What is a mortgage broker?
A mortgage broker acts as a middleman between you and potential lenders. The broker works on your behalf and in your best interests to provide lending solutions that offer competitive products and interest rates best suited to your individual circumstances and requirements. Mortgage brokers are licensed and regulated financial professionals.
Why use a mortgage broker?
A mortgage broker has access to a wide range of products from many different banks and lenders, rather than only one bank’s product options. A broker will interview you to assess your needs and goals and is then able to offer you choices so you can compare interest rates, repayment amounts and loan products. A mortgage broker will do the heavy lifting for you so you don’t need to waste time shopping around with different lenders whose products you may not qualify for. Using a mortgage broker can save you money by finding you the right loan for your circumstances.
What makes Mortgage Broker Sydney different?
Our brokers are experienced and knowledgeable on a wide range of products and policies. We are able to assist you in obtaining finance for home loans and investment loans as well as commercial ventures and asset finance. We are not a huge conglomerate and our boutique size means you get the attention you deserve. We will guide you through your options and help you understand different products and features so you can make an informed decision. Our process is designed to ensure you receive the best outcome for your needs which is why our customers provide such positive reviews.
Does Mortgage Broker Sydney charge fees?
We do not charge our clients a fee for our service. We are paid a commission by your selected lender for introducing you as a customer. We will provide you with clear and transparent information regarding our remuneration arrangements both generally when you first enquire, and then specially for the lender you choose.
At all times our advice is based on what is best for our customers, not any financial arrangements we have with the lenders. We are subject to strict regulations to ensure we act in our client’s interests and our business relies on the reviews and referrals we receive from those of you who use our service. Looking after our customers is our number one priority.
Does a Broker just help me get to settlement or do they provide an ongoing service?
Mortgage Broker Sydney will not only help you to find the right lender and product and settle your loan, but will provide ongoing service throughout the life of your loan. We receive a trailing commission from lenders which means there is no charge for our ongoing service. We want to ensure that your home loan is suitable for you now and in the future and can assist you with any questions that arise or any changes you might like to make to your loan, such as an increase to fund redecorations to your property or a switch in products.
We will touch base with you each year and at important milestones during your loan to check if you still have the best deal, to negotiate a better rate with your current lender, or to assist you with any new finance needs you might have.
How much do I need to save for a deposit?
Having a bigger deposit means you may not have to borrow as much money, reducing the amount of interest you will ultimately pay over the life of the loan. A larger deposit means less risk to the lenders and you are more likely to receive a competitive interest rate.
It is generally recommended that you have a deposit of at least 20% of the purchase price. However, as this may not be achievable for everyone, you can put down a smaller deposit. In most cases this means that lenders mortgage insurance will apply (see more details further on). First Home Buyers are able to put down as little as 5% deposit and may be eligible for various government grants, subsidies and schemes to further assist them.
The purpose you are purchasing for may also impact the level of deposit required. For example, you will generally need to save a larger deposit to purchase an investment property than for one you intend to live in.
What other costs are associated with securing a home loan?
While you will not pay a fee for the services provided by Mortgage Broker Sydney, you will most likely incur some other costs related to settling your loan. There are not only fees the lender might apply but also Government charges.
For a property purchase you will need to pay stamp duty which is a one-off government levy calculated on the purchase price. Other government fees also apply such as land transfer registration and mortgage registration. You will need to allow for your conveyancing or legal fees as well as any council and water rates or strata fees that might apply.
If you are refinancing you won’t need a conveyancer so you will not have legal fees and stamp duty but you will still pay for land transfer and mortgage registration as well as a discharge fee to your existing lender.
For a purchase or a refinance, the lender might also charge fees at application. These fees will differ from lender to lender and it is part of your broker’s job to discuss these with you and keep costs to a minimum. Lender fees will form part of any product comparison provided.
What is negative gearing?
Negative gearing is a term used in relation to property investment. It occurs when the income generated from the property is less than the expense of owning and managing the property. Expenses may include the agent fees, rates, and mortgage interest for example. While this means you are making an investment loss and will need income from other sources to cover any shortfall, many investors choose to negatively gear as they can generally claim a tax deduction for the investment loss. The aim is for capital growth, with the increase in the value of the property over time more than offsetting any shortfall in the net income.
At Mortgage Broker Sydney we recommend seeking the advice of a suitable industry professional when it comes to tax matters. We are able to provide referrals to the relevant industry experts to assist you in deciding on the best investment plan for your individual circumstances.
What is positive gearing?
A positively geared investment property generates a surplus of income over expenses. The surplus would generally be declared as part of your taxable income. We recommend seeking the advice of an accountant to understand the tax implications for your personal situation.
What is a pre-approval?
