How well do you know your finance jargon? Take our quiz!

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The finance industry has a bunch of acronyms and abbreviations that can make the home buying process a little confusing. But they’re not as difficult to understand as you might think. Take our short quiz to see how many you can answer!

Below we’ve listed eight commonly used acronyms and abbreviations in the mortgage and finance industry.

So grab a pen and some paper and test out that noggin of yours!

Quiz time

We’ll give you one point for each acronym you can identify, and an extra point if you know what it means.

1. LVR

2. LMI

3. FHB

4. FHLDS

5. Low Doc

6. DTI

7. ADI

8. FHOG

Once you’ve written down your responses, scroll down for the answers below.

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1. LVR: Loan to Value Ratio

LVR is the percentage of the property’s value, as assessed by the lender, that your loan equates to.

For example, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is worth 80% of the property value, making your LVR 80%.

2. LMI: Lenders Mortgage Insurance

LMI is insurance that protects the bank or lender in case you can’t pay your residential mortgage.

It’s usually paid by borrowers with an LVR higher than 80% – that is, borrowers with a deposit of less than 20%.

3. FHB: First Home Buyer

This one is pretty self-explanatory. Basically, a FHB is someone who has never purchased property before but is in the process of doing so.

Being a FHB allows you to take advantage of a number of federal and state government schemes and incentives, which we’ll cover below.

4. FHLDS: First Home Loan Deposit Scheme

The FHLDS is a federal government scheme that allows eligible FHBs with a 5% deposit (aka 95% LVR) to purchase a property without paying for LMI.

This can save FHBs thousands of dollars (sometimes even tens of thousands!) and help them enter the property market sooner.

5. Low Doc: Low Documentation home loan

Low doc home loans are often used by self-employed borrowers who find it difficult to provide conventional proof of income. That’s because many self-employed people try to minimise their taxable income to pay less tax, but this creates problems when they try to borrow.

Fortunately, low doc loans don’t require the same level of “documentation” as normal loans and are specifically designed for self-employed people who are capable of servicing a loan.

6. DTI: Debt-to-Income ratio

Your DTI is used by lenders to determine if you can afford to take on any more debt. Basically, it compares your total debt to your gross income.

The formula is: Total Debt / Gross Income = Debt to Income ratio

So if you have a $500,000 home loan (and no other debt), and $160,000 in gross household income, your DTI is 3.125.

7. ADI: Authorised Deposit-taking Institution

ADIs are financial institutions that are licensed by the Australian Prudential Regulatory Authority (APRA) to carry on banking business, including accepting deposits from the public.

They are generally banks, building societies and credit unions.

8. FHOG: First Home Owners Grant

FHOG are generally state government-run grants available to eligible first home buyers to help them get a leg up into the property market.

Typically, they’re in the vicinity of $10,000 to $20,000, and in many states they’re available alongside stamp duty exemptions and federal government initiatives, such as the $25,000 Homebuilder Grant.

How’d you score?

If you scored 1-4: Hey, no worries! We all started out with this score. And to be honest, we enjoy nothing more than helping people embark on their property buying journey.

If you scored 5-8: Have we met before? I’m sure we have. You seem pretty well-versed in the world of property and finance. We should have a chat again soon to discuss your next steps on the property ladder.

If you scored 9-12: You likely either work in the finance industry, are a savvy property investor, or we’ve taught you well! Long story short: you know your stuff!

If you scored 13-16: Ok, so you either work for us, are married to one of us, or you’re one of our competitors sussing us out! If you scored in this range, take a bow!

Last but not least!

If you ever want to clarify anything with us – whether that be acronyms, abbreviations or any other finance topic – then please don’t hesitate to ‘DM’ us (see, we’re down with all kinds of lingo around here!).

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Proving genuine savings for your home loan deposit

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Saving a home loan deposit can be challenging enough.     Then, lenders often will put another hurdle in your way by asking for proof of ‘genuine savings’. Here’s all you need to know about clearing that obstacle.

Lenders use the term ‘genuine savings’ to describe any funds you’ve saved over a period of time.

Basically, it’s their way of confirming that you’re in this for the long haul – that you’re committed to being financially responsible with your money.

Usually Lenders require you to demonstrate that you have 5% genuine savings when you are borrowing more than 80% of the property valuation.

What many home buyers don’t realise though is that there are several different ways you can verify that your savings are genuine.

