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The Meaning Behind Axton Finance

Posted on by Clinton Waters

A Strong Foundation for Your Mortgage Needs

At Axton Finance, we take pride in being your preferred mortgage broking professional. With over two decades of experience and more than 250 Google five-star reviews, we’ve built our reputation as one of the best mortgage brokers in Melbourne, based on a foundation of trust, expertise, and tailored solutions.

The Cornerstone of Your Financial Journey

The word “Axton” holds a special meaning for us.

When Clinton Waters established Axton Finance in 2014, his research in determining our name unearthed the significance of “Axton” as an old English word meaning the cornerstone of a building.

Just as a cornerstone is a crucial element in constructing any building, providing the stability and support that anchors the entire structure, we see ourselves as the cornerstone of your financial journey for your property purchasing and refinancing needs.

A Name Rooted in Strength and Protection

Another intriguing aspect of our name, Axton, lies in another possible old English origin. It’s also been defined as the combination of two Old English words: “eax,” meaning “axe” or “sword,” and “tun,” meaning “stone” or “settlement.” This combination gives “Axton” a profound and meaningful interpretation.

“Axton” can be seen as “sword stone” or “settlement with swords.” This name carries connotations of agility and resilience. Just as a well-forged sword offers protection and security, we, at Axton Finance, are dedicated to providing you with reliable and tailored mortgage advice that serves as the leading edge of your financial journey.

In the same way a sword is honed and sharpened to perfection, we carefully craft and fine-tune mortgage advice that suits your individual needs and circumstances. We understand that every client is different, and we are here to ensure that your mortgage options are presented to you that promotes your needs and not the banks!

Axton Finance isn’t just a name; it’s a reflection of our commitment to providing you with a solid foundation for your property dreams and offering you the reliable and trusted advice that you deserve.

Get in contact with us today on 03 9939 7576 or click our contact form to discuss your needs with us.

What self employed borrowers need to know

Posted on by Clinton Waters

When it comes to applying for a low or alt doc home loan in Australia, it’s important to understand what lenders are looking for. While these types of loans can be a great option for those who don’t have completed self-employed tax returns or traditional income, the application process can be more rigorous than for a standard home loan. However, with the right preparation and understanding of what lenders are looking for, you can increase your chances of being approved.

Firstly, it’s important to understand what a low or alt doc home loan is. These types of loans are designed for borrowers who may not have the traditional income documentation required for a standard home loan, such as payslips or tax returns. They may be self-employed, have irregular income streams, or have a poor credit history. As a result, low doc loans typically require less documentation and have more flexible lending criteria than standard loans.

However, this flexibility does come with some additional requirements from the lender. Here are some of the key factors that Australian banks and lenders will consider when assessing your low or alt doc home loan application:

    1. Income and assets
      While low doc loans don’t require the same level of income documentation as standard loans, lenders will still want to see evidence of your income and assets. This can include bank statements, tax returns, profit and loss statements, and any other documentation that shows your financial situation. Lenders will also consider any assets you have, such as property, shares, or savings, as this can help demonstrate your ability to repay the loan.
    2. Credit history
      Your credit history will also be taken into account when applying for a low doc loan. Lenders will look at your credit report to assess your creditworthiness, including any missed or late payments, defaults, or bankruptcies. While a poor credit history won’t necessarily rule you out of a low doc loan, it may affect the interest rate you’re offered.
    3. Loan-to-value ratio (LVR)
      The loan-to-value ratio (LVR) is the amount you want to borrow compared to the value of the property you’re purchasing. For low doc loans, lenders will typically require a lower LVR than for standard loans, as this helps mitigate the risk of lending to borrowers with less traditional income documentation. Most lenders will require an LVR of no more than 80%, which means you’ll need a deposit of at least 20%.
    4. Loan purpose
      Lenders will also consider the purpose of your loan when assessing your application. While low doc loans can be used for a range of purposes, such as purchasing a home, refinancing an existing loan, or investing in property, lenders may have different lending criteria depending on the purpose of the loan. For example, if you’re using the loan to purchase an investment property, you may need to provide evidence of rental income or projected rental income to show that the property is a viable investment.
    5. Security
      Finally, lenders will consider the security you’re offering for the loan. For low doc loans, the property you’re purchasing or refinancing will typically be used as security for the loan. Lenders will assess the value of the property and consider the location, condition, and any other factors that may affect its value. This helps ensure that the property is sufficient security for the loan, and that the lender can recover their money if you default on the loan.

