1300 706 540
Free Consultation
X

Category: Home Loans

How a Guarantor Can Help You Buy Your First Home

Posted on by Rix Almonicar

Buying your first home can feel like a distant dream, especially with rising property prices, high-interest rates, and increasing living costs. However, one way to make that dream a reality is by using a guarantor for your mortgage. A guarantor, often a parent or close family member, can help you access the property market sooner and potentially reduce some of the costs associated with buying a home. But what does this mean for you, and how does it work?

What is a Guarantor Mortgage?

A guarantor mortgage allows you to use another person’s property as additional security for your home loan. This doesn’t mean they’re buying the home for you or making your payments; instead, they’re offering part of their property as security to help you avoid Lender’s Mortgage Insurance (LMI) and possibly secure a lower interest rate. Essentially, it can help you get into your new home sooner and with less upfront cash.

How Can a Guarantor Help You?

There are several ways a guarantor can assist you in purchasing your first home:

  1. Avoiding LMI Costs: LMI is an insurance premium you might need to pay if your deposit is less than 20% of the property’s value. By having a guarantor, you can potentially avoid this cost altogether, making your home purchase more affordable.
  2. Lowering Interest Rates: With the additional security provided by a guarantor, lenders may offer you better interest rates. Lower rates mean lower monthly repayments, saving you money over the life of the loan.
  3. Increasing Your Borrowing Power: A guarantor can also help increase the amount you’re eligible to borrow. This could be particularly useful in a competitive market where you need extra funds to secure your desired property.

How Does a Guarantor Mortgage Work?

A guarantor mortgage can be structured in several ways, depending on the lender and your specific situation:

  1. Partial Guarantee: Your guarantor provides security for a portion of the loan, typically around 20%. This helps you reach the necessary deposit threshold and avoids LMI without making your guarantor liable for the entire mortgage amount.
  2. Full Guarantee: In some cases, the guarantor might cover the entire amount above what you can provide as a deposit. This can be particularly helpful if you have little savings but have good income and a guarantor willing and able to help. However, this option can increase their financial risk, so it’s important to discuss this carefully.

Is a Guarantor Mortgage Right for You?

Using a guarantor can be a great way to enter the property market sooner, but it’s essential to consider the implications carefully:

  • Understand the Risks to Your Guarantor: While a guarantor can help you avoid extra costs and potentially lower your interest rates, it’s crucial to understand the risks they’re taking on. If you severely default on your mortgage payments, your guarantor could be responsible for covering the outstanding debt. This could put their property at risk if they are unable to cover the payments in an extreme situation.
  • Consider Your Financial Stability: Before asking someone to be your guarantor, assess your own financial situation. Are you in a stable job? Do you have a reliable income? Can you comfortably afford the mortgage repayments? Ensuring you can meet your repayments will protect both you and your guarantor from financial strain.

Steps to Take Before Using a Guarantor

  1. Discuss with Your Family: Open communication with your potential guarantor is crucial. Make sure they fully understand what being a guarantor entails, including the risks and responsibilities.
  2. Seek Professional Advice: It’s always a good idea to speak with a mortgage broker to explore your options and understand the best way to structure a guarantor loan. At AXTON Finance, we can provide you with tailored advice to suit your situation.
  3.  Legal and Financial Consultation: Encourage your guarantor to seek independent legal and financial advice. This ensures they’re fully aware of their obligations and the potential impact on their finances.
  4. Plan for the Future: Have a plan for how you’ll release your guarantor from their obligations. This could be through repaying the loan to below 80% of the property’s value or refinancing when your financial situation improves.

Alternatives to a Guarantor Mortgage

If you or your potential guarantor are uncomfortable with the risks involved, consider other options:

  • Saving for a Larger Deposit: While it might take longer, saving for a larger deposit can reduce or eliminate the need for LMI and lower your loan amount, making repayments more manageable.
  • Co-Borrowing: Instead of a guarantor mortgage, consider co-borrowing with a family member. This means both of you are responsible for the loan and can share the repayments. However, this option also comes with its own set of complexities and risks.
  • Financial Gifts: Your parents or family members could gift you the money needed for a deposit. This would reduce the amount you need to borrow without tying their property to your loan.

