The Mortgage Brokering Process (Australia) - Full

 so you've saved money for a deposit and

you're interested in buying a property

but what happens next

welcome to the finance hub and networks

your one-stop shop for all things home

loans

applying for a home loan can be an

overwhelming process

especially if you've never gone through

it before

and that's where a mortgage broker can

help

a mortgage broker is a go-between who

deals with banks or other lenders to

arrange a home loan for you in this

video series we want to introduce you to

what you can expect when consulting a

mortgage broker

in the early stages of the process the

first step would be to speak with your

mortgage broker so that they can obtain

a clear understanding of your financial

position and the purpose of the loan

you're applying for

it's crucial to establish exactly what

your goals objectives and milestones are

because taking out a home loan can

affect all of this

there is no one-size-fits-all strategy

when it comes to home loans so your

broker will try and understand the why

behind your objectives

this is the most important step in

creating a real connection with the

client because the broker will be in a

better place to