Overall, applying for a low or alt doc home loan in Australia can be a more complex process than for a standard payg employee. However, by understanding what lenders are looking for, and ensuring you have all the necessary documentation, have a quality submission prepared by your broker and have evidence to support your application, you can increase your chances of being approved.

Speak to us today about your scenario and we will gladly tailor a solution that meets your exact needs.

Is Your Cheap Fixed Rate Mortgage Expiring?

Posted on by Clinton Waters

The pandemic saw a torrent of ultra-low fixed interest rates set up for Australian homeowners and investors alike. However, many of these fixed loans are set to expire, and borrowers will face a sharp increase in their interest rates, which has been dubbed somewhat ominously by the Australian media as the “mortgage cliff.”

The expiry of these fixed rates over the coming months and years could cause significant financial stress for borrowers who are unprepared for the sudden increase in their mortgage payments. In some cases, monthly mortgage payments could double, putting a significant strain on an already elevated household budget.

Thankfully, there are some sound options available for those with fixed rates to mitigate the impact of the so-called cliff!

  1. One of the most effective solutions is to pick up the phone and call your current lender to needle them to improve your rate. It is a well-known fact in the banking industry that it is cheaper to keep a current borrower than to seek out a new one so you might be surprised by what they may be able to offer you. Once you have done this you can compare the market yourself or use the services of a mortgage broker to assist you in comparing like-for-like options.
  2. Failing a decent response from your current bank or lender, you can seek to refinance your home loan. This is best done by a professional mortgage broker, who will be experienced in comparing like-for-like products, policies and structures. Since interest rates started to rise in 2022 lenders have slowly increased the assessment criteria that may result in you being unable to refinance your current loan based on the revised stress-tested rates even though you are making repayments at a higher rate today! Further compounding this complexity is the fact that borrowers with higher LVR’s (Loan to Valuation Ratios) may have experienced a reduction in the value of their property which can make refinancing uneconomical. An experienced broker will help you clearly navigate the benefits and costs early on before you commit to any decision.
  3. Switch your loan to interest only and/or extend the term. This really should be a last resort option because while your monthly repayments may drop considerably, the true long-term cost can add tens of thousands of dollars to the total cost over the life of your mortgage. Extreme caution needs to be applied when looking at this option and getting a professional broker in your corner to model out the effects is highly advisable.

By working with an experienced mortgage broker, like the team at AXTON Finance, we can help you understand the terms of your current loan, including any hidden fees or penalties that could impact the refinancing process.  Will will have a high degree of confidence that your decision will be an informed one that one helps you avoid any costly mistakes.

The mortgage cliff is a looming challenge for borrowers with expiring ultra-cheap fixed home and investment loans. However, there are some simple solutions available, such as refinancing, that can help mitigate the impact of rising interest rates.

How To Get Approved When Refinancing Your Home Loan

Posted on by Clinton Waters

With the rapid increase in interest rates in Australia and many people coming off ultra low interest rates there has been a cause for concern for many people looking to refinance their mortgages. With the onset of higher interest rates, lenders are substantially more cautious and selective when it comes to approving mortgage applications. We are even seeing many examples where people cannot refinance to a better rate because various lenders are applying higher assessment hurdles to a loan they are already servicing which is locking people into their home loans. However this may not need to be the case, there are a few clever but very simple ways to increase your chances of getting your refinance mortgage application approved. Here are some tips to help you get started:

  1. Review your credit score

    A higher credit score can increase your chances of getting approved for a mortgage, even if interest rates have risen. Review your credit report and make sure there are no errors that could negatively impact your score. If you have a lower score, consider working to improve it before applying for a mortgage. Being late on loan repayments, making too many credit applications, moving address regularly or having numerous consumer debts can all negatively affect your credit score.

  2. Demonstrate a stable income

    Lenders want to see that you have a stable income that can support your mortgage payments. This is especially important if interest rates have risen since you first took out your mortgage. Provide documentation of your income, including pay stubs, tax returns, and bank statements. Bonus income can also be used in many circumstances but policies vary considerably from lender to lender – best to speak to us about your option first.