Home loan pre-approval or approval in principle is confirmation from a lender of your borrowing capacity. This is based upon the scenario your broker has outlined to them. Pre-approval is confirmed in writing and will include certain conditions. The standard conditions are:
- A satisfactory valuation of the property being purchased
- Final credit approval
- Formal acceptance from the mortgage insurer (if applicable)
There may be additional conditions depending on your personal circumstances or the lender’s requirements. A pre-approval is not a guaranteed loan offer as any conditions need to be met prior to an offer being made. However, having pre-approval can give you the confidence to buy knowing what your budget is. It will make you a more appealing buyer by showing you are ready to proceed and may also reduce the time it takes for a formal loan offer to be issued.
Pre-approval applications do require a credit check so it is advisable to obtain this from the lender you ultimately intend to go with to avoid multiple entries on your credit file. Most pre-approvals expire after 90 days so your broker will be in touch to renew if you haven’t purchased within that time.
What happens when I buy a property?
If you have pre-approval in place and have found the property you want to buy you will then make an offer, sign the contract of sale and pay your deposit. Before you do this, you should engage a licensed conveyancer or solicitor to assist you in contract negotiations and navigating the buying process.
You will need to provide your broker with the fully signed contract of sale and deposit receipt so they can then convert your loan pre-approval to a full approval.
Your broker will arrange for the lender to complete a valuation and once this is accepted and all other conditions have been met, your lender will issue you with unconditional approval. The loan offer or contract will then be issued. Your broker will be on hand to assist you in the sign-up process.
What happens between approval and settlement?
Once loan documents have been returned, they will be verified by the lenders in-house settlement team or agent. After confirming documentation is in order, they will liaise directly with your conveyancer to book the settlement. The settlement date is included in your contract of sale and typically will be 4 to 6 weeks after you exchange contracts.
In the weeks leading up to settlement your solicitor will calculate the final figures that you need to pay at settlement. The amount you have to contribute from your own funds will need to be available in time to meet the settlement deadline.
You don’t need to attend the settlement yourself; your conveyancer will look after this aspect for you. The bank will provide the loan funds needed to settle the purchase. At this point you become the official owner of the property and can collect your keys from the estate agent!
Do I need a Conveyancer?
A conveyancer is licensed to act in the field of property contract law. A conveyancer may also be a solicitor, but this is not always the case. At Mortgage Broker Sydney we recommend the use of a conveyancer/solicitor when buying or selling a property as they will they act on your behalf and protect your interests.
What is a cooling off period?
A cooling off period provides time for a buyer to complete their due diligence on a property, including checks and inspections, but also means you have secured the purchase of the property. You, not the vendor, have the option of pulling out of the transaction before the end of this period. The cooling off period commences from the date of the exchange and should you choose not to proceed the cost to you is 0.25% of the purchase price.
What is a Section 66W Certificate?
Typically, when you buy a property in NSW you have a 5-day cooling off period after you exchange contracts when purchasing by private treaty. This period allows you time to consider your purchase, undertake any searches such as pest and building inspections and progress your finance arrangements. However, the cooling off period can be waived if the purchaser’s solicitor issues a section 66W certificate making the contract immediately binding. The decision to waive the cooling off period is generally requested by the vendor to ensure the unconditional nature of their sale. Your conveyancer can provide advice on when this might be appropriate.
*What is the difference between buying by private treaty and buying at auction?
A purchase by private treaty, or private sale, takes place when a property is listed for sale through an estate agent with an asking price attached or implied. Prospective buyers make offers via the agent who presents them to the seller for consideration. Once a sale is agreed contracts are exchanged, the deposit is paid and generally a cooling off period applies.
A property sale by auction is a competition in the open market. Prospective buyers need to carry out all their due diligence and checks prior to the auction date. This includes agreement of any specific conditions relating to their intended offer. The seller will set an undisclosed minimum sale price. The highest bidder at the end of the auction becomes the successful buyer, provided this bid matches or exceeds the seller’s minimum. Contracts are exchanged that day and no cooling off period applies. Should the seller’s minimum price not be achieved, as the highest bidder you would be granted the opportunity to negotiate further and may end up agreeing a sale privately.
*Legal advice should be sought for your individual circumstances
What is Lenders’ Mortgage Insurance?
Lenders’ Mortgage Insurance (LMI) is a one-off, non-refundable, non-transferrable premium that’s generally added to your home loan. It applies when a borrower has insufficient savings or equity to meet the standard 20% equity requirement of the property value. LMI is insurance designed to protect the lender, not the borrower. It provides the lender with indemnity against any loss incurred if you are unable to repay your home loan and the property needs to be sold. The higher the percentage the higher the premium will be as the risk of loss to the lender is deemed to be greater
Can a guarantor help me avoid Lenders’ Mortgage Insurance?
One way to avoid paying Lenders’ Mortgage Insurance is by using a security guarantor. This occurs when a close relative, in most cases a parent, provides additional security for your home loan in the form of a mortgage over either their home or an investment property that they own. The guarantor provides part of their property equity to top up your cash deposit to reduce the loan to value ratio to 80%, at which point LMI is no longer applicable. The exact requirements for this feature vary with different lenders but it is essential that the guarantor obtains independent legal advice so they are fully aware of any risks or obligations that will apply to them.