Here are some types of savings lenders may consider genuine savings

– Regular deposits into a savings account over 6 months
– Term deposit savings accounts held for at least 3 months
– Shares or managed funds held for at least 3 months
– Rental history evidenced by tenant ledger for the past 6 months
– Salary sacrificing through the First Home Super Saver scheme
– Additional repayments into a car loan or personal loan
– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (i.e. not borrowed from somewhere else)

Keep in mind that different lenders will have different policies around what they will and won’t accept as genuine savings.

What doesn’t count as genuine savings?

Here are some examples of funds that won’t count as genuine savings with the banks:

– Gift from parents or family
– First Home Owner’s Grant (FHOG)
– Borrowed funds (for example money taken from a personal loan)
– Selling assets (for example selling a car or furniture to raise cash)
– Tax refund
– Inheritance

A few final pointers

Keep in mind that some banks may consider using the FHOG towards your overall deposit amount in some circumstances.

Likewise, there are situations where a gift from a family member could be large enough to avoid the need to prove genuine savings at all.

The key to improving your chances of getting your home loan approved is to structure your genuine savings history so that it appeals to the right lender.

There’s never been a better time to buy property so let us help you get into your home sooner.    Just talk to us.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

More carrot, less stick: how positive credit reporting can help your credit score

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Many people only pay their bills on time to avoid being slugged with late fees and a bad credit rating. But changes to credit reporting means that you can now be rewarded for timely repayments.

From 2019, ANZ, NAB, Westpac and CBA have been subjected to mandatory comprehensive credit reporting (CCR).

CCR has been seen as a more “positive” reporting system than the “negative” credit reporting system that has previously been in place.

The result is an environment that is likely to support more responsible lending, competitive interest rates and financial products, and less unmanageable debt for all Australians.

Hold up. What exactly is comprehensive credit reporting ?

CCR will see the banks provide additional data to credit reporting bodies such as Experian, Illion and Equifax.  Under a comprehensive credit reporting system positive data is able to

be included on credit reports.

The data that they’re now required to supply to these agencies include:

– The type of loan or credit account.

– When it was opened or closed.

– The credit limit.

– When payments were made on time.

– And when payments were made more than 15 days late (not to mention the ones that are made 45 days late!).

So how does this help my situation?

In years gone by, the credit reporting bodies only heard about you when you had messed up.

Basically, this meant that banks, credit unions and lenders could only really assess your borrowing capacity on the negative aspects of your credit history. This included late payments or defaults.

However, now that CCR has been adopted by the major banks, your positive credit history, such as timely repayments, will be reported too.

This now gives your credit score the chance to go up – not just down.

Here’s the real kicker though

Three in five Australians are unaware their credit score may already have changed since banks started sharing positive customer data, so just by knowing the above information you’re already more informed than 60% of the population according to research by credit reporting agency Experian.

But the best bit is: positive credit reporting can help you obtain a loan for a home or business.

“From our experience in the 19 other countries where we operate credit bureaus, positive data sharing is a much fairer system and provides consumers with better credit opportunities,” says Experian Australia’s Poli Konstantinidis.

“It doesn’t just help those with strong credit scores, it also means those without a long credit history, young first home buyers for example, can build one quicker than before.”

So what can I do to improve my score?

Well, that’s simple. Make sure you’re paying all your bills on time!

  • Pay your credit cards and loans on time as lenders may consider this when deciding whether or not to approve your credit application.
  • Make sure you’re regularly checking your credit score – You can get a free credit report once a year from one of three national credit reporting bodies (CRB’s). You can find out how on this government website.
  • Avoid multiple late payments – one late payment may result in a drastic drop in your credit score, but consecutive late payments or significantly late payments are the most damaging to your credit rating and could impede your ability to get credit in the future.
  • CCR only shows your credit limit, not your actual amount owing so lenders will view this limit as your total amount of liability. Reducing this liability by doing things like closing any unnecessary and unused credit facilities/accounts, could increase your credit score.

If you want help with getting finance ready –  just talk to us.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Is it the right time to switch lenders?

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One in 10 consumers have switched credit products in the past year, according to new research, with Millennials and women in particular pouncing on offers from small banks, credit unions and building societies.

The financial landscape is shifting.

Over the past 12 months, 10% of consumers have switched credit providers, according to the Australian Consumer Credit Pulse 2019 report from Equifax, as once-loyal customers increasingly check out what lenders outside the Big Four banks have to offer.

