit from being
made aware of any potentially minor cost savings associated
with refinancing, with an explanation of when the cost savings
would exceed the refinancing expenses.”

• Considering promotional offers – “any promotional offer
that is quantifiable will be considered as part of the cost of the
credit product… it is important to be aware of eligibility criteria,
exclusions and time limitations.”

• Comparing interest rates – for example a “fixed rate loan with
a substantial break fee could be detrimental to a consumer who
wants flexibility to refinance.”

• Deciding on account structure – “an offset account may not
be relevant to a consumer whose plans do not include repaying
additional amounts (and may be detrimental if there is an
additional cost for the feature).”

You will have the assurance that we must place your interests
ahead of our own as set out in the Conflict Priority Rule
guidelines. Conflict priority requires mortgage brokers to prioritise
the consumer’s interests in the event of a conflict of interest.

For example

Linh and Zelda approach a mortgage broker for a home loan.

Based on the information provided, the broker sourced two very
similar loan products:

Lender 1 – A home loan package with an offset account, but NO
annual fee.

Lender 2 – A home loan package with an offset account but
includes an annual fee of $149.

The broker recommends to the client to proceed with Lender 1.

However, Lender 1 offers a higher commission to the broker than
lender 2 for the same size loan.

Commentary

In prioritising the consumers’ interests, it IS POSSIBLE that the interests
of the consumer and the broker align – even if the broker is paid more
commission. In this situation, the fact that there is an additional
benefit for the broker DOES NOT indicate that the broker did not
prioritise Linh and Zelda’s interests.

If the situation was reversed, where Lender 2 offered the broker more
commission, AND the broker recommended Lender 2 over Lender 1,
then the Lender 2 product would be inconsistent with the conflict
priority rule, and therefore becomes a conflict of interest – thus not
operating in the best interests of the consumer and not legally
complying with BID.

Best Interest Duty does NOT apply to any lenders!

A lender may offer you products, but a mortgage broker
MUST act in your best interest.

Lenders have no legal obligation to act in your best interest, but
we do!

Looking for a home loan? Contact us today to see how we can
assist you.

The dream of home ownership is a tough one for many Australians to fulfil. After all, Australia is one of the most expensive countries to live in. But it’s not just the cost of living and property pricing that delays our property buying.

The road to home ownership can be a long and winding one for most. Considering the affordability of repayments, the location and lifestyle balance of the property, saving up the baseline entry level 20% deposit (if not, having to absorb further costs by paying lenders’ mortgage insurance (LMI)) and stamp duty are just some of the other factors to consider. In Australia, depending on age of the borrower and purchase price, it can take anywhere from two years to over six years to save for a deposit. This of course is also dependent on the income and expenditure of individuals.

Yes, it can be tough to get a foot on the property ladder, but first home buyers (FHBs) are not deterred.

About a third of millennials and a quarter of all Australians plan to buy a property in the next two years with many using the lockdowns in 2020 to up the ante on their savings.

There is no better time than now for FHBs to dive in and make that commitment – if possible.

Here is why:

1. Only a 5% deposit and no lenders’ mortgage insurance (LMI) – until 30 June 2021 and only through certain lenders – for those who are eligible!

Under the First Home Loan Deposit Scheme (FHLDS) eligible first home buyers can buy or build a new home with as little as a 5% deposit

Usually, a 20% deposit is required to avoid LMI costs (which can cost tens of thousands of dollars). But under the FHLDS, the government guarantees the remaining 15% of the value of the property purchase financed by the eligible first home buyer’s loan. Eligibility, property price thresholds and conditions apply.

2. One-off $15,000 grant to eligible owner-occupiers, including first home buyers

The Australian Government HomeBuilder grant provides eligible owner-occupiers, including first home buyers, with a grant to build a new home, substantially renovate an existing home or buy an off the plan home/new home. A $15,000 grant is available for contracts signed between 1 January 2021 and 31 March 2021.

The government has also extended the deadline to 14 April 2021 (inclusive) for those applying for the $25,000 which applies to eligible contracts signed on or after 4 June 2020 until 31 December 2020³. They have even lifted the property price cap for new build contracts in New South Wales to $950,000 and Victoria to $850,000 ($750,000 in all other states and territories).

Caution: lenders won’t assume you have this money because the grant is paid to you and not the bank – so be careful when working out how much money you have for the build (or even if T&Cs apply)!

3. Some lenders are offering bonus first home buyer incentives

From bonuses offered at settlement, conveyancing fee rebates, no account keeping and establishment fees, to no application and valuation fees – these are a few of the incentives offered by some lenders to attract first home buyers (however these include specific criteria and conditions).

4. Lenders’ mortgage insurance discounts are being considered by select lenders

Some lenders have been known to reduce the LMI to just $1 for eligible first home buyers! Others offer a percentage discount on LMI fees following settlement. Minimum deposits, maximum loan size and T&Cs apply.

5. Cash in on cash backs – certain lenders offer cashback incentives to first home buyers

Thousands of dollars of cashback to an eligible first home buyer with LMI and new purchase rebates are just some incentives that are on offer from some lenders.

Nabbing a great deal or incentive on your home loan could help you save money, but it is even more important to consider price (interest rates and fees) and features when choosing the right home loan.

6. Stamp duty concessions are available in some states

Besides saving for a deposit, stamp duty can be another big barrier to home ownership. However, most states and territories offer some assistance on this cost, including some exemptions, for eligible first home buyers.