  3. Reduce your debts

    Lenders look at your debt-to-income ratio, which is the amount of debt you have compared to your income. If you have a high debt-to-income ratio, it could be a red flag to lenders. Consider reducing your credit card limits or paying off some debts before applying for a mortgage. Reducing your credit card limit by just a few thousand dollars can have a fairly substantial effect on your loan. As of the time of publishing, most lenders want to see your debt-to-income ratio less than six times.

  4. Shop around for lenders

    Different lenders have different requirements and criteria for mortgage approvals. Shop around and compare rates and terms from multiple lenders to find the best fit for your financial situation. Of course the best way to do this is through the professional services offered by the team of experienced mortgage brokers at AXTON Finance.

  5. Be prepared to provide additional documentation

    Currently, banks and lenders are requesting additional documentation or information during the application process. Be prepared to provide this information in a timely manner to keep the process moving forward which will reduce the time it takes to ‘yes’ and for you to enjoy your lower rate.

  6. Extend your loan term

    This one can make your borrowing capacity higher but can make your mortgage ultimately a lot more expensive. So while you may be able to get a loan term of 35 or 40 years this can be very costly if you are already 10 years into a 30 year mortgage – tread with caution on this one but an experienced mortgage broker will be able to model out the pros and cons for you.

In summary, getting your refinance mortgage application approved despite rising interest rates requires some simple planning and preparation. With these tips in mind, you can increase your chances of getting approved for the refinance of your home or investment loan and secure a better interest rate.

Get in touch with one of the experienced team at AXTON Finance today to refinance to a better rate.

Call us today on 03 9939 7576 or book a quick obligation-free mortgage review online here.

What Are The Benefits Of Having Multiple Offset Accounts?

Posted on by Clinton Waters

When it comes to managing your home loan, one strategy that has gained popularity in recent years is the use of multiple offset accounts. While this approach may not be suitable for everyone, and not every lender offers this feature, it offers some significant benefits to homeowners who are looking to gain better control of their finances, pay off their mortgage faster and save money in the long run. In this article, we will explore the advantages of using a multiple offset account structure against your home loan.

First, let’s define what an offset account is. An offset account is a transaction account that is linked to your home loan. The balance in the account is used to offset the balance of your mortgage, reducing the interest charged on your loan. By reducing the amount of interest paid on your loan, you can save money and pay off your mortgage faster.

Now, let’s look at the benefits of using a multiple offset account structure:

Increased flexibility and control

With a multiple offset account structure, you can divide your mortgage into different portions and use an offset account for each portion. This allows you to have greater control over your finances, as you can allocate your money as you see fit. For example, you may choose to have one offset account for your regular living expenses and another for large purchases or investments. By having multiple accounts, you can better manage your cash flow and track your spending.

Maximising your offset benefits

The more money you have in your offset account, the greater the benefit to you in terms of reducing the interest charged on your mortgage. With multiple offset accounts, you can maximise this benefit by distributing your funds across different accounts. For example, if you have a lump sum of cash that you don’t need to use immediately, you can deposit it into an offset account to reduce the interest charged on your loan. By having multiple offset accounts, you can maximise the amount of money you save on interest.

Reducing your interest payments

One of the primary benefits of using an offset account is that it can significantly reduce the interest charged on your home loan. By having multiple offset accounts, you can reduce your interest payments even further. For example, if you have a large lump sum of cash that you don’t need to use immediately, you can deposit it into an offset account to reduce the amount of interest charged on your loan. By having multiple offset accounts, you can reduce your interest payments and pay off your mortgage faster.

Improving your financial security

By using a multiple offset account structure, you can improve your financial security. If you have a sudden expense or a change in circumstances, you can use the funds in your offset accounts to cover the costs. This can help you avoid having to take out a loan or use high-interest credit cards to cover the expense, which can be expensive and increase your debt. By having multiple offset accounts, you can have greater financial security and peace of mind.

In conclusion, using a multiple offset account structure against your home loan can offer significant benefits. By increasing your flexibility and control, maximising your offset benefits, reducing your interest payments, and improving your financial security, you can save money, pay off your mortgage faster, and have greater peace of mind. While this strategy may not be suitable for everyone, it is worth considering if you are looking for ways to better manage your finances and pay off your mortgage faster.

