Household Income Homebuyers Surged to $220,000 – Clinton’s interview on Home Affordability!
Listen to episode #928 of @therealestatepodcast where Clint is interviewed by the shows host Craig. In this short 15 minute podcast Clint provides his expert insights on home affordability, interest rate forecasts, the surge in household homebuyer incomes, and the dynamics of sharing property ownership.
Purchasing a property is one of the biggest financial decisions you will ever make, and at AXTON Finance we know the importance of having the right professionals by your side when embarking on your property journey.
There are several experts involved in the property buying journey, and each plays a vital role in ensuring that you make informed decisions and get the best result. These professionals will also be key to ensuring you receive the correct advice in the future.
Here are some of the important professionals to engage when purchasing a property:
So to help maximize the likelihood of a successful property transaction it is essential to surround yourself with the right professionals to guide you through your property-buying journey. Each of these professionals brings a unique set of skills and expertise to the table, and working together with you over time will not only ensure that you get the best result on the initial purchase but the best advice moving forward as you grow your wealth in the years to come.
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:
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.
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.
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.
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.
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.
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.
Firstly our small team at AXTON Finance hope that you, your friends and your family are looking after yourselves during this time. Please listen to government advice on how you can play your part to keep yourself and others safe during this pandemic.
Australian banks and lenders pitch in
On Friday 20th March The Australian Banking Association (The ABA) announced a unified response to assist Australians during this crises.
Below is a summary of COVID19 links available from each lender in the Australian market place.
This page is being updated as more information comes to hand.
Key points to consider – our brief summary
– The term ‘repayment holiday’Â SHOULD NOTÂ be interpreted as interest being waived. It is only repayments (interest) being deferred. You still have to pay the capitalised interest added to the loan balance in the future.
– Qualification requirements are likely to apply (eg unemployment, significantly reduced hours, at risk industry etc)
– Our opinion is that the deferred repayment should be used where genuine hardship is being experienced or is expected. In the long term adding (capitalising) interest for six months or more can add a significant amount of interest to your total loan cost.
– Most lenders are offering up to six months relief in repayments. Some are offering up to three months with a checkin at that point for a further three months.
– Credit reporting agencies and lenders have already outlined that the hardship arrangements are typically not reported as defaults, and therefore do not impact a borrower’s credit score, with APRA also stating on Monday 23rd March 2020 that banks need not treat repayment holidays as arrears.
– The very cheap fixed options we are starting to see should be considered carefully. Often you cannot make extra repayment on a fixed rate, there is often no redraw and expensive break costs can also apply should you pay the loan out early.
– It may be economical to consider refinancing to a new lender to take advantage of cheaper rates, a new interest only term or one of the current cash back rebates available before you simply defer your repayments.
Speak to your AXTON broker if you would like a mortgage review (click here for a free review) or to discuss any of the points above.
Bank Of Melbourne (click link on main page to COVID Information)
If in doubt or if you just want to chat about your situation please contact your mortgage broker to assist where possible.
Contact details are as follows:
Our office number (1300 706 540) is still actively being monitored as we run a full VOIP system and can be contacted as per normal.
Many thanks
Your team @ AXTON Finance
Photo by Branimir Balogović on Unsplash
As you have probably heard in the media the nations lenders have clamped down on their lending criteria as a result of pressure from various government agencies like APRA and ASIC and from recommendations made during the Banking Royal Commission into banking misconduct.
It would be fair to say that many lenders have perhaps taken this a little too far which has resulted in a market place full of inconsistent applications of an incomprehensible set of rules for borrowers to deal with.
As a result of this we felt that the following information can be used as bit of a guide to help maximise your chances of securing finance approval by implementing any number of the following tips.
Lenders will often apply a score to your loan application based on the information you supply and if you skip on optional questions this can be detrimental to the strength of your application if things a little tight. For example even if you have a savings account with another bank with a small amount in – tell your proposed lender. If you have a middle name don’t forget to include it – it matters. If you have moved a couple of times try and be accurate with your living history as lenders often marry up data they can see on your credit file with the information supplied in your application.
If you are looking to refinance or buy your next property check out client fact find here – this is a fantastic form which is responsive to asking you the questions we know a lender will want to know – nothing more and nothing less! We can contact you after you have completed to run some tailored options past you.
Lenders get very concerned when they see on your credit file that you have applied to a number of credit providers within a short period of time for about the same amount of money. The lender in question will often take the pessimistic view and think that there is something wrong with your application and has been declined by other lenders prior to it so will pick over your file with more detail trying to find out why you would apply so many times.