Is now a good time to consider a switch?

With the RBA recently delivering back-to-back rate cuts, there’s no shortage of borrowers who are considering following suit and switching things up.

In fact, a further 11% of consumers intend to apply for credit in the next three months, says Equifax, and of these, half are looking to switch providers when they make their application.

James Forbes, General Manager, Marketing Services at Equifax, says that over the past 12 months the Big Four banks have ceased to be the first preference for many consumers who are switching credit products.

“Instead, they’re increasingly choosing small banks, credit unions, building societies and other lenders,” Forbes says.

So what credit products are people switching?

Home loans and credit cards. They’re the big two.

Of the one in 10 people who made the switch over the past year, a quarter moved their home loans and nearly half moved their credit cards.

Home loans are also a popular product among the 11% of consumers intending to apply for credit in the coming months, making up half of the intended applications.

Who’s switching things up?

According to the report, the younger you are, the more likely you are to switch lenders.

In fact, out of all consumers who switched credit products in the past year, 43% were aged 18-34, and 32% were aged 35-50.

Women are also more likely to switch three or more of their credit products, while men are likely to switch just one or two.

What’s driving the behaviour?

Unsurprisingly, lower costs – including interest rates and fees – were the major consideration for switching across all credit product types, Equifax says.

However, consumers also cite better customer service and brand reputation as important considerations.

“In the wake of the Royal Commission, consumers are increasingly thinking about more than just cost when applying for credit,” says Forbes.

Keen to know more?

With the lowest home loan rates in more than 30 years, if you haven’t looked into your refinancing options lately, now is the time to consider doing so.

Whether you’re a first home buyer,  down sizer,  self employed,  expat living overseas,  young professional with limited deposit,  we’ve got a home loan to suit you.

Just call us

 

 

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

APRA suggests banks relax key lending criteria

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Here’s a bit of good news:  you may be able to borrow more to buy your dream home after new APRA guideline changes. 

 

Recently the Australian Prudential Regulation Authority (APRA)  sent a  letter to the major Australian Banks. This letter advised the Banks to remove their guidelines that propose borrowers be assessed by their  ability to make repayments using an interest rate of  7.25% p.a.  Instead, now the APRA is now encouraging Banks to use an interest rate buffer of 2.50%p.a. .

What do the new guidelines change?

CoreLogic researcher Cameron Kusher examines  the impact of the new changes . He  states  “If someone is looking to borrow at an interest rate 3.90%, the borrower would previously have been assessed  at a rate of  7.25%p.a.  Now they would be assessed on their ability to repay at a lower 6.40%p.a. (3.90% + 2.50% buffer)” He said.

Kusher added that the proposed APRA changes are further in response to declining interests rates.  “It has become  more difficult to get a mortgage, that is partly because of this assessment,” he said.

Why the rate change?

APRA chair Wayne Byres said the operating environment for  Australian Deposit taking Institutions (ADIs)  had evolved since 2014, prompting APRA to review the current guidance.

“APRA introduced these  guidelines  to reinforce sound residential lending standards at a time of heightened risk,” said Mr Byres.

However, Mr Byres said with  low interest  rates, the gap between the 7% floor and actual rates paid has become quite wide, sometimes , “unnecessarily so”.

What does this mean for you?

Mr Byres said the changes are likely to increase the maximum borrowing capacity for a given borrower.

However, he warned  that these changes  do not  signify any lessening importance the APRA places on  lending standards.

“These changes will provide ADIs with greater flexibility, while  maintaining  prudence through the application  process ” Mr Byres said.

What next?

A four-week consultation will close on  June 18th, ahead of APRA releasing a final version of the updated guidance.

CoreLogic’s Kusher said the changes will allow some borrowers who can’t quite access a mortgage currently to get one.  “Overall for the housing market, it will mean more people are able to get a mortgage” Kusher said.

 

If you’d like to find out  how these changes may help you,  give us a call.    We’d love to help !

 

Learn how new government schemes can support first home buyers

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Did you know that it can  take up to seven years for the average household to save a 20% deposit for their first home loan  ? However, a new scheme promises to drastically reduce that time by dropping the required deposit to just 5%.

The Coalition government has recently announced a plan to let first home buyers borrow up to 95% of the value of a property and still avoid paying lenders mortgage insurance (LMI).

Now, the First Home Loan Deposit Scheme “isn’t free money”, but it does means fewer young Australians will need to ask the “bank of mum and dad” for cash upfront.