Get Started with AXTON Finance Today

Navigating the complexities of buying your first home can be challenging, but you don’t have to do it alone. At AXTON Finance, our team of experienced mortgage brokers is here to guide you every step of the way. Whether you’re considering a guarantor mortgage or exploring other options, we can provide expert advice tailored to your needs. Contact us today to learn more about how we can help you achieve your homeownership dreams while protecting the interests of both you and your family.

Can You Use Your Super to Buy a House? 

Posted on by Rix Almonicar

Dreaming of owning your first home or expanding your property portfolio? You might be surprised to learn that you can use your superannuation to make it happen. Whether you’re eyeing the First Home Super Saver (FHSS) scheme or considering a self-managed super fund (SMSF), there are pathways available to help you step into your new home faster. Read on to find out how you can unlock the power of your super to achieve your property goals!

How Can You Leverage Your Super to Buy a House?

Ever wondered if your superannuation can help you buy a home? The short answer is yes, but it’s a bit more intricate than just stumping up a deposit for a standard home loan. You have two interesting options: the First Home Super Saver (FHSS) scheme and using a self-managed super fund. Each offers unique benefits and is tailored for different needs—whether you’re a first-time buyer or already managing an SMSF. Curious to see how these options can work for you? Let’s dive in!

Exploring the First Home Super Saver Scheme

The FHSS scheme is a federal government initiative that helps first-time buyers save for a home deposit within their super fund. With potentially better returns than a high-interest savings account, thanks to the lower tax advantages of superannuation, it’s an opportunity worth considering.

How Does It Work?

The FHSS scheme lets eligible first-time home buyers make voluntary contributions to their super fund, up to $15,000 per year, both before-tax and after-tax. These contributions benefit from a lower tax rate of just 15%, compared to the regular tax rates. Contributions from your employer and any additional voluntary payments count towards this cap.

Who Can Take Advantage?

To make the most of the FHSS scheme, you need to meet a few criteria:

  • Be at least 18 years old when applying for a FHSS determination or release (but you can contribute before turning 18).
  • Be an eligible first-time home buyer with no previous property ownership in Australia, including investments, vacant land, or commercial properties.
  • Plan to move into the property within a reasonable time and live there for at least six months within the first year.
  • Have not previously requested a FHSS release.

One benefit is that eligibility is assessed individually, so couples, friends, or family members can combine their FHSS contributions to purchase the same property!

Can a Mortgage Broker Help with the FHSS Scheme?

Absolutely! A licensed mortgage broker, like us here at AXTON Finance, can be your guide through the FHSS maze, offering:

  • Expert Insights: Navigate the complexities of home loans and government schemes with ease.
  • Financial Evaluation: Determine how much you can contribute and withdraw.
  • Loan Recommendations: Find the perfect loan to match your FHSS goals.
  • Application Assistance: Get help with paperwork to avoid mistakes.
  • Pre-Approval Guidance: Know your budget with pre-approval support.
  • Ongoing Help: Receive support throughout your home buying journey.

Connect with an experienced Axton Finance mortgage broker to harness the full potential of the FHSS scheme.

Using a Self-Managed Super Fund (SMSF) to Buy Property

Another exciting option is using an SMSF to buy property. While more complex, it offers a chance to invest in real estate through your super. Note that SMSFs can’t be used for personal residences, but you can buy investment properties.

How Does It Work?

To purchase property with an SMSF:

  • Your SMSF should have a substantial balance (ideally $200,000 or more).
  • Maintain a liquidity buffer of about 10% of the property’s value so that you don’t completely drain your fund.
  • Be aware of borrowing restrictions; you can’t use the entire fund balance for the purchase, use the property for any personal reason, lease it to friends or family and there are restrictions around what sort of renovations/developments can be made.

How Much Can You Use?

For SMSF borrowing, your balance will influence what you can borrow. Most lenders will allow you to borrow up to 60-80% of the value of the property being purchased. For example, with a $300,000 SMSF balance, you might use $200,000 as a deposit to borrow $400,000 for a $600,000 investment property. This would be approximately a 66% LVR (Loan to Valuation Ratio).  

