frequently asked questions
Discover an easier way.
Why choose a broker?
It’s all about you!
A Finance & Mortgage Broker will take the pain out of the loan process for you, from start to finish & for the life of the loan- Saving you time & stress.
With hundreds of different lenders & loan types available a Broker will give you guidance to find the right type of loan along with negotiating the best deal that will meet your requirements – This could save you thousands over the life of a loan.
The Broker will take care of the application & liaise with all parties involved helping a stressful time stay exciting.
What is the Banks general qualifying criteria?
Without making it complex, it is a simple as two words. Contribution & Serviceability, these 2 things are the fundamentals of lending;
1. Contribution (deposit) – this is what you are putting in towards the transaction to ensure that the Bank is lending less than the property is worth
2. Serviceability (affordability) – This calculation demonstrates that after what comes in (income) & what goes out (expenses) you can afford to make the required loan repayments at an inflated interest rate.
What's the minimum deposit I need?
At Reach, we call this your total Contribution. This way the figure we advise includes all fees & charges with no additional funds required, keeping it simple for you.
A general rule of thumb is that the minimum total contribution required will be 13% of the property’s purchase price. This rule is based on main stream lenders that can offer the best deals for this level of lending.
However, we do have access to lenders that allow lower contributions with the lowest being around 8%.
What is my borrowing capacity?
Your Borrowing capacity is calculated by working out your surplus income available for loan repayments by;
1. What comes in = your net income
2. Less what goes out (post settlement) = your living expenses, personal loan repayments, minimum credit card repayment on available limit, any other debts/commitments etc
3. What is left over = The surplus income that is available to make repayments on the loan. This is calculated at a rate of 5.50% or the actual rate + 2.5% (whichever is higher). This allows for future rate increases to ensure you can manage the loan now & in the future.
What Government Grants are available?
Currently the available First Home Owners Grant for eligible applicants in SA is $15,000 for constructing a new home or purchasing a completed new home never lived in.
Please use the link below for up to date & eligibility questions direct from RevenueSA
What costs are involved with purchasing a property?
In addition to the property purchase price, you will also have other costs involved. At Reach, we include these costs when we advise what your total contribution is, this way you do not need to consider any additional amounts keeping it simple.
These costs are:
- Stamp duty: This varies for each state & is approximately 5.5% of the property’s value in SA
- Conveyancing: Reach will generally include an allowance of $2,500 to cover all conveyancing costs which will cover the conveyancers service fee, transfer of council rates & water rate adjustments + other government searches.
- Lenders mortgage Insurance (LMI): The is an insurance premium added to the loan amount if you borrow more than 80% of the properties value (see FAQ for LMI)
What is LMI? (Lenders Mortgage Insurance)
LMI is a type of insurance that is paid by the borrower as an upfront lump sum premium by being added to your loan. This Insurance cover protects the Lender to cover any shortfall in the instance where the lender is required to foreclose & the total cost of the foreclosure including paying out the existing loan is not met.
The LMI can also require additional lending criteria for the insurance to be approved. One of these requirements is generally of you borrow more than 85% of a property you are required to have 5% as genuine savings.
LMI assists thousands of Australians each year purchase a home with a lower contribution prior to having a 25% contribution. This helps entering the property market rather than saving for many more years.
What is the Genuine Savings requirement with LMI?
To be approved for LMI, the insurer also want to make some checks to ensure the likeliness of a claim is avoided. Normally if you borrow above 855 of the property’s value they will require 5% of the property’s value as Genuine Savings. For example, on a property purchased for $500,000 the genuine savings would need to be $25,000.
This means $25,000 would have had to have already been saved & held for a minimum of 3 months in the applicant’s bank account or accumulated with reduction over the last 3 month period.
There are some exceptions to the rules where this is not required up to 90% or if other means to show you have been spending the 5% perhaps on rent, as this will cease after settlement of your new home.
What is settlement?