Labor has now matched the proposal, meaning it should go ahead no matter who wins government this election.

Why is this a big deal?

As it stands, it is possible to get a home loan with just a 5% deposit.

But people with a deposit of less than 20% usually have to pay LMI, which can be a pretty big deterrent if you’re wanting to purchase your first property.

Basically, LMI is the insurance that reimburses a lender if a property is repossessed and sold for less than its outstanding mortgage debt.

The insurance is designed to cover the lender, but the premium is paid by the borrower.

Under the new scheme, the government would guarantee the additional amount needed to reach the 20% threshold, which would save borrowers thousands of dollars in LMI.

How much could I save?

Let’s say you want to purchase a $400,000 home to get your foot in the property market.

Currently, if you have saved up $62,000 for the deposit and fees, you’ll have around a 15% deposit. In that case, you’ll pay about $3,500 in LMI.

If you have pulled together a 10% deposit ($42,000 in savings), you’ll be up for $6,500 in LMI.

And if you’ve only put away a 5% deposit ($22,000 in savings), you’ll face $12,500 in LMI.

As you can see, that’s quite a lot of money you’ll be able to save in LMI under the new scheme.

The key features of the government’s policy:

We’ve gone through the government’s policy and pulled out some of the key bits we think you should know . They are as follows:

– The scheme will start on 1 January 2020.

– To be eligible first home buyers can not  have earned more than $125,000 in the previous financial year, or $200,000 for couples.

– The scheme will be limited to 10,000 first home buyer loans each year.

– The lender will still have to undertake the full normal credit check process .

– If the borrower refinances, or the loan comes to an end, the Commonwealth support will terminate.

– First home buyers will be able to use the scheme in conjunction with other relevant State  first home buyer grants and duty concessions.

Other factors to consider

Keep in mind that having a 5% deposit, rather than a 20% deposit, means that the monthly repayments on your home loan will be larger.

You’ll also likely pay tens of thousands more dollars in interest over the life of a 20-30 year home loan.

That said, this scheme will enable many young Australians to start growing their property portfolio years earlier than they otherwise could have.

And for most people, it will also mean they can save a few years paying rent.

For example, if you’re paying $400 a week in rent, that’s $62,000 over three years that could have gone towards the mortgage on your first property instead.

 

Final word

As we’ve alluded to, lenders will still be required to go through all the checks  to ensure a first home buyers are  genuinely able to afford their home loan mortgage.

We’d love to provide you with some helpful tips to ensure that when lenders look through your accounts  your prepared. If you want help getting into the property market,  please do not hesitate to get in touch.

Five common reasons home loan applications are rejected

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Whether it’s unrequited love, or an unsuccessful home loan application, getting your heart broken is never easy. Here are five common reasons home loan applications are rejected.

Due to the banking royal commission, lenders are cracking down on home loan applications.

Applications that would have been approved in a just few days last year are now being put under the microscope for much longer periods.

To help you in your quest to secure an approval, here are five common reasons a lender may reject your loan application.

1. No proof of genuine savings

Lenders use the term ‘genuine savings’ to describe funds you’ve saved over a period of time.

Basically, if you can’t prove to them that you can knuckle down and save for a home loan, they’re going to baulk when it comes to believing that you can pay one off.

Here are seven ways to prove ‘genuine savings’.

– Regular deposits into a savings account over 6 months.

– Term deposit savings accounts held for at least 3 months.

– Shares or managed funds held for at least 3 months.

– Rental history for the past 6 months.

– Salary sacrificing through the First Home Super Saver scheme.

– Additional repayments into a car loan or personal loan.

– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (ie. not borrowed from somewhere else).

2. You spend like a drunken sailor

Lenders not only want to see you save money. They also want you to demonstrate that you can exercise discipline when it comes to your spending habits.

Therefore lenders will trawl through your spending accounts hunting for any big-ticket items that are out of the ordinary.

This might include a $400 ATM withdrawal at a casino, or a $100 purchase at a baby store if your application says you don’t have children.

3. Your credit history ain’t so hot

Since Comprehensive Credit Reporting was introduced in July, lenders have been sharing a lot more of your credit history.

You can get a free credit report once a year from one of three national credit reporting bodies, which are listed on this government website.

If you find errors in your report, you can get them corrected. You can also take steps to improve a ‘poor’ rating by clocking up a period of consistency and reliability.