This might sound scary and a reason for a lender to decline a loan but many lenders have different policies that may consider your scenario depending on the circumstances and what you have done to remedy the situation. As a general rule of thumb defaults from utility providers like power and telecommunication companies have less impact on your scenario than do defaults on financial service providers like personal loans, credit cards and home loans.
It is important to realise that with the evolution of the positive credit reporting regime lenders can now increasingly see the conduct of other institutions credit facilities. So if you are late on your credit card payment with the CBA and your home loan application is with Macquarie Bank, then there is a good chance that they can see this on your credit file down to which months you were on time and those that were not!
Treat your repayment history with a healthy level of respect and you will find your application will run pretty smoothly. A good mortgage broker or banker will be able to work with you prior to submission to identify any sort of severity and work out the best course of action and the lenders most suited the scenario you have presented.
If in doubt you can get a free copy of your credit file from mycreditfile.com.au (a service from Equifax Pty Ltd). We can take a look at it for you free of charge and provide you with some insight – feel free to contact us here.
The advent of the ‘buy now and pay later with no interest’ companies like Afterpay and Zip Pay creates an interesting situation for lenders. In simple terms these are not seen as a great look on your bank statements because the lender makes the assumption that these often relatively low cost purchases were made because you did not have the money in the first place and with retailers quick to jump on the band wagon with this offering its even available on products and services that may be considered essential. Our recommendation is generally not to have these buy now pay later arrangements if you are seeking to make a mortgage or finance application.
You will of course have to supply items like payslips, ID, mortgage statements and tax returns etc depending on your situation. This often slows down the process when the information requested is not provided in a timely manner. Many lenders simply get to your file and if information is missing they request whats needed and place your file at the back of the queue again. Sometimes information supplied can result in additional questions being asked so be prepared for this to happen and its nothing unusual albeit it can be frustrating.
OK I get it that a budget is boring but again an increased focus is being made on just how much borrowers are spending on living expense and there is a general reduction on the reliance of HEM (Household Expenditure Measures) standards and a more tailored approach. Having a summary ready before your finance meeting will help you have a more productive and realistic expectation of your borrowing capacity for any sort of approval. There are often many ways that you can reduce and improve your living expense without making drastic changes in the months lading up to when you are looking at securing a mortgage. Go through your statements and look at where you may save money via;
Lenders are now required to ask about any expected changes to your future income that may affect your ability to meet repayments. This of course is a requirement to be answered truthfully and is strengthened by your ability to provide other information about how you may deal with such a situation. For example if you are about to go on maternity or paternity leave you could state that you have a certain amount of funds available for the estimated period of you being on reduced income to meet the commitments of your loan. A return to work letter and using a lender with a strong appetite for this sort of scenario will also help you a lot.
Of course we may be a little biased here but having an experience broker working with you will help explain things in plain English for you and be across the lending policies of dozens of lenders and not just one (like you would get directly at a bank).
The quality of your application submission that is made by your broker or banker can really dictate how smoothly your application goes. Do some simple research like looking up your preferred broker or banker online through Google, LinkedIn and the other usual social media links. Usually you will get a pretty quick impression as to how experienced and professional they are. If in doubt trust your instincts!
It is often that the more competitive products and policies lie outside the big four banks. Well over 50% of all mortgage lending goes to just four of the major banks. At AXTON finance, only 20% of our lending in the last six months has gone to a majors! There are better deals to be had if you are willing to look outside of the square it can save you tens of thousands over the life of your loan.
A business mentor once told me of the following three things;
Good, fast and cheap…. pick two. It is impossible to have all three.Â
Wise words to live by indeed.
A quick search of the internet may list some amazing rates that look too good to be true and while it is still may be worthwhile considering you should also think about;
So there you have it – ten tips on helping get your mortgage application approved!
Please feel free to contact us on 1300 706 540 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!
Best regards,
Clint Waters
0422 464 353
AXTON Finance
If the Reserve Bank of Australia (RBA) cash rate is so low, then why is your interest rate going up?
We are asked this question a lot.
The official cash rate, as set by the Reserve Bank of Australia (RBA), has remained at 1.5%pa since August 2016 when it was then cut by 0.25%. The below graph shows the last thirty years of the official cash rate – you would have to go back to the 1950’s to see rates this low.
There are a few simple reasons why some rates are increasing. As you probably know in the past few years, we have experienced a boom in property prices (mainly only in Melbourne and Sydney though). This has resulted in significant growth in investment and interest only lending.
Interest only loans are of course an attractive form of mortgage lending as it reduces your monthly cash flow commitments but it does significantly increase the total cost of a loan over its effective life. You can actually simulate this using one of our online calculators to see for yourself here.
