Mortgage brokers are typically paid for introducing home loans to banks and mortgage lenders. In most cases a broker will be paid an upfront remuneration of between 0.5% to 0.75% of the loan amount. This is usually paid thirty to sixty days after the loan settles. In addition to this brokers are usually also paid (but no always) a trailing commission of between 0.1 to 0.4% of the loan amount, whilst the loan remains in place with the lender. This is usually paid on a monthly basis. For example, on a $400,000 loan, a broker may receive an upfront payment of 0.6%, which would equate to $2,400 and trailing remuneration of 0.25%, which would be $83 per month. There are no additional fees for borrowers to pay to cover this remuneration and as such they are not disadvantaged by engaging a broker as opposed to dealing direct with a bank.
In most circumstances you will require the following documents to obtain finance approval
• Copy of 100 points ID (passport, Drivers license, Medicare card)
• Last 3 months bank statements showing your savings history, and also your account that receives your wages/income
• Most recent statement for any personal/car loans and credit cards you currently hold
• Copy rates notice for any other property you own, rental income statement/lease agreement and latest home loan statements associated with that property
If you are a “pay as you go wage earner” (PAYG) then you will require
• Your most recent two payslips
• Your latest PAYG/group certificate
• Copy of your employment contract
If you are self-employed, you will require
• Last two years tax return for you, your company/trust and associated entities
• Last 2 years profit and loss and balance sheet for you company/trust
• Your last 2 years notice of assessments from the Australian Tax Office
Depending on your individual situation the following may also be required
• If a permanent resident or on a temporary visa, a copy of your passport page identifying this document
• A copy of your marriage certificate if you have statements or assets in a previous name
• Copy of the contract of sale for the new property you are purchasing, if you have signed a contract
• A copy of your building contact you have signed if applicable
• Centrelink notice for any family assistance or other government income received
• A copy of your industry membership if working in the medical, legal or accounting professions
• Letter from any individuals gifting you funds for the purchase of your new home
Please note whilst we have attempted to include all possible information that may be required, in some instances there may be other documents that the lender requires than what is listed from the above.
An offset account is an everyday bank account that sits next to your home loan and reduces the amount of interest you pay on your home loan, by the amount sitting in your offset account. For example if your home loan balance was $500,000 and you had $10,000 in your offset account, you would only pay interest on $490,000. If you removed $5,000 from your offset account, and your balance was now $5,000, you would pay interest on $495,000. Because interest is calculated daily, everyday you can leave funds in your offset account, will reduce the amount of interest you pay and assist you with paying off your home loan faster.
Just as it sounds, a fixed rate home loan involves locking in a certain interest rate for a fixed period of time, usually 1 to 5 years. The advantages of a fixed rate are
• Provides you with certainty of exactly what your repayments will be for the fixed rate period
• Your home loan rate is locked in the agreed interest rate even if interest rates increase
The disadvantages to a fixed rate home loan are
• You are usually limited in paying off extra during the fixed rate period (often $10,000 extra per year) and charges may apply if you exceed this amount
• Offset accounts, are usually not available
• Large break/exit fees can apply if you end the loan within the fixed period
A variable rate home loan, is based on an interest rate that can move up or down, which is at the banks discretion and often follows movements of the Reserve Bank of Australia.
• Variable rates are usually quite flexible, allowing you to pay extra at any time and redraw on extra funds you have paid
• Often an offset account is available
• Only limited fees apply if you pay the home loan out early and ahead of time (often between $300 to $400)
• If interest rates go up, you interest rate will likely go up and as will your repayments
• There is no certainty as to what your repayments will be in the future
Quite simply by looking at your income vs your expenses. Income can include items such as wages, rental income from investment properties, dividends from shares, family allowance and various forms of pensions.
Getting pre approval on your finance involves the bank assessing your borrowing power and how much you can afford to borrow and repay each month. Once submitted, pre-approval is usually received in 3 to 5 business days.
Typically your first repayment will be one month after settlement of your property. Your repayments will then be weekly, fortnightly or monthly depending on what you have chosen in your loan documents.
Mortgage insurance is cover taking out by the lender/bank when they are approving a client who has less than 20% of the purchase price of the property. Typically this can be added onto the loan.
Typically if you have your bank/broker organise the forms the funds will be paid on settlement of your property.