4. You don’t have a big enough deposit

Lenders like to see that you’ve saved a deposit of at least 10% to 20% before applying for a home loan.

But all too often people forget to factor in additional funds for other expenses such as stamp duty, lender’s mortgage insurance and removalist costs.

That means, for example, if you have saved $70,000 for a $700,000 loan, you might want to keep saving for a little while longer before you apply for a loan to factor in those other expenses.

5. Your employment situation

Even if you tick all of the boxes above, lenders may also reject your loan application if you haven’t been in your job long enough. And if you’re unemployed, they can’t approve it full stop.

Those who are self-employed are also running into headwinds. Lenders are becoming increasingly hesitant to approve loans unless a steady and reliable income stream can be proven. That said, there are lenders who are more flexible when it comes to self-employed workers, and we can help guide you towards them.

How we can help

We help people who are seeking a home loan overcome all of the above hurdles on a daily basis.

So if you or someone you know has recently had a home loan rejected, or you simply want to nail it the first time, get in touch.

We’d love to help you navigate the tighter lending standards to make your dream of home ownership a reality.    Just call us.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Home loans: to lock in the rate or not?

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With some of the major lenders recently lifting interest rates on variable home loans, we’ve had a number of enquiries this week as to whether now is a good time to lock in an interest rate.

As predicted, Westpac’s recent decision to increase variable home loan rates was soon followed by Commbank and ANZ.

NAB was the only Big 4 bank not to hike up rates, citing a need to “rebuild trust” with customers.

Yet with the bulk of the market moving variable rates up, many are asking: is now a good time to lock in an interest rate?

Well, like everything in life, the answer depends on your personal situation.

Fixing the rate

A fixed home loan has an interest rate that’s fixed at the time the loan was taken out and won’t change for a set period – usually one, three or five years.

Having a fixed home loan means that rate rises won’t affect you.

Selecting a fixed home loan can give you a sense of clarity and certainty, and as such, will help you budget and plan ahead.

So, while others are grumbling about rising interest rates, you can be content knowing you won’t be affected. That said, future interest rates rises are never a foregone conclusion.

You might prefer a fixed home loan rate if you:

– Believe interest rates will rise in the future

– Are comfortable with the interest rate you are committing to pay

– Prefer to be able to accurately plan your finances in the short and mid-term

– Are concerned that you would be unable to make your repayments if rates were to rise.

Variable home loan rate

A variable home loan has an interest rate that changes. Instead of staying at a certain fixed level, the rate will move according to market interest rates.

As a result, your repayments will either rise, fall, or fluctuate over the term of your loan. This means that sometimes you’ll pay more than a fixed loan, while other times you’ll pay less.

Variable loans can come with advantages linked to their flexibility.

For example, it can be cheaper and easier to switch loans if you find a better deal elsewhere than it would be if you had a fixed loan.

Often you’ll also be able to make extra repayments on your loan at no additional cost, which can help you pay off your loan more quickly.

You might prefer a variable home loan rate if you:

– Suspect interest rates will stay put or fall over time

– Are unsure about interest rate movements and would prefer to go with market rates

– Are confident you could manage a rate rise

– Don’t mind having some unpredictability in your financial planning.

Still on the fence?

Discussing your individual circumstances and financial goals can help you decide whether a fixed or variable loan is right for you.

With so much at stake it can be difficult to decide on the best option.  The solution?  Come and have a chat with us.

We’d love to help

 

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Get your ducks in a row: how to make a timely deposit

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So you’ve finally found the property of your dreams and you can’t stand the thought of someone else moving in? Don’t let a payment oversight get in the way.

One of the most common questions we get asked is when and how to make the deposits on a new property.

And for good reason.

If it’s your first time, you’re probably nervous about locking down that property, so you don’t want a payment mishap getting in the way.

The process varies slightly from state-to-state and in private sales vs auctions, but below we’ll step you through the general process.

Payment one: a holding deposit

You’ve scrimped, you’ve scraped, and you’ve finally saved enough to buy a home. Great! Now you’ve got to work out to who, and when, the deposit is paid.

In private sales, once you’ve made a verbal offer on a property that’s been verbally accepted, the real estate agent may ask you to pay a holding deposit to show you’re committed to your word.

This figure can be between a few hundred dollars to around 1% of the purchase price. It is not an additional cost – it’s simply an advance.