Most accountants and financial planners will rightly recommend that you setup your investment purpose lending as interest only (the theory being do not pay down a debt that gives you a tax deduction first if you have a home loan mortgage that does not). While this structure is in most cases a wise one, it has also seen a significant increase in owner occupied home loans that have been set up as interest only. This of course means that borrowers have had more cash flow available to them to either spend on more investment debt or, more worryingly so, on living and lifestyle expenses – without having to pay off what they owe.
The government has recognised this trend and has been concerned with the level of indebtedness that Australian households have taken on; coupled with low wage growth and rising house prices. When interest rates increase (and they will) and if left unchecked this could create significant economic pain for borrowers and the government alike.
Subsequently APRA (Australian Prudential Regulation Authority), the government body tasked with ensuring sound governance of our banking system, set a speed limit that states that lenders cannot exceed 30% of all new loans being interest only – which has been running at something closer to 40% of all new loans approved.
Until recently, interest only and investment lending has traditionally been priced at the same rates as owner occupied mortgages and even the same as interest only loans – so effectively the rate you paid was the same across the board regardless of what the purpose or structure was.
This has now changed so there are effectively four types of rates on the market (excluding fixed options) They are summarised as follows and ordered cheapest to most expensive;
– Â Â Owner Occupied – Principal and Interest (3.7%pa – 4.2%pa)*
– Â Â Owner Occupied – Interest Only (3.9%pa – 4.5%pa)*
– Â Â Investment – Principal and Interest (3.8pa – 4.5%pa)*
–   Investment – Interest Only (4.2%pa  – 5.00%pa)*
*Approximate interest rate ranges as at early July 2017
In summary – interest only and investment lending is now more expensive.
Mortgage lending policy is being tightened
As a result of these restrictions we are seeing significant changes in lending policies and rules across all lenders. In combination these rules have a direct effect of reducing demand for interest only and investment lending purposes.
Across the board there have been countless changes which cannot be summarised in this brief blog but at a high level they can be summarised as follows;
Reducing higher lending ratio loans
Generally higher lending ratio loans for investment and interest only lending are being capped at around the 90% loan to valuation (LVR) ratio with strong pricing incentives for borrowers to be at 80% or less.
Increased stress testing of borrowers
While the mainstream media may have made broad brush statements about irresponsible lending by the nation’s banks and lenders, this is simply not quite true. Banks have always maintained rigorous assessment criteria and have always sensitised interest rates in their calculations to account for a ‘what if’ scenario for when, not if, interest rates rise. Most lenders test borrowers for affordability at around 7.0% to 8.0%pa and apply minimum benchmarks to acceptable living allowances to determine affordability.
This latter requirement has come under significant scrutiny recently with most lenders demanding borrowers to summarise their own basic living expenses which will be compared against the banks own standards (some lenders now will also index living expenses according to the amount of income an applicant earns with those on higher incomes having higher minimum living expenses applied.).
Lender rules first, rates second
In this environment, more than ever before, it is important to get quality advice around your finance options. There are significant differences between what one lender’s rules are and anothers. There may be a slight difference in the rate but a huge difference in policies that will affect your ability to be approved, your structure and of course your total borrowing capacity.
What you can do about it
Fortunately there are a few simple things you can do about it. If you are completely unsure then just get in contact with us here or fill out our FREE mortgage health check link here
A few recommendations include;
Some of the lenders are offering some pretty attractive fixed terms that are the same or cheaper than many variable investment and interest only loans. With the likelihood of further increases for this sort of lending, now would seem like a pretty good time to consider your options around locking in a near historical low rate
Given that the banks are under significant pressure to reign in interest only lending taking a principal and interest repayment is attractive to all lenders these days and they have priced their products accordingly to increase demand for principal and interest repayments. It does of course increase your monthly repayments but you are paying down the loan and ultimately paying much less interest in the long term
If you have some funds sitting in a interest bearing account it can be a suitable option to put the same funds into an offset account. The effect is it reduces the balance of your loan and interest charged on your mortgage by the amount you have in offset (eg $10k in an offset account reduces the balance of a $100k loan to an effective balance of $90k). The rationale being that an interest bearing account may earn you a poultry 2.0%pa currently, less tax, less the effect of inflation and you aren’t really going anywhere. Where an offset account saves you interest at a much higher rate with nil tax payable on the saving. Consider it that saving money is better than making money.
You might be surprised at how a simple phone call may result in you getting a better rate. The recent rate increases have been a pretty broad brush 0.15%pa increase here or a 0.3%pa increase there on top of whatever you are paying. If your product is out of date and hasn’t been looked at recently you could be paying well above what is available currently. It also helps to use the magic words ‘Im looking at refinancing what can you do for me?’
There are dozens of lenders out there and you might just be better off refinancing to a new lender. We can of course give you some options around this. Here are two useful tools to help you start that process.