For tailored mortgage advice that fits your unique situation, consult an Axton Finance mortgage broker in Brisbane or nearby locations.

How Can Axton Finance Help You Reach Your Property Goals?

Whether you’re buying your first home or investing in property, the Axton Finance team are here to guide you through using your superannuation effectively. Whether it be via a purchase within your SMSF (Self Managed Super Fund) to building a better deposit to buy your first home via the FHSS (First Home Savers Scheme), we’re ready to help you achieve your property dreams faster. Contact us today to get started!

Why Income is Key to Getting Your Loan Approved?

Posted on by Rix Almonicar

When you’re applying for a home or investment loan, your income is one of the most important factors lenders consider. It helps them decide if you can afford the loan and how much they’re willing to lend you.

What is Borrowing Capacity and Why Does It Matter?

Borrowing capacity is simply how much a lender thinks you can afford to borrow based on both their rules and government affordability guidelines for regulated credit. This is based on all of your assessable income, current debts, and other financial commitments. Knowing your borrowing capacity is essential because it ensures that you’re taking on a loan you can manage without financial stress.

Why Your Income Matters Most

Your ability to make regular loan repayments—what lenders call “servicing income”—is crucial. Lenders look at different types of income to see if you can handle the loan, including:

  • Your Salary or Wages
  • Part-Time and Overtime Pay
  • Income from Casual Jobs (usually with a consistent income over 3-6 months)
  • Rental Income
  • Dividends from Investments
  • Income from a Trust
  • Business Profits
  • Some Government Pensions
  • Insurance Payments

For certain incomes, like bonuses, lenders might only count a portion (say 80%) to account for any variability.

Equity and Debt-to-Income Ratio: Why They Matter

While having equity (like owning a portion of your home) is important, your ability to make repayments is even more critical. Lenders also check your Debt-to-Income (DTI) ratio, which ideally should be less than six times your gross income. This ratio helps them ensure you’re not taking on more debt than you can handle.

The Buffer

Australian banks are required by APRA (The Australian Prudential Regulation Authority – the regulatory body in Australia that oversees the financial services industry to ensure the stability, safety, and soundness of financial institutions) to add a three (3) percent margin to the actual home loan rate to ensure that you home loan repayment is manageable should interest rates rise.

At the time of writing this article (September 2024) it is generally expected that we are at or near the height of the current rate increasing cycle that started in May 2022 when the RBA raised the official cash rate from the historically low level of 0.10% to 0.35%, marking the beginning of its efforts to tighten monetary policy in response to rising inflation. 

So while we are near the absolute highest rates are likely to go the three percent buffer has reduced peoples borrowing capacity by a significant degree and in some cases it has even restricted people being able to refinance loan limits they already have even if it results in a cheaper repayment (there are exceptions to this rule so call us to learn more).

Credit Score and Reporting

Your credit score plays a significant role in loan approval. In Australia, VEDA and Illion are the main credit reporting agencies in Australia. A VEDA score below 500 can make it tough to get approved, while a score of 750 or above is ideal. Positive credit reporting gives lenders a clear view of your credit history with other financial institutions, so when looking to get pre approved for any form of finance it’s important to keep your repayments on time and avoid defaults.

Tips to Boost Your Borrowing Capacity

If you want to increase your borrowing capacity, here are some steps you can take:

  • Reduce or Close Credit Card Limits: High credit limits can reduce how much you can borrow.
  • Avoid Buy Now, Pay Later Services: Services like Afterpay and Zip Pay can indicate you’re stretching your budget to a potential lender
  • Limit Credit Applications: Too many applications can hurt your credit score.
  • Cut Down on Car Loan Repayments: These can eat into your ability to afford a new loan.
  • Stick to a Budget: Lenders will ask about your living expenses, so cutting back before applying for a mortgage can help show you’re ready to manage the repayments.

Take the Next Step

Curious about how much you can borrow? Find out with AXTON Finance expert mortgage broker in Sydney today by booking a quick 15-minute FREE discovery meeting here. 

How to minimise your mortgage with an Interest Free Credit Card and an Offset Home Loan

Posted on by Nick

Offset accounts can significantly enhance the financial benefits of a mortgage loan, especially when used in tandem with simple tools like an interest-free credit card. This article explores how coupling offset accounts with the clever use of interest-free credit cards can create a powerful saving strategy, particularly for those with substantial mortgage balances and good household incomes.