Accessing one or more of these schemes or incentives could provide the assistance you need to buy your first home. It could also potentially save you tens of thousands of dollars.

But before considering any of these options, CONTACT US, so we can help steer you through the various options that may be appropriate for your specific situation. It is important to understand the various terms, conditions and eligibility criteria.

A FHB opportunity awaits

If you are one of the lucky ones who have remained financially stable, this could be your opportunity.

While there are always varying peaks and troughs in different property markets across the country, now could be an ideal time for FHBs to get into the market… Why?

• Historically low interest rates make borrowing cheaper than it has ever been
• Government incentives, spending and infrastructure initiatives continue
• Consumer confidence is returning as we adapt to the new normal
• Simpler lending rules for home loans are expected shortly

Knowing where to start, taking the initial steps and navigating through the whole process can be overwhelming. We can step you through the process from the initial stages so you can rest assured you will be well informed for one of the biggest decisions in your life. We have the experience and knowledge, along with access to a wide array of lenders, to ensure you are successfully guided through your first home buying journey.

Well, 2020 was a year we will never forget. Many of us endured
personal and financial challenges that forced us to adjust our
lifestyle and priorities – some significantly and some for the
better!

While we adapt to a new COVID-normal, life should prove to be
more stable and positive this year. We can use our experiences
of 2020 to get us back on track with new perspectives on life
and money.

Now is a good time to set some personal financial goals for
2021. But first, we need to learn some lessons from 2020.

A consumer survey conducted in late 2020 identified
Australians’ top financial concerns were debt worries, savings
goals and property market outlook.

Some of the concerns and trends from this survey show that:

• The piggy bank took a hit – 30% of Australians dipped into
their savings to cope in 2020.
• There were two big pain points – Job security and price of
groceries were Aussies’ biggest financial concerns.
• We accumulated more debt in 2020 – 40% of the average
debt was accumulated in 2020.
• Credit card debt remains high but has lowered –
Australians have knocked $7.31 billion off personal credit
debt BUT there has been a shift to using more buy now pay
later services. Beware of the BNPL trap!
• Majority of our savings are sitting in a savings account
– 47% of Australians keep their savings in savings accounts
compared to only 7% in an offset account linked to a home
loan. 4% made extra payments on a home loan and another
4% salary sacrificed extra superannuation contributions.
• We took advantage of low interest rates – 32% of
mortgage holders negotiated a lower home loan rate with
their current lender, 14% switched home loan lenders and a
further 17% intend to switch.

Australians appeared to be in survival mode by sticking to the
basics of putting food on the table and holding down a steady job.

But by making small shifts in your spending habits and financial management techniques, you can shift from just surviving to thriving.

Here are a few ways we help our clients to thrive:

1. We can help you clear your credit card debt

While credit card debt is easy to rack up, it is not so easy to clear and it can have detrimental effects on your cash flow and your future borrowing power.

What is the best way to clear credit card debt? This will depend on your level of debt, the number of cards and your individual circumstances. However your choices might include:

• paying out the balance in full before interest accrues

• paying the maximum amount you can afford each month to clear the debt as quickly as possible

• if you have more than one card, paying at least the monthly minimum on each card while allocating a larger payment to the card with the highest interest

• transferring your balance to a new credit card offering a lower interest period

• if you are a home-owner, consolidating your debt into your home loan

You should avoid paying ONLY the minimum monthly repayment or you could be in a cycle of debt that is NEVER resolved.

There are other ways to free up cash for the essentials, nice-tohaves or big-ticket items.

Together, we may consider consolidating all your debt (credit card balances, personal loans, car loans etc) into one loan with a lower interest rate. If you are a homeowner, your home loan usually has the lowest interest rate, especially during this time of historically low rates.

We can help our clients decide which type of debt best suits them and help them minimise ‘debt lag’ – especially after festive season spending!

2. We have the power to negotiate

By refinancing, switching lenders or simply negotiating a better rate with your existing lender, you can potentially save thousands of dollars in interest, repay your home loan quicker, or lower your repayments. By securing a lower interest rate and still making the same repayments, you can pay down your debt sooner. We can step you through refinancing should you go down that path.

Here is a quick calculation to show how you could save almost $52,000 in interest.

Of course, interest rates do fluctuate over time, fixed and variable rates vary from lender to lender as do rates for owner-occupiers or investors.

Loan Term – 25 years

Loan Amount – $600,000

Repayment Frequency – Fortnightly

Repayment Type – Principal and Interest

Interest Rate – 2.54 % – 3.10%

Total Cost of Loan – $810,810.43 – $862,575.12

Total Interest Payable – $210,810.43 – $262,575.12

3. Structure your home loan and bank accounts for maximum benefit

We mentioned earlier that only 7% of Australians use an offset account for their savings. Many mortgage holders are missing out on potentially massive savings. Here is how:

Let’s say you signed up to a 30-year loan and you are five years into your $600,00 mortgage when you start your 100% offset account. You could save $24,189.03 in interest and cut 10 months off the term of your loan.

Loan Amount – $600,000

Loan Term – 30 years

Interest Rate – 2.8%

Repayment Frequency – Fortnightly

Start Offset ay year – 5 years

Interest Saved – $24,189.03

Time Saved – 10 months 

Now that seems a lot to think about, but as you can see by making a few changes to your financial situation (with our help), you can potentially save yourself a lot of money.

The challenges we have faced over the last year left many of us asking ourselves how we can better prepare for an emergency and take control of our finances.

If you want to improve your finances this year, call us to book a time to discuss what potential solutions are available to suit you.