If purchasing a property, this is the rewarding & exciting day -You get the keys!
Settlement is the term used when the property you have purchased has been exchanged, your loan & funds have been paid to the vendor (seller) meaning the property is now going to be registered to you. A contract to purchase a property will have a settlement date that everyone works towards achieving.
For loans that don’t involve a property purchase, we will still refer to the day the loan is established as settlement.
Who gets involved in my property purchase?
When purchasing a property there are numerous parties involved. Your Reach Financing Broker will liaise & communicate with all these parties, making it simpler & stress free for you. This will include:
- Reach Financing Broker & Admin
- The Lender
- Real Estate agent or Builder
- Your Conveyancer
What's a Conveyancer & do I need one?
Conveyancing is a necessary process in both buying or selling property. A professional conveyancer or conveyancing solicitor helps with the settlement & title transfer process by ensuring that their client is meeting all legal obligations & that their client’s rights are protected during this transaction.
A conveyancer is not required when refinancing between Lenders unless there is a change of ownership or other legal requirement associated with the title.
What should I consider if I’m selling & purchasing?
Some key points to know are:
- What is a realistic sale price. Reach can use Property Data to assist + appraisals from Real Estate agents will help determine this
- What will the cost be for selling. Agents will generally charge a percentage of the sale price + marketing costs.
- How much will you need to spend to get into the desired property type
- Do you have a backup plan if you need to sell first, this could be living with family or friends & putting your belongings in storage for the short term as an example
If I don't meet requirements, can I still discuss my options with Reach?
Yes, it’s never too early to learn & get on track with the Reach Road Map. We understand how disheartening it can be when you don’t know where to start, or you may have approached another lender & was told to come back when you have more savings. With a Reach Road Map, we will assist you by understanding your current situation & educating you on what needs to be done to enter the market. We will complete a financial analysis which will assist with completing a Budget for a tailored savings plan to put you on track to having a goal, ambition & timeframe for property ownership.
What Loans & repayment types are right for me?
With so many loan types in the market, not all types are suitable for everyone. At Reach we will discuss your requirements & give advice around loan structuring with specific product types that will suit your needs providing you an analysis of the comparisons between different options.
In general, the options are:
- Variable Rate: This interest rate will increase or decrease with the lender. Generally this will have more flexibility with making additional repayments along with more options like Offset facilities.
- Fixed Rate: This rate will be locked in for the chosen term. This means if the rates reduce you will stay on the same rate & not receive the benefit of the decrease however if rates go up you will stay on the same rate meaning you have benefited from no increase. Fixed rates generally have less flexibility, meaning you may have terms that will not allow more than a certain amount of additional repayments & can have penalties if you break the fixed rate terms. However, can be a good option for certainty of repayments & budgeting purposes.
- Principle & Interest: This is a repayment type, meaning your monthly repayment will pay the interest for the month + some additional off the loan (the principle)
- Interest Only: Another repayment type, meaning your required monthly repayment will only pay the interest charged not reducing the principle at all. This is generally more sought after for investors for tax reasons. This type of repayment has become harder to source & requires aligned objectives to be approved.
- Basic Loan: Most Lenders will have a Basic offering. This will generally have low to no ongoing fees & a low standard base interest rate. These Loans may not have all the options like the Offset account & redraw or limited redraw.
- Package Loan: A lot of Lenders offer loan products that will come under a package. The package will generally have an annual fee charged every year which will give you discount off the standard variable rate, an offset facility amongst other benefits like credit card fees waived, insurance discounts & no or reduced fees on additional borrowings if required.
What is an Offset/Account Facility?
An offset account is a bank account that is linked to your home loan you don’t pay interest on the funds in the account. For example you have a $300,000 Home Loan with a $100,000 balance in your offset account, the interest charged is calculated on the net balance being $200,000.
An offset account is not for everyone, whilst it sounds like a no brainer in principal, it could cost you more to have over th elif eof the loan versus a Basic loan product
Thinking of refinancing?