Contact the team today to discuss a tailored mortgage solution for your home loan today on 03 9939 7576 or book an obligation-free meeting online with one of our experienced Melbourne mortgage brokers.

 

Five Reasons To Refinance Your Home Loan

Posted on by Clinton Waters

With interest rates set to continue to increase in early 2023 it has been in the news everywhere that you should be looking at ways to save money in your daily budget and one of the biggest savings that can often be had will be looking at your current mortgage rate. While you should always call and haggle with your current lender we often see customers paralyse themselves with choice and end up comparing apples with cantaloupes which can end up with a borrower making a poor decision.

Take a look at these five reasons to refinance your home loan and reach out to us to discuss your options or book a free mortgage review meeting with one of our professional team online here – most meetings usually takes only 15 minutes to provide you with some tailored advice.

Five reasons to consider refinancing your home loan;

  1. Lower Interest Rates: Of course one of the main reasons to refinance your home loan is to take advantage of lower interest rates. If interest rates have dropped since you first obtained your mortgage, refinancing to a lower rate can result in significant savings on your monthly payments and overall interest paid on the loan.
  2. Cash Back Offers: Many banks and lenders in Australia are currently offering cash-back incentives for refinancing your mortgage. These cash back offers can be significant up to $5,000 and can provide a welcome injection that can be used to pay off high-interest debt, make home improvements or even to go on a well-deserved holiday. It’s important to check with different lenders to compare the cash-back offers and weigh them against the potential savings of refinancing.
  3. Consolidate Debt: Refinancing can also be used to consolidate high-interest debt such as credit card balances or personal loans. By rolling these debts into your mortgage, you can often lower your interest rate and simplify your monthly payments. There are some catches with doing this which can extend the total cost of your lending structure so it pays to get some professional advice before you do this.
  4. Switching to a Different Type of Loan: There are many different types of home loans available in Australia, such as fixed-rate, variable-rate, and interest-only mortgages. Refinancing allows you to switch to a different type of loan that may better suit your current financial situation or goals.
  5. Accessing Equity: Finally, refinancing can also be used to access the equity in your home. This can be done by either increasing the size of your mortgage or by taking out a separate home equity loan or line of credit. This can provide you with the funds you need for home renovations, investments, education fees, or other expenses.

It’s important to note that refinancing a home loan is a big decision and should not be taken lightly. It’s important to consider the costs associated with refinancing, such as application fees, legal fees, and lender’s mortgage insurance, and weigh them against the potential savings. It’s also important to shop around and compare rates, cash back offers and fees from different lenders before making a decision.

Why not book a time with one of the experienced team at AXTON Finance today – you have nothing to lose other than maybe years off your mortgage.

Book an online meeting here with one of our professional brokers.

How Does Bridging Finance Works?

Posted on by Clinton Waters

Bridging finance is a term often thrown around in client meetings but not many people really understand how this policy works. So lets start at the top and work our way down.

Imagine that you have seen your dream home come up for sale and you haven’t sold your current property yet or even considered selling it yet – then you might need bridging finance.

In its simplest definition, bridging finance is a type of loan that enables you to buy a property and settle it before you sell your current one. So you can buy before you sell!

Bridging finance enables you to fund the purchase price of a ‘to be purchased’ property, usually in its full entirety plus closing costs (ie stamp duty and legal costs) and allows you to keep your current property and sell it within a reasonably short time frame (less than six months ideally). The lender charges you interest on the bridging loan and adds it to the balance each month until you pay it down with the sale proceeds of your existing property (less any existing debts/costs).

Let’s look at a simple example. Say you own your current home worth $1.0m and you owe $500k to the bank already (a 50% LVR / Loan to Valuation Ratio), you haven’t sold it and you might not even have it on the market yet, and you want to buy an amazing new home that you have seen for $1.5m – you might need bridging finance.

The purchase price can be funded with a new loan of say $1.6m to say cover stamp duty. At peak, you will owe $500k (existing) plus the $1.6m so call it $2.1m owing. If you have any cash deposit you could use it to reduce the total loan size required.

This $2.1m loan does not usually need you to make monthly repayments on the bridging component (ie the $1.6m loan) but you do need to keep repayments up to date on your current home loan. Interest however does accrue daily on the bridging loan component and is added monthly to the balance. This can get pretty expensive if you are in a bridging position for too long.

