Mortgages - An Introduction

Step 1 - Application

When you contact us we will ask you to provide some details.  This will enable us to begin the process of researching an appropriate loan.  We will give you a list of the documents we need to process your loan and arrange a time for a meeting.
This can be at your place or you can come to us.

 

Step 2 - Contact & Review

You can provide us with all other necessary information at the meeting.  We will then submit your loan to the agreed lender.

 

Step 3 - Approval Process

We will keep you informed regarding the progress of your loan application and let you know when it is approved.  We will then explain how final settlement will be processed.

 

 

Before you start to look for your home it is wise to establish how much you can borrow, and importantly, if you wish to borrow the maximum available.


This will be determined by your income, debts, liabilities and financial commitments, assets and an adequate deposit.  We can easily assist you with this initial task.


If you maximise your borrowing you may well have to, at least initially, make some changes in your lifestyle to service a large loan.  Finance brokers can help you calculate what may be available to you.


Once you know what your price range is, you can then proceed to find your home whilst starting the loan application process.  This is when we assemble the required documents, complete a loan application and then submit it to the lender that we have agreed is offering you the deal you like best.


The documents you need to provide are listed under the Documents You'll Need Tab.  These will vary depending on whether you are employed and earning a salary or are self-employed. 

 

What Information Will Lenders Require?

 

  • Details of employment such as evidence of a salary or wage sufficient to service the mortgage, that is pay interest and principal as regular payments over the life of the loan. If you are self-employed, you will need to provide the documents listed for self-employed under our Documents You'll Need tab. They usually incorporate a “stress test” using a higher interest rate than the current one to assess your capability to handle interest rate rises.
  • proof that employment is ongoing
  • a savings discipline that shows that you have been accruing cash or investment assets for at least six months (this can be cash in a bank account, managed funds, shares, etc.) evidenced by bank statements or holding statements
  • evidence that you actually have the required deposit for the loan
  • a credit check may be necessary to prove that no default loans exist
  • a valuation or other proof that the purchase price of the desired property matches its value.

In some instances other details may be required.

 

Deposit, Fees and Charges

Usually a lending institution will require a deposit.  That is, they will not finance the full price of the property.

Many lenders will require a 20% deposit but it is possible to obtain a mortgage with a deposit less than this but the lender will require you to pay Lenders Mortgage Insurance (LMI).  This is an insurance that you pay to cover the lender against your defaulting on the loan.
If you default, the insurer will compensate the lender for any loss.  The premium for this can be capitalised into the loan.

Bear in mind that there are other costs involved when you take out a mortgage and purchase a property.

Regarding the loan, there may be what the lender refers to as an establishment fee.  This can amount to $500 - $600.

The lender may require a fee for a valuation of the property.  This could be around $250.

There will be a conveyancing fee.  Conveyancing is conducted by a conveyancing company or a solicitor.  This process establishes, through a title search, that the vendor is in fact the legal owner of the property and facilitates the transfer of ownership.  Again, this can amount to $500 - $600.

A lender will require that the property over which it holds a mortgage is insured.  The cost of this will naturally depend on the size, type of structure, location, etc. of the property.  It is also highly advisable to have contents insurance, although the lender will not insist on this.

State governments levy stamp duty on a property’s sale price.  This is roughly proportional to the price paid.  The more expensive the property, the higher is the stamp duty.  You can use the stamp duty calculator on this site to arrive at the amount you will pay on any property.  This can be a substantial amount.  For example, the stamp duty on a $500,000 property would amount to $21,970. 

Other government fees include a mortgage registration fee, in this case $107.60, and a transfer fee of $1,362.  It is worth noting that you can reduce the amount of stamp duty payable by purchasing land and building.  This way, you only pay stamp duty on the land.

Everyone’s situation is different.  This means that for each individual there may be other costs such as removal expenses, temporary accommodation, etc.

 

In summary, it will pay to do your homework and assess your total costs including the purchase price.  Again, a finance broker can offer you assistance with all of this.

I was buying my first home and was extremely an...

Kristin Gustavsson
Read all

Top 10 tips for finding the right mortgage for you...

Google+FacebookBookmark SiteTell a FriendPrintGoogle+Facebook