Understanding Offset Accounts

An offset account is a bank account linked directly to your mortgage that has the usual functionality of an everyday account such as being able to have a debit card, Apple/Android Pay, branch withdrawals and deposits etc. The money held in this account is offset daily against the mortgage balance, and interest is charged only on the net balance. It is important to note that the offset account itself does not earn interest – it offsets it’s balance against your home loan. For instance, if you have a mortgage of $1,000,000 and an offset account balance of $50,000, you will only be charged interest on $950,000. This setup can lead to significant interest savings over time, reduce the term of your mortgage, and increase your equity. Offset accounts are particularly beneficial as they provide flexibility in accessing funds, unlike direct repayments into the mortgage which may be less frequent and require a higher level of discipline to action each month.

Multiple Offset Accounts

There are a handful of banks and lenders who offer multiple offset account structures that enable you to aggregate the combined account balances against a single mortgage account. This is great if you like better financial control and have funds put aside for large bills, your children’s education costs, taxation provisions, savings for a holiday or any other purpose you can really think of. Multiple offset account structures are a great tool for both saving on interest and maintaining purpospeful liquidity for day-to-day needs.

The Role of Interest-Free Credit Cards in Financial Management

Interest-free credit cards have been around for a long time now and of course offer a period during which no interest is charged on purchases, typically ranging from 30-55 days. When used wisely, these cards can manage cash flow without incurring extra costs, thus allowing any spare cash to sit in your offset account for as long as possible, further reducing the mortgage balance subject to interest. The key to maximizing the benefit from interest-free credit cards lies in responsible spending and consistent repayment within the interest-free period. This ensures that all your available cash can remain in the offset account, working to decrease your mortgage interest obligations, without accruing additional debt from credit card use.

Using Offset Accounts with Interest-Free Credit Cards

Utilizing both an offset account and an interest-free credit card together can significantly amplify your savings. Here’s how to synchronize these financial tools effectively:

  • Direct Income into an Offset Account: Route all of your income directly into your offset account. This increases your average daily balance, which reduces the interest on your mortgage each month – this can have a powerful compounding effect over time.
  • Use Credit Card for Expenses: Use your interest-free credit card for daily expenses. This approach keeps more money in your offset account for a longer period during the month, maximizing the interest savings on your mortgage. There is of course the added benefit that many credit card companies offer customers frequent flyer points affiliated with the major Australian Airlines Qantas and Virgin – you may be surprised at how quickly you will rack up those frequent flyer points for your next trip!
  • Pay Off Credit Card From your Offset Account: Before the end of the interest-free period on your credit card (typically 30-55 days), pay the balance using the funds from your offset account. This method ensures you avoid interest charges on your credit card while keeping your offset account balance high throughout the month. Many credit card companies enable you to have an automatic sweep of the monthly balance due to automate and streamline the efficiency of paying the card bill on the very last day its due. This maximizes the benefit of the money in your control and minimizes the manual effort required to administer the money smart procedure.

Case Study: $1,000,000 Mortgage with an Offset Account

Consider a hypothetical scenario: a homeowner with a $1,000,000 mortgage at a 6.0% annual interest rate over a 30-year term. Suppose this homeowner maintains an average of $50,000 in their offset account and spends $3,000 monthly using an interest-free credit card, which they pay off at the end of each month from the offset account.

Calculation: Without the offset account, the monthly interest would be calculated as $5,000 initially ($1,000,000 x 6% / 12 months). With $50,000 in the offset account, the interest reduces to about $4,750 monthly ($950,000 x 6% / 12 months), saving $250 per month or $3,000 annually. Over the life of the loan, this strategy alone could save approximately $90,000 in interest.

So as you can see having a basic understanding of how offset accounts work and how they can help save your thousands in interest. Not all offsets are created equaly though as many lenders limit customers to only one offset (not multiple) or ‘partial offset’ arrangements rather than 100% offset so it pays to get qualified advice.