Of course, the main pro of this structure is you might be able to buy a property before you sell and minimise the risk of having to move twice if you sell first and can’t find your next home before the settlement of your current home. Furthermore, lenders will give you a loan size (in the short term) much larger than what your income might otherwise support to hold both properties for a period of time.

So what are the cons – well to be honest there can be a few and this list is by no means totally exhaustive so lets go through them;

Market Risks

Without doubt, the biggest risk of using bridging finance is mainly around factoring in that you may not sell your current property in time or be forced into a situation that makes you accept a lower price than you might have otherwise been happy to accept. A falling market can be a risky place to be in a bridging finance position so being realistic in what you would sell for is an absolute must.

Costs

Like any mortgage interest is calculated daily and charged monthly. With a bridging loan is the same but a little different. You must keep repayments up to your existing loan balance (or a calculator whereby the lender works out what the approximate loan balance will be at the end of the bridging period). The bridging loan interest is still calculated daily (usually at a higher rate) and the interest is added to the loan balance each month and paid out with the sale proceeds at the end of the transaction.

Timing

Most lenders will want you to be in a bridging finance position for not more than six months and in some limited cases up to 12 months. But remember a bridging loan is usually a very large sum of money that you have borrowed and while you may not need to make monthly repayments the interest accruing could be adding up quite quickly.

The good news is that if you can negotiate a longer settlement on the property you have just purchased you might not need bridging finance for a very long time frame or at all. This is because bridging finance only kicks in from the settlement date of the purchase property. We can help inform you of what sort of solutions and purchase negotiations might work as an alternative to bridging finance that could help save you a lot of money and stress.

Market conditions

Bridging finance favour certain market conditions better than others. As a general rule, a declining property market could be risky if you are using bridging finance and you have purchased before you sell. If the sale of your property takes longer than you anticipated and you are unable to meet market conditions the sale price you might be able to secure as the weeks and months roll on could be accelerating down to your detriment. Conversely, in a rising market, the opposite can be true – you bought a nice new expensive home before prices take off and you are selling your old home in an environment that favours you as a vendor. There is a degree of luck to this so it might not be for the faint-hearted unless you go into a structure with your eyes completely open.

Deposit

So we have identified that bridging finance might be an option but you need a cash deposit to secure your new home on the auction day! This is often an overlooked consideration by many buyers – but doesn’t the bank just give it to you I hear you ask? Not quite – you need to have finance approved to release equity against your current property first to release the deposit required (if you don’t have sufficient cash) or utilise redraw or offset funds to pay the required deposit. Increasingly we are seeing vendors accepting deposits less than the standard ten per cent deposit with five per cent becoming more common especially to bring more bidders to an auction or to accommodate a buyer like yourself who may be interested in trading up to a new property using bridging finance.

There are also options outside of using a cash deposit that we can discuss with you like using a deposit bond (basically an insurance bond issued by a reputable insurance company), a bank guarantee (increasingly rare these days), as well as a few other options that we can discuss with you.

Servicing requirements

This is just mortgage jargon for ‘can you afford the loan’. Lenders have a myriad of metrics that they assess your capacity to meet repayments when interest rates rise. With bridging finance there are a few extra variables to consider which can stress your ability to ‘afford’ the end debt loan amount once you have sold your current property. These variables relate to lenders applying a discount of usually about 15% of the current valuation of your home to ensure that in a forced event you could actually sell and settle your property which would in this worst case result in a sale proceed being reduced and thus the ultimate loan you require increasing. Furthermore, the lender will add up to twelve months of interest on the bridging loan amount (in addition to the sale price discount) to ensure that the larger loan at the end of an extended period could be closed out and still be affordable. The lender of course will only charge you for interest that you used which is why it pays to minimise a bridging loan time frame. We can help you navigate the ins and outs of how lenders assess this risk and apply it to your personal scenario.

Complexity

Not all lenders in the Australian mortgage market are prepared to offer bridging finance and pretty much each lender who does has a different process and assessment policy on how they interpret your structure before they will approve you – lucky for you we are experts at navigating this on your behalf. Many lenders make it a requirement that you are an existing borrower of their institution before they are happy to extend a bridging finance product to you. Because the funding and legal documentation required to be in place for bridging finance is only usually for a short period of time (under six months usually and often just a few weeks) the interest rate charged on the bridging loan component is often not discounted and will likely be at a much higher amount than what your ‘end debt’ loan will be one you have sold your current home. While this might be fine to achieve the property purchase you want, the cost and stress of bridging finance could add up to be a very expensive solution without the right advice.