Refinancing is when you take out a new home loan that will pay out your existing loan, generally due to having a benefit.
Benefits could include;
- Reduced Monthly Repayments to assist with better cash flow, perhaps starting a family
- Reduced Interest rate & fees. Help you pay the loan off quicker
- Consolidating other debts to have 1 loan repayment
- Reviewed circumstances with new product type to meet you current requirements
You need to consider;
- Exit fees from your existing lender
- Upfront costs from the new lender
- Wether you be required to take out LMI (Lenders Mortgage Insurance)
At Reach, we will do comparisons to show the true cost & savings of refinancing to determine the actual benefit with our Reach Better Loan Health Check.
What does LVR mean?
LVR is ‘Lending to Value Ratio’. So for example, if you borrow $400,000 against a property worth $500,000 your LVR is 80%. Loan amount divided by Property Value.
Am I eligible for a commercial loan?
Like all loans, Commercial loans are assessed based on RISK. Commercial Loans are assessed on a case by case basis & unlike regulated residential loans, the assessment will have a broader more holistic approach.
The lenders will be looking at what the purpose of the loan is along with what it will help you achieve. This will then fall into a category like the following;
- Investment (lower risk): To buy or refinance a commercial property that will be leased.
- Owner-occupied (medium risk): To buy or refinance a commercial property that is leased to or occupied by your own business.
- Working capital (high risk): Financing the day to day operations of your business or liquidity shortfalls.
- Other purposes: All other commercial, business or investment purposes are considered on a case by case basis, e.g. buying an insurance broking practice.
Once the purpose is determined the lenders will then look at what the likelihood of the loan being repaid in the required agreement terms & what are you contributing towards the deal.
They will do this by looking at how your business has historically been performing by reviewing your financials, looking at industry trends & benchmarks, your Asset & Liability position.
Speaking to a Broker will give you a better understanding of what’s required, the chance of being approved & how to get the best deal possible for your situation.
What interest rates can I get on a commercial loan?
Unlike residential loans, Commercial Loan interest rates are generally based on RISK to the bank. The more comfortable the bank is with you to repay your loan will be result with a better interest rate offered.
As it is RISK based, it is important your Broker demonstrates the strengths of your application by providing a full snap shot of your position along with any other important factors to help mitigate any RISK to the Bank to achieve the best deal for you.
How much can I borrow for a commercial loan?
For a Commercial property purchase, generally you will be limited to borrowing up to 65% – 70% of that properties value depending on the type of property. The difference could come from a cash contribution or you if you have equity in other property. In some instances we may be able to source a higher loan amount if you fit into a lower risk profile for the lender.
What structure is right for me?
Firstly you will need to have a registered ABN to be applying for a loan in that Business’s name. There are numerous entity types that run business’s such as sole traders, a partnership, Company (PTY LTD) or Trust entities.
You should speak to your Accountant to work out what the right borrowing entity is for your finance for protection & tax reasons.
You are not alone! You may be finding it difficult to obtain a home loan due to this. A credit impairment is a mark on your credit file that has a negative impact. This could be a Credit default, a judgement or court order amongst other listings usually resulting from an unpaid or disputed credit contract. We have access to lenders that understand a credit impairment could be an incorrect indicator of how you manage money now, as these defaults could be from up to 5 years old. These lenders will generally charge a slightly higher interest rate to help you Reach financing that is required. By having Reach on your side, we will tailor an exit strategy to get you back to a mainstream lender based on certain milestones.
Seperation & Divorce
Unfortunately, separation & divorce is far too common in today’s society however it is a part of modern life. Whilst it is normal through these tough times to ignore your finances, often there is an agreement where one of the parties wants to keep the family home & may require additional funds to pay the other party out. Generally, if a loan changes borrowers or the ownership on the title changes, the Lender will require the borrowers loan to be reassessed.
A ‘dream’ is simply a desire, without financing
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Phone : +61 411 019 534
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