Offset home loans are typically marginally more expensive because of a slight loading on the interest rate charged or the fees payable so if you have limited monthly cashflows there maybe diminishing returns for having an offset account. Some loans in certain entities like trusts or companies or for expat / overseas borrowers are not always allowed to have offset accounts linked.

Overall offset home loans are a fantastic feature that may be able to help you pay off your loan sooner. Why not book a time with us today to discuss your needs and to determine if an offset home loan is suitable for you. We have over 30 major banks and non bank lenders that we can compare for you today.

How is Your Home Loan Interest Rate Calculated?

Posted on by Nick

Buying a home or just refinancing one usually means a hefty financial commitment – and understanding interest rates is key to making sound choices.

We often get asked how the interest rate on your mortgage is calculated.

Let’s dive in!

Factors Influencing the Interest Rate of Your Mortgage

Your interest rate isn’t a random number. It’s determined by several factors:

  • Credit Score: A high credit score indicates you’re a reliable borrower, potentially earning you a lower interest rate. If you want to get a free credit score report reach out to us.
  • Loan-to-Value Ratio (LVR): LVR reflects how much you’re borrowing relative to the property’s value. Higher LVRs may mean higher interest rates especially as you pass 80% LVR and it really ramps up over 90%.
  • Loan Type: Different loan types (variable, fixed, line of credit, interest only, intro rates etc.) come with varying interest rates. The cheapest form of lending is usually principal and interest for owner-occupied purposes. The more expensive rates are interest-only investment purpose lending. If your loan is an SMSF (Self Managed Superannuation Fund) loan then the rates are higher again because they are limited recourse structures.
  • Economic Climate: Interest rates are a function of controlling inflation first and foremost. The effects of rapid rates of inflation have a very corrosive effect on people’s purchasing power and the overall stability of the greater economy. To curb inflation, central banks, like the RBA (Reserve Bank of Australia) raise the cash rate, the rate at which banks borrow money from each other. When the cash rate goes up, lenders typically raise their interest rates, and vice versa. This discourages borrowing and spending, which can help slow down inflation. Conversely, if the economy weakens and inflation falls, the cash rate may be lowered to stimulate borrowing and spending.
  • Funding Costs: Banks lend you money from various sources which include but are not limited to deposits held, bonds and other security instruments. Depending on a number of macro-level variables source funding costs can be more expensive at times which sees the cost passed onto you, the borrower.

Types of Interest Rates

  • Variable Rates: Fluctuate with the market, and will rise and fall during your loan term. Banks and lenders can also move rates outside of RBA if conditions determine so.
  • Fixed Rates: Stay the same for a set time, typically 1-5 years, offering predictable repayments.
  • Split Rates: A combination of variable and fixed rate portions within the same loan.
  • Introductory rates: Also called honeymoon rates are, as the name suggests, a cheaper starter rate that ramps up after a period of time usually six to twelve months. In the long run honeymoon rates are generally a more expensive product solution and are rarely recommended by us.

What’s the Outlook in 2024 for Interest Rates

Interest rates are constantly changing. The best way to get an accurate picture is by comparing lenders or appointing a broker who proactively does this for you during the life of your loan (like we do at AXTON Finance!). Look at their advertised rates primarily, but be cautious in relying just on the so-called comparison rate which is usually an inaccurate assessment for larger loan sizes of $750k. It’s worth considering that comparison rates only compare a standard $150,000 loan over a set 25-year term including all fees and charges. An experienced mortgage broker can help demonstrate the effects of what a new loan term may really cost you, especially when you factor into account the long-term effects of consolidating debts, like a car loan or credit card into your home loan. The costs can be nasty if you are blinded by the ‘lower’ monthly repayment on offer.

Tips to Save Interest on Your Home or Investment Loan

Larger Down Payment: Lowering your LVR means potentially lower interest rates.

Shorter Loan Term: Reduces the total interest paid, though repayments will be higher.

Consider an Offset Account: Offsets your savings balance against your loan balance, decreasing the amount you pay interest on each repayment cycle. When used right this structure combined with the above concepts can have an enormous compounding effect on the cost of your loan.

Refinance Regularly: Don’t stick with the same lender forever because ‘it’s OK’ or ‘you are too busy’. Shopping around and refinancing when better rates arise could save significant interest if you are comparing apples with apples and getting good advice from an experienced mortgage broker.

