HOME LOAN FAQ
1. What is a Mortgage Broker?
A Mortgage Broker is a home loan specialist who negotiates the loan on client’s behalf by presenting the loan application in most positive light with all supporting documents to the home loan lender so that the clients can have the most suitable home loan affording to their objectives and individual circumstances.
A golden key mortgage broker will research and compare the most suitable home loans on the market from the thousands available, help you choose the right loan and then support you through the entire mortgage application process from lodgement to settlement.
2. How do Mortgage Brokers get paid?
Mortgage Brokers generally do not charge the borrowers anything for their broking service, as brokers are paid a set commission by the lenders only when the home loans are settled.
However, banks do not pass on the cost of the broker's commission to the customers if they lodge the home loan application themselves directly to the bank, as the bank's internal cost of supporting customers with their home loan application lodgement process through their branches are usually higher than mortgage broker commission.
3. What are the benefits of using a Mortgage Broker?
1. A mortgage broker can compare the range of loans available from multiple lenders very quickly to find you the right home loan for your needs. You can check a lot of the home loan deals yourself using the mortgage loan rate comparing sites or by contacting a number of banks and lenders yourself but those are time-consuming.
2. The mortgage brokers also provide you with one central point for home loan related information and will talk you through the entire application process from lodgment to the settlement and more.
3. Different banks or lenders have different document requirements, and unless you’re very familiar with them all, you could find yourself not getting a preferred home loan - for as little as where you simply forgot to tick the right checkbox.
4. Most of all, you are missing out on a great free professional service, where a home loan broker comes to your place and discusses the most suitable loan for you and helps you with the documentation for the home loan application and guides you through the entire home loan process if you go to the bank straight.
4. What do mortgage brokers do?
A mortgage broker usually has more home loan options in terms of lenders and loans available. A bank can only offer what is available by them. A mortgage broker can offer loans from all the banks and lenders available.
Therefore, a well-experienced mortgage broker will give you home loan options from various lenders available in the marketplace. A home loan broker is also very familiar with the home loan application process and documents required for different circumstances as they deal with a lot of clients and different banks or lenders credit assessment teams. It is also broker's best interest to get you the suitable home loan you have chosen ASAP as the brokers get paid their commission from the bank only after the loan has been successfully settled.
Therefore, a mortgage broker can give you choice by comparing hundreds of home loans and will help you the entire home loan application process from lodgement to settlement so that you can make a better-informed decision based on your financial situation.
5. How much can you borrow?
Banks usually loan up to 95% for investment properties. Therefore, you will need to save and provide at least 5% of the value of the property for a deposit plus the amount of the costs.
6. What are the additional associated costs to your home loan?
Remember that additional fees and costs will generally require 5 - 7% of the purchase price. These costs may vary due to many factor based on your unique circumstances. These costs generally include:
a. Stamp Duty: the state government tax on mortgage documents and the property price
b. Conveyancing: the legal transfer of property title from one person to another.
c. Lenders Mortgage Insurance (LMI): Additional cost for you if borrowing more than 80% of the property value. It gets added to your home loan amount and small increase in your repayment.
d. Building Insurance: You should have your policy activated as soon as the contracts are exchanged, including contents if you are an owner occupier.
e. Goods and Services Tax: will be charged with new house and land packages, your real estate agent’s selling commission, conveyancing and solicitor fees, valuation fees, moving costs etc.
7. What is Cross-Collateralisation?
Cross-collateralisation is a term used when the collateral of one loan is also being used as collateral for another loan. If a person has borrowed from the same bank a home loan secured by the house the person lives in, an investment property loan secured by another investment property, and so on, and these assets can be used as cross-collaterals for all the loans. If the person pays off the investment property loan and wants to sell the investment property, the bank may reject the proceeding because the investment property is still being used to secure the home loan and other loans. Essentially, cross-collateralisation only expires when the borrower has no outstanding loan with the bank.
Home Loan Mortgage Calculator
Australian Securities & Investment Commission (ASIC) has developed mortgage calculator for potential home buyers to easily calculate repayments and compare loan repayments with different interest rates. This calculator can also help you determine how much you can borrow or help you plan and budget ahead in case your home loan interest rate rises.