Below we have Edward McInerney’s point of view on some commonly asked questions in regard to finance. Edward has many years’ experience in helping find his clients the lending products they need.
Please note Edward recommends you seek personal advice for your situation, as this information may not be suitable for your situation.
1. If you had pre-approval prior to the change of interest rates, do you need to re-apply?
There are some lenders that will honour the pre-approval however there will be special conditions. The first thing to do when applying for pre-approval is ask the lender or broker if it a fully assessed pre-approval and that the interest rate quoted is the rate that will be used for a 90 day period?
2. What are the changes to the first home buyers grant for the new financial year?
The first home guarantee, which has 35,000 places from the 1st of July entails that you can have 5% savings + costs associated (stamp duty, etc). This is for the purchase of properties up to the value of $800,000in metro Melbourne and $650,000 in regional Victoria. The price caps have been increased as well as the amount of people eligible.
Please refer to
First home guarantee - more info here
3. Is there any concession for pensioners with interest rates or stamp duty when buying?
If you have a concession card that may be a trigger for stamp duty reduction. This is something that your conveyancers/solicitors can investigate and discuss if there is an eligibility.
4. What is the preferred debt to income ratio?
Debt to income ratio is your income versus your liability. The preferred debt to income ratio is under five time your household income to debt. However, some lenders may lend up to 7x or potentially higher for certain circumstances. Although most lenders will start to cap 6x more than your salary. Other factors like Interest rates impact your borrowing capacity, so some people can’t borrow 6x their salary. You also need to consider spending habits and other liabilities held. Budget needs to be a key focus!
5. Is the deposit money the only money I need to save to purchase a property?
The key is 20% plus costs associated with the purchase – for example stamp duty. All these costs are taken into account to ensure you have enough funds at settlement. The reason behind 20% plus costs is the lender wants to make sure they are safe guarded. Borrowing over 80% means they need someone else to secure that lending – whether that be a lenders mortgage insurance company, government schemes or family guarantees.
6. Where can I find information on stamp duty? And is this something you can assist with?
You can go to the state revenue office website that has a calculator, which gives you an idea of how much your stamp duty will be (this depends on your purchase price and your situation). Or feel free to reach out and we can discuss the costs associated with a particular purchase price.
7. Looking to purchase an investment property what should I be cautious of? Are there extra costs involved?
Yes, there are extra costs involved, you will have to take into consideration the cost associated with holding an investment property. Such as management fees, land tax, and additional rates and insurances due to holding an investment property and most likely an owner-occupied home. From a lenders point of view, they are more likely to charge you a slightly higher interest rate for investment properties, especially if you are seek an interest only loan.
8. Why deal with a mortgage broker instead of going straight to my bank?
Mortgage brokers take the time to investigate what you are currently looking for and the future goal, they can help you set up a plan and provide options from a wide selection of lenders. They can work with your current lender and negotiate on your behalf. A diligent broker will maintain the customers ongoing product and negotiate with your current lender, keeping the interest rate as competitive to market as possible.
9. What costs are involved speaking with a mortgage broker?
Mortgage brokers can charge fees, with residential lending there is normally no cost, the fee is inbuilt into the interest rate offered by the lender.A lender is either paying a salary for their staff or a commission for the brokers’ service.
10. What is the best interest rate you have seen at the moment?
Currently 4.24% is one of the more competitive variable rates I have on panel (however there may be other lenders that can offer something slightly better) and a 4.4% – 4.5% is quite a competitive rate. This is not considering the NEW November reserve bank rate increase (Melbourne Cup reserve bank decision of .25%).
11. Would you recommend a locked in interest rate with the increases still happening?
Interest rates whether fixed or variable are discussed with your specific circumstances in mind. It is about finding the right product for you. Fixed rates are for certainty, it’s not trying to beat the bank. The broker is there to make sure you are aware of how this impacts your lifestyle. If you take on a fixed loan it gives you certainty around those repayments for 1-5 years.
If you have any further questions that you may like to ask Edward or are looking for some advice you can contact him on 0400 522 464 or via email edward@homefreemortgages.com.au
Commonly asked financial questions - View full video here
Edward McInerney is a credit representative (Credit Representative Number: 462220) of BLSSA Pty Ltd (Australian Credit License Number. 391237)
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