Fortnightly Payments: Paying fortnightly instead of monthly means you make an extra month’s worth of repayments over a year, reducing interest faster. This can easily cut five years off a normal 30-year loan term.

Harness Credit Card Power: If disciplined, put all your expenses on a card with a long interest-free period (say 55 days) and pay it off IN FULL each cycle. In the meantime, your salary in your offset account reduces the loan’s interest-accruing balance.

Negotiate: Don’t be afraid to ask your lender for a better rate, particularly if you’ve got a good repayment history. Better still your broker should be regularly doing this for you as part of their ongoing service – if they aren’t you better speak to us.

How Axton Finance Can Help?

Navigating interest rates and loans can be overwhelming especially when there seems to be near limitless choice. That’s where we step in! As experienced mortgage brokers, we’re here to guide busy professionals like you through the complexities. We’ll compare lenders, help you secure pre-approvals tailored to your circumstances, and ensure you find the most competitive rates for your home or investment loan.

Let us help you make informed financial decisions – get in touch today!

Should You Be Loyal To Your Bank?

Posted on by Clinton Waters

When it comes to your money, especially a significant commitment like a mortgage, loyalty to your bank might seem like a good idea. Many homeowners tend to stick with their original lender out of familiarity, a sense of loyalty or sometimes because they think it’s too hard to change. However, the mortgage landscape is constantly evolving, regardless if interest rates are increasing, decreasing or going sideways and sticking with your bank probably isn’t always in your best interest – not that they will tell you this…

Is maintaining allegiance to your bank when you have a mortgage crucial? Or does prudently exploring better deals that align with your interests make more financial sense?

The myth of loyalty

The notion of loyalty to your bank is deeply ingrained in many individuals. Often, people associate familiarity and a long-standing relationship with their bank as a form of security. However, while loyalty may have its merits in certain aspects of life, it might not always pay dividends in the realm of your home loan and your hard-earned dollars.

New to bank = a better deal

You would think that being loyal means you should get a better rate or a discount like you do with your insurance company, but this is often not the case. While you might get a slight improvement by haggling with your old bank the overall system is hugely hungry for ‘book growth’, meaning banks and lenders will usually trip over themselves to get new customers in the door and rely on their ‘loyal’ customers to stay put at higher rates – it’s just the way the system often works. Even when you get your current bank to tweak your rate, there will come the point when the ‘computer says no’ because the return on their loan isn’t worth it anymore for a host of technical reasons – you might think you got a better deal, but did you?

You don’t know what you don’t know

Mortgage rates fluctuate regularly. What might have been a competitive rate when you initially secured your mortgage a few years back could now pale in comparison to newer, more favourable deals available in the market. By limiting yourself to one lender, you could potentially miss out on a better interest rate or more favourable terms offered by other banks and lenders.

Why reviewing your mortgage regularly is crucial

One of the keys to ensuring you’re not missing out on a better deal is to review your mortgage at least every one to two years. This proactive approach allows you to assess if your current loan still aligns with your financial goals and if there are better options available. You are probably unsurprised that banks don’t prioritise this process, and they are not obliged to always act in your best interest – licensed mortgage brokers are, however! This means you may be unaware of a better rate available from your current lender or someone else in the market.

This is where the expert mortgage brokers at AXTON Finance can help save you a lot of time and money. AXTON Finance is committed to empowering homeowners by regularly reviewing their loans with automated repricing tools that needle your bank or lender to ensure you get the best rate for your scenario. After all, if we are not doing this on your behalf, we are certain you will and that you may leave us! One of our primary goals is to create a long-term relationship with you as your trusted mortgage broker. We do not treat you as a once-off transaction!

Our efficient digital systems ensure that your mortgage is reviewed at least annually, ensuring that you are getting the best possible rate and terms that suit your needs.

Why AXTON Finance are Melbourne’s leading Mortgage Brokers

Unlike dealing directly with banks and online lenders, AXTON Finance is dedicated to working in your best interest. Our team of experienced mortgage brokers navigates the complex mortgage market on your behalf, identifying tailored structures and negotiating to secure lower interest rates and favourable terms.