Please feel free to contact us on 03 9939 7576 and ask for Clint or one of the team to help you out. We a sure you will love speaking to an experienced person and not a call centre!

10 Ways To Get Your Finance Approved First Time

Posted on by Clinton Waters

Whether you’re refinancing or looking to purchase your first or third home, financing can be daunting. Even for the experienced, getting your finance approved can be a stressful process and with the effects COVID-19 creating extra scrutiny being prepared matters more than ever. To have your financed approved first time is the dream, one that can be made a reality with a little groundwork. With these ten tips, you’ll be well on your way to making that dream come true:

1. Assess your goals

Knowing how much to borrow from a lender is one of the most important pieces of knowledge you will require for this process. The goals you have in mind for the property you wish to purchase will have an impact on this. Know what you’re looking for in terms of a lifestyle and financial perspective. Marrying those together will help you buy for tomorrow.

Buying for tomorrow is distinctly important. Ask yourself; ‘Will this property be suitable for me in a year or two’? While the price-point may seem agreeable today, and it suits your current lifestyle, are either of those likely to change? It is much more expensive to trade up to something more appropriate further down the line than it is to get it right the first time.

Further, determine your own borrowing limit. Banks and Lenders maximum lending rates are stress-tested relative to interest rates. If or when interest rates increase, you could experience a great deal of mortgage stress by borrowing at the Lenders maximum rate. By using loan repayment calculator, you can look at what rates to expect to pay today, and at higher interest rates. This will allow you to know what loan size you need before speaking to Lenders.

2. Do you research

Knowing is half the battle, and with mortgages, it’s no different. Understanding what products are available, their features and the lingo will leave you informed before making a decision. While some features can seem alluring, such as offsets, you have to ask yourself: ‘does this benefit me’? ‘Is this offset worth higher rates, or extra fees’? Quite often the most basic mortgage products can be just as affordable and effective as more complex products.

Secondly, know the difference in the policies of lending institutions. Policy is one of the largest differences between lenders. By knowing what can and cannot be done, you can approach securing finance with a greater degree of confidence.

3. Speak to an experienced mortgage broker

There is a discernible difference between speaking with an experienced mortgage broker and direct with a lender. Lenders will only have one product and set of policies to offer. An experienced mortgage broker will have access to the broader market. With this access to the broader market, brokers will be able to identify a solution tailor-made to your scenario and needs. Experience matters.

With their exposure to the greater market, an experienced broker is invaluable. Their exposure equips them with the knowledge of lender products and policies. An experienced broker will talk you through policies and help you secure a product based on your needs. There are many brokers out there, some more experienced than others. As before, research matters, so research brokers. Look at their websites and reviews on Google. Even better still, ask for personal referral. They could prove a prime opportunity for a personal introduction to a quality broker.

4. Supporting information and documents

When it comes time to provide documentation and information, it pays to get it right the first time. Lenders will comb through your supporting documents seeking out inconsistencies between them and your customer fact find answers. Providing everything needed and answering the fact find honestly can and will avert many issues that may arise.

Banks and lenders have an obligation to report on the conduct of savings and mortgage accounts. There are many tools that lenders use to automatically read documents to determine your conduct as a customer. By keeping accounts paid up and to date, as well as not overdrawing, you will ensure your account is in good conduct. Conduct is very important factor in securing finance.

5. The Importance of savings

The importance of saving cannot be overstated. One of the first questions a bank or broker will ask is: ‘how much is your deposit’? This is because, as a very general rule, the larger your deposit, the easier it is to secure finance approval.

When looking at savings, lenders and banks are looking for what is termed ‘genuine savings’. Genuine savings are identified as funds that have stood in good stead for at least 3 months. Sudden windfalls will usually not all that favourable when securing finance. Genuine savings can also be recognised as shares or equity in other properties the customer owns or even rent currently paid.