We hope that this helps shine some light on the current situation around why mortgage interest rates have been increasing recently. As mentioned please feel free to contact us here or call the office on 1300 706 540 to discuss your option tailored to your scenario.
Your Investment Property Magazine recently announced their Property Investor of the Year Winner who is actually Axton Finance’s long term client Matthew Armstrong!
Matthew has built an impressive portfolio of five quality properties over a number of years. In the article Matt talks wisely about taking a long term approach to investment with some common sense tips on what makes a sound strategy. He also highlights the importance of getting a top team of professionals on his side which he lists as his mortgage broker (Matt did say he mentioned Axton but they edited us out!), buyers advocate, solicitor, accountant and property manager.
A big congratulations to Matt and his award – being such a modest fellow we had to find out about this from the magazine!
Over the years I have helped countless Australian expat clients working in all corners of the world to appropriately finance their property portfolio back here in Australia.
Building your property portfolio with tailored mortgage advice
With the advent of new technologies, expat acquisition of property in Australia has become significantly easier. By getting in touch with me and using various simple yet powerful tools on the internet you can gain easy access to our experience and expertise. We offer packaged mortgage broking and portfolio structuring advice encompassing:
– Purchase of owner occupied home and investment properties
– Owner occupied purchases or refinances
– Lines of credit establishment for investment purposes
– Property portfolio planning
– Mortgage health check reviews
Where initial face-to-face meetings are not possible, I can conduct client meetings via SKYPE video (see my availability & book obligation free skype meeting here) and I will provide you with much more than just an opinion of a rate and product offered by a bank. I provide a live shared screen viewing of proposed structures and worksheets especially tailored to your individual circumstances.
– Expats can generally borrow up to 90% of the value of the property purchased
– Some professions are eligible for the waiver of mortgage insurance if lending >80%
– No loading on interest rates – normal resident discounts apply
Interviews can be completed on SKYPE
– Foreign Currency Loans (FCL) available in certain circumstances
Private banking solutions available
Get access to our network of trusted professionals:
Over the years I have established trusted relationships with some of Melbourne’s best professionals who you too can confidently leverage upon without having to trawl the internet remotely trying to find the right people to help you with your property needs.
We have direct access to leading professionals in the following fields:
Buyers advocates – where clients are not able to inspect or bid for a property in Australia, a buyers advocate can source and review properties and negotiate on your behalf. Our advocates have years of experience and can help ensure clients make the right decision with the confidence as if they were undertaking the transaction themselves.
Solicitors/conveyancers – aside from arranging the settlement and legal transfer of real estate into a client’s name,  it is vital that property contracts and disclosure documents (known as section 32’s in Victoria) are closely examined to identify any hidden pitfalls.  Our preferred conveyancers are experts at assuring a smooth settlement process and identifying issues early before they become bigger problems.
Accountants – a good accountant should be proactive and be across such matters as the taxation entitlements  expats may be eligible for while non-resident.
Financial planners – generally expats are considering the purchase of a property as part of a longer term wealth creation strategy. The purchase of a property may form part of a much bigger wealth creation picture that needs careful consideration. Our preferred planners can provide you on a tailored fee for service basis with quality advice on risk insurances, superannuation, retirement planning and financial goal setting and reviews.
Property managers – you wouldn’t give the keys to an expensive car to just anyone so equally why would you hand over the management of a valuable property to someone you didn’t trust? We have access to some of Melbourne’s best property managers with whom we have had extensive personal experience.
Licensed pre purchase inspections – buying an established property can unearth all sorts of issues, many of which are only found after settlement. Help avoid this situation by requesting an insured pre purchase inspection by one of our selected professionals. Each inspection generates a detailed report covering such matters as structural issues, any unregulated improvements/renovations, asbestos risk and pest infestations.
Our growing expat business is due in no small part to the comprehensive set of services we provide that are tailored to individual needs and involve access to a range of technical and professional skills that are designed to take the hassle out of property investments.
Contact me now to make an obligation free review of your proposed mortgage finance needs on 1300 706 540 or email me direct at [email protected]
Alternatively see my availability & book obligation free skype meeting here.
I’ve been a long term client with Clint and have recommended him to many other clients who have been most impressed. The formation of AXTON has seen service taken to another level – with Bertrand and Richard proving to be top-notch resources – mostly in the clarity and well laid-out instructions in each timely and informative communication they provide. I am living in Canada so the logistics are not simple – however the constant attention and care made the transaction relatively easy. Thanks Guys! Stuart Sandiford – Expat Australian Newfoundland Canada – July 2016
We will contact you within 10 minutes or sooner during business hours for a quick high level discussion.