We provide you with personalised attention, ensuring that your financial goals are understood and catered to effectively.

We build relationships – not transactions

While bank loyalty may have been a thing when 20th-century bank managers had authority, it’s now essential to recognise that in modern home and investment loans, blind loyalty to your bank might only sometimes serve your best interests. Regularly reviewing your mortgage and exploring better deals is indeed a smart financial move but getting experienced advice from the leading mortgage brokers at AXTON Finance will help ensure your best interests and not the banks are being served!

We know that your mortgage is not just a set-and-forget transaction but an evolving instrument that adapts to your changing financial needs. Don’t wait for your bank to offer you the best deal; take control of your financial future today. Contact AXTON Finance, Melbourne’s trusted mortgage brokers, and experience our personalised service, efficient systems, and dedicated team, who can help you secure a better mortgage approval.

Four Reasons Why You Need A Tailored Finance Pre-Approval

Posted on by Clinton Waters

A critical key to unlocking your dream property often lies in securing a properly assessed pre-approval from a suitable bank or lender. With access to over 30 major banks and lenders, AXTON Finance understands the importance of this initial step, especially for busy time-poor professionals, probably just like you.

Here’s why getting your tailored mortgage pre-approval properly assessed is crucial before venturing into the market:

Confidence

Imagine this scenario – armed with a properly assessed pre-approval, vetted by experienced human professionals rather than relying on a flimsy computer-generated bank ‘pre-approval’ that comes with all sorts of conditional clauses. This assurance stems from a thorough assessment by the expert mortgage brokers at AXTON Finance, who have taken the time to understand and outline specific options available to you. It is worth highlighting that any offer made at an auction is unconditional, which means bidding without a proper pre-approval is risky and certainly not advisable.

With this in hand, you can confidently navigate the property market, knowing that your pre-approval isn’t just a computer-generated ‘yes’ loaded with escape clauses. This assurance lets you focus solely on properties within your approved budget range, minimising uncertainty and providing a strong foundation for your property search.

Strength

When it comes to making an offer, the terms you present matter significantly and its not just about price. Offers that are contingent on ‘subject to finance’, even in a weaker market or before an auction, will significantly weaken your position. However, a thoroughly assessed pre-approval equips you to negotiate from a position of strength. You can craft a compelling offer not only in terms of price but also with the consideration of settlement parameters, making you an attractive option compared to those relying on uncertain finance ‘what ifs’ and ‘maybes’.

Speed

Contrary to what you might think, obtaining a pre-approval isn’t a time-consuming process, especially with the advanced tech stack and human expertise at AXTON Finance. Having that dialled in pre-approval means you may be ahead of others who might not have their lending strategy sorted. This advantage empowers you to act swiftly, staying ahead of those who are dithering and unprepared to seize opportunities in the market.

Success

Of course you are probably reading this because you actually want to buy your next property. So above all, a properly assessed pre-approval sets the stage for success. Delaying or avoiding this crucial step might mean missed opportunities. Many individuals hesitate to seek pre-approvals due to uncertainty or lack of understanding about their options. But with professionals like AXTON Finance by your side, you are laid out with a clear pathway for your property aspirations. Avoid the disappointment of watching potential homes or investment opportunities slip away because you weren’t prepared – speak to one of the experienced brokers at AXTON Finance today.

A properly assessed pre-approval isn’t just a step; it’s your strategic advantage in the competitive real estate arena. At AXTON Finance, we know that securing your finance pre-approval is of immense value in guiding busy professionals like yourself by providing confidence, negotiation strength, speed, and a clear pathway to achieving your property goals.

Don’t let uncertainty hinder your progress; secure your tailored pre-approval with an experienced AXTON Finance mortgage broker and open the door to your desired property with confidence.

Contact us today – and speak to a human who knows!

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 1300 706 540 or book a quick obligation-free mortgage review online here.

×
×

Get in touch with the expert brokers at AXTON

We will contact you within 10 minutes or sooner during business hours for a quick high level discussion.

"*" indicates required fields

Hidden
Hidden
DD slash MM slash YYYY
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Hidden
Hidden
DD slash MM slash YYYY
This field is for validation purposes and should be left unchanged.