Ideally, your deposit should be at least 20% of the value of the property you wish to acquire. This will allow you to avoid paying mortgage insurance. Mortgage insurance is a one-off fee, and in the name sounds fine, but it is of no benefit to the customer. This one-off fee, paid by the customer, only protects the lender and offers no insurance to your situation. While only a one-off fee, it can get quite expensive. The higher the loan amount, the more expensive the fee, relative to the Loan to Value Ratio (LVR). An LVR of 80% (loan is 80% of the price, deposit 20%) means no mortgage insurance is paid. An 82% LVR leaves mortgage insurance at a more reasonable level. Once in excess of 90%, the mortgage insurance premium becomes extremely costly. Talking to a broker about your current LVR and where you’d like it to be is an important step before making a finance application.

6. Don’t be late

More than ever, Lenders are looking for good conduct on your accounts. So it is imperative to avoid overdrawing your savings. The same goes for missing payments on mortgage loans or credit cards. When accounts are provided to lenders for assessment, their systems will usually automatically scan for tell-tale signs of poor conduct, such as late fees. This can affect your chances of securing finance.

Lenders will typically look back through the accounts provided across a period of six months. During the lead up to applying for a mortgage, it’d be best to keep all accounts ‘squeaky clean’. There can be issues that arise around credit defaults that may be listed, such as late payments on bills and utilities. Ideally, the defaults of this nature should be avoided. While it isn’t entirely detrimental, it can create unnecessary hurdles.

7. Do you really need it?

The advent of the ‘Pay-now, buy-later’ systems such as AfterPay and Zip Pay has created new hurdles in the process of securing finance. These systems, while technically not treated as credit, can still adversely impact the approval process. Lenders treat these systems as a form of conduct and affordability. They view this as conduct as by using this system, the customer has demonstrated they lacked the funds at the point of purchase. Ideally, it’ll be best to avoid have an AfterPay system, or equivalent, attached to your accounts.

8. It’s not all about the rate

While your gut reaction may be to ask ‘What’s the cheapest rate in the market’, you shouldn’t get hung up on the rate entirely. It’s an important question, but not all mortgage and loan accounts are structured the same. The rate you pay is influenced by several factors. How large the loan is, your LVR and credit history, features of the loan, funding models and more play into determining the rate you pay.

A more worthwhile question to ask is ‘can you identify the best products based on my scenario’? A good lender will ask you a series of detailed questions to determine your situation. From there they will be able to take you through and compare products that are ideal to your scenario. Products better suited to your scenario will ensure a greater chance of success in having your finance approved.

9. Be realistic

Due to increased compliance requirements, and the disruption caused by COVID-19 to bank processing systems, patience will be required. Pre-approval and overall approval of loans will likely take some time depending on which lender you use. It is important to be realistic about how long this may take. Pre-COVID, this process still took some time, with processing times between lenders varying from a few days to many weeks.

Same day approvals or ‘instant pre approvals’ should be taken with a grain of salt. These systems typically are computer generated and subject to the vetting of support documents. Quite regularly, there will be a disconnect between the questions you answer the assessment the lender applies to you. Applying for finance well before bidding for properties will be important.

10. Be realistic with your borrowing capacity

Your own assessment of repayments based on current interest rates is not what lenders look at. In their assessment, they look at interest rate increases in the future. They consider if the loan you are acquiring will still be suitable when interest rates rise in the future. They will also consider that some income is inconsistent, such as commissions or overtime. Subsequently, lenders will shade a component of this payment to around 60% to 80%. Rental income may also not be accepted in fullness, and may only be accepted at around 70%.

The living expenses banks apply to you may differ from your estimates. Banks apply a Living Expense Ratio lower than your actual expense ratio. Therefore, it is important to have a realistic assessment of your expense before doing a Customer Fact Find or finance application. Lenders will digitally assess savings accounts statements to apply a sense check to compare your estimate to theirs. This is another important consideration when applying for financial approval.

Finally, have contingencies in place for lenders and your income. Consider which lenders would be second or third choice if your ideal one doesn’t work out. Consider what will happen if your income is disrupted or reduced in a meaningful way. It isn’t wise to put every spare cent available to mortgage repayments. Nor is it wise to secure finance approval and not have emergency buffer funds available. It is also highly recommended to look into insuring the asset you are in the process of acquiring. Information and advice should be gathered from a licensed financial planner regarding this. They can provide valuable advice around income and risk insurance regarding life, trauma and Total Permanent Disability (TPD).

