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Home loan forums

September 20, 2010 By admin Leave a Comment

World finance forumAre you looking to take out a new mortgage? No doubt you have quickly worked out that the finance industry is at best confusing, and at it’s worst has enough conflicting information & advice to drive you insane! Without clear, concise and professional advice it is difficult to make the right decision, which could cost you a small fortune.

Your mortgage is likely to be the biggest expense that you have in your entire life. If you don’t take the right steps to reduce your mortgage then the interest on your loan often ends up being more than the amount you borrowed!

So how can you get the right advice? There are several methods that prospective home buyers use to work out the best loan for them:

1. Seeking the advice of a good mortgage broker

Using the services of a mortgage broker is a fantastic way to find out about the hidden discounts offered by some lenders that are not advertised to the general public. However this isn’t the main benefit of using a broker. Primarily people use a mortgage broker because of their expertise and ability to match a loan to someone’s particular situation.

2. Getting advice from friends

Do you have friends who have applied for a mortgage before? Your financially savvy friends can help you to get the right advice and to help you identify possible pitfalls that you may encounter. Friends can help you to get in touch with a good mortgage broker, as often half the battle is finding a good one to begin with!

3. Asking questions on a home loan forum

If your mortgage broker has given you advice that you aren’t 100% sure about, then double check it by asking a question on a forum. Joining a forum is easy, and the knowledge of the members covers a vast array of different finance topics.

The main advantage of a home loan forum is that every post from a different member will give you a new viewpoint. The members may even argue over the best advice! This gives you a diverse and well thought out view point to help you make a more accurate decision.

However, in the end your common sense & understanding of your finances is what will help you to choose the right mortgage. Your needs are different to those of your friends and the people posting on a forum. So take on the advice you a given, but also make up your own mind as to which bank to choose, and how to structure your loan.

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Filed Under: Australian Mortgages, Mortgage Reduction, Pay Off Mortgage Early Tagged With: , , , ,

Lenders mortgage insurance secrets

September 20, 2010 By admin Leave a Comment

What is LMI?

Lenders Mortgage Insurance or LMI for short, is a once off fee you pay when you apply for a mortgage that is for more than 80% of the property value. The lender obtains insurance on your loan so that if you default they do not lose any money. The insurance does not cover you as the borrower, yet you still have to pay for the insurance premium!

How much will it cost me?

LMI is calculated on a sliding scale based on the value of the real estate you are offering as security, the size of your loan and also the percentage of the value that you are borrowing. This percentage is known as the Loan to Value Ratio or LVR for short. The larger your home loan and the higher your LVR then the higher the LMI premium will be.

Do I have to save up to pay my LMI?

No, most lenders will allow you to add the premium onto your loan. So if your LMI premium was $3,000 and your loan was $300,000 then the lender would lend you $303,000 so as not to effect the size of the deposit you would need to buy that property.

How can I save on my premium?

By reducing the amount that you borrow as a percentage of the purchase price you can greatly reduce your outlay. Have you asked your parents if they can help you with a larger deposit or if they can guarantee your loan using their home? This is a good first step, as if your loan is for 80% or less of the property value then you will not pay any LMI at all!

Other ways to reduce your premium are to try to borrow less than $500,000 or $300,000 as these are the cut off points where the fee increases dramatically. Also try to borrow less then 95% or 90% LVR as at these two benchmarks the fee will also increase. Did you know there was a $2,300 difference in the premium between a loan of $300,000 and a loan of $300,001? Incredible!

Is there a calculator I can use?

Yes, you can use an LMI calculator to work out the exact cost for your loan. This calculator works for most major lenders such as CBA, ANZ, Westpac, NAB, St George & Suncorp. It compares premiums from the major insurance companies such as Genworth and QBE LMI. Overall it will help you to compare the cost to you and work out if you can save money by applying with a different lender.

About the Author

Otto is a Mortgage Broker that has specialized in home loans for over 6 years. His company The Home Loan Experts is now one of the top mortgage broking firms in Australia.

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Filed Under: Australian Mortgages, Lenders Mortgage Insurance Tagged With: , , ,

Australia sub-prime crisis

September 20, 2010 By admin Leave a Comment

What makes Australia so special?

The USA, Europe and even many parts of Asia have had their economies devastated by the sub-prime mortgage crisis creating havoc with their banks and consequently the funding available to businesses in those countries. While Australia was never immune, these problems have been of a much smaller magnitude and consequently it is business as usual down under.

Australia was fortunate in that the Howard government introduced credit reforms in the mid 1990′s to prevent a slide in credit standards and to ensure that banks and other institutions had an adequate amount of capital to see them through such one off events.

As a result the four major banks have still been able to raise funds offshore thanks to their AA rating and smaller lenders have been able to raise funds thanks to government guaranteed deposit accounts.

How has the face of lending changed in Australia?

Compared to most other countries Australia’s lending rules remain relatively unchanged. Riskier non-conforming lenders that specialise in lending to credit impaired borrowers have been all but wiped out by the crisis due to an inability to raise funds. The major banks and other non-bank lenders have tightened their credit policies to stop high risk no deposit loans & low doc home loans.

There is an increasing reliance on borrowers ability to demonstrate savings as it is well known in Australia that borrowers that can save their own deposit or down payment are far more likely to make their loan payments on time.

Borrowers with no savings and no deposit are still able to borrow 100% with the help of a limited guarantee over their parents home. This is known as a guarantor mortgage and is still available from many Australian lenders.

About the Author

Otto is Mortgage Broker and industry commentator who is well known for providing useful insights into the operations of the Australian mortgage market. His company The Home Loan Experts specialises in lending to Australians that do not meet standard lending guidelines or who do not have a large deposit.

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Filed Under: Australian Mortgages, GFC Tagged With: , , ,
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