Beware, however, that this holding deposit doesn’t lock down the home. It confirms your intent but another player can still come along and enter the game.

A holding deposit is also not compulsory. So if the seller asks, and you don’t feel inclined, you don’t have to cough up the dough.

If your offer is accepted and contracts are drawn up, the holding deposit is considered part of the full deposit that you’re required to pay.

Be sure to get a written receipt from the real estate agent which states they will refund the money to you if the seller decides to accept another offer – which can, and does, happen.

Private sale deposit

Now it’s time to move onto the full deposit.

In a private sale, once the contracts are signed and exchanged, you generally must pay the seller’s real estate agent a 10% deposit, unless the contract has specified a different amount (which can be around 5%).

The agent then generally keeps the deposit in a trust account until the settlement.

Now, these contracts can take a few days to exchange and sign off, which gives you time to organise how to pay the deposit with the seller’s real estate agent.

During this time, speak with them to arrange a payment method that best suits you both. Options generally include a personal cheque, counter cheque, electronic funds transfer or deposit bond.

Auction deposit

Boom. The hammer comes down and the property’s yours. Well, ok, not just yet.

If you’ve put your hand up for the winning bid, it’s usually expected that you pay a 10% deposit on the day of the auction (once again, it can be as low as 5%).

But hang on, banks are usually closed on the weekends. So how are you going to stump up the cash?

This is where it’s important to plan ahead, and where we can help make sure it all runs smoothly.

Options include writing a personal cheque on the auction day. Or getting a counter cheque from a branch before the weekend auction. Deposit bonds are also an option.

Regardless, it’s always important to check before the auction as to what options are available for paying the deposit.

But what about the deposit on my loan?

The deposit you pay the seller’s agent will count towards your finance application deposit.

For example, say you’ve told the lender you’ll be making a $50,000 home-loan deposit.

Then, when the contracts are exchanged, the seller’s agent only asks for a $25,000 deposit.

The good news is you’ve paid half. The bad news is the lender still requires the remaining $25,000 of the deposit.

Final word

So that’s the general timeline for when it comes to paying deposits on a home.

On a related note, it’s very important to ensure your finance has been pre-approved nice and early before the auction.

And as you know, that’s our bread and butter.

We can help you obtain a home loan with a great interest rate, with fees and features that best suit your personal circumstances and budget.

If you’d like to find out more, get in touch with us today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

 

Location is crucial when buying investment property

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The first thing most of us look at when selecting an investment property is its location. If the property itself isn’t quite right, you can always renovate, but it’s not as easy to move a house to a better location. That’s why you should consider the location carefully. Here are some of the most important things to look for.

Love thy neighbour

Before you buy, familiarise yourself with the local community. If possible, visit the neighbourhood during both day and night to get a feel for whether it’s a safe place to live. Are there kids playing outside or security bars on the windows? Are there trampolines in the front yards or the remnants of last night’s party? This will help you determine whether the location is suitable for the type of tenants you want. After all, if you’re looking in an area that attracts university students but you would prefer to rent to a quiet couple, then perhaps this location isn’t right for you.

Future plans

The neighbourhood might look suitable now, but things can change. It’s a good idea to investigate any future plans that could affect the value of your property. For example, the local council should be able to tell you if a freeway or large-scale construction is planned. Major works could increase or decrease your property’s value depending on where they’re situated.

Access to infrastructure

To increase your potential rental income, try to buy near desirable infrastructure and facilities. For example, families often pay a premium to live in the catchment area of a quality public school, so it’s worth checking the educational zoning.

Access to shops, public transport and the beach are also attractive features for both tenants and prospective future buyers. And while it’s handy to be near the airport, if you’re located right under the flight path it might impact the amount of rental income you receive.

Bargain pockets

Finding a bargain pocket in a good suburb could increase your capital growth potential. By looking at demographic data, such as that collected during the Census, you may be able to spot trends. Perhaps the neighbourhood has recently been gentrified by young professional couples who are increasing the average income of the area, which is likely to increase the value of the property over time. Bargain pockets may also be found in close proximity to high-growth areas that will benefit your investment in the long term.

By considering the location, not just the address, you can increase your chance of maximising your rental and capital growth potential.   Searching for an investment property can be a rewarding experience however if you really want to maximise your investment opportunity you should engage a Buyers Agent who are specialists.   At MortgageDirect we work closely with Buyers Agents and can recommend someone for your specific needs.