Securing approval for finance from a lender has many moving parts. With the right guidance and research, you’ll be ready to secure the approval tailored to your scenario. With that, you’ll be well on your way to refinancing and securing a better rate or securing an approval to allow you to bid competitively at that next action. 

Good luck in your ventures, and if you have any further questions, do not hesitate to reach out to our team of experts, we’ll always be happy to assist you with securing the best structure possible!

The team at Axton Finance                

Ph: (03) 9939 7576

Alternatively see our availability and book an obligation free Zoom meeting here.

Finance Tips For Aussie Expats

Posted on by Clinton Waters

So you are an Australian citizen or an Australian permanent resident (PR Visa holder) living and working overseas and looking at buying or refinancing a property back here in Australia?

We look after lots of time poor Aussies needing help with tailored expat and non resident lending needs from our panel of over 30 major banks and lenders.

The following key questions provides a high-level summary of the available policies generally applied by the major Australian banks and lenders who offer mortgages to Australian expats and non resident with permanent residency status.

What is the maximum LVR that an Australian Expat can get?

The Maximum loan to valuation (LVR) ratio is generally 70% or 80% of a property’s value (some lenders may allow higher up to 90 or even 95% but there are caveats to this which are usually higher rates and mortgage insurance being applied).

How much foreign income can I use?

Your overseas income is usually shaded by 20% for currency risk purposes before converting to Australian dollars ($AUD). The resultant figure is then hypothetically ‘taxed’ at Australian tax rates to determine what net income (after tax income is available to support your loan). This is applied because Australian lenders are generally not resourced to deal with understanding every countries different tax systems.

What if I earn tax-free income in the UAE? 

If you earn tax-free income in the United Arab Emirates (UAE) or similar tax jurisdictions – you may be in luck then. In many circumstances, we have a handful of lenders who will not apply hypothetical Australian tax rates to your expat tax free income in places like Dubai and Abu Dhabi. This will usually result in you being able to secure a larger loan size than what most Australian banks would otherwise approve.

Can I use bonus income as an expat? 

This depends heavily on which lender is being proposed and how often the bonus income is paid. It can be difficult to use for servicing purposes when it comes to expat and non-resident lending.

How much income do I need to secure an expat loan approval? 

Because of the rules above that most lenders apply, your taxable income generally needs to exceed $250,000 AUD PA equivalent. Shading due to currency risk and different tax assessment rules can significantly reduce your borrowing capacity as an expat.  If your income is less than this it is often very difficult for us to meet current expat lending rules even for modest loan sizes.

What currency do I need to earn to be eligible for an Australian expat home loan?

Most lenders require that your income is earned in primary currencies like;

  • United States Dollars (USD)
  • Pound Sterling (GBP)
  • European Euros (EURO)
  • Singapore Dollars (SGD)
  • Hong Kong Dollars (HKD)
  • Japanese Yen (JPY)

A smaller list of lenders still accepts other countries depending on individual lender policies and includes but are not limited to;

  • Indian Rupee (INR)
  • Indonesian Rupiah (IDR)
  • Vietnamese Dong (VND)
  • Chinese Yuan (CNY) / Renminbi (RMB)
  • Emirati Dirhams (AED)

What if my payslips and other supporting information are in a foreign language?

If your support documents are not in English they must be translated into by an accredited translator (most Australian lenders accept NAATI as a standard translation service).

What if I don’t have Australian Citizenship or PR Visa status – can you help me?

Unfortunately if you do not hold Australian citizenship, PR residency or New Zealand citizenship we are currently unable to assist you based on our available lending policies.

I am a self-employed expat – can I secure loan approval? 

Being self-employed has many benefits but borrowing money as a self-employed expat can greatly reduce the number of lenders who may be able to support your plans. While not impossible we may be able to assist you especially if your tax returns are up to date and are published in English.

I want to know more about expat mortgages – how do we meet?

Want to get some tailored mortgage advice from someone who knows what they are talking about then feel free to book a time here for a quick 15 minute chat or jump onto the chat box on our website now (it will confirm if one of our brokers are online for a chat).

Book your 15 minute online chat here!

Of course, you can also call us in the office on +61 3 9939 7576 for a chat during normal business hours. If we miss your call leave a message and one of our team will usually get back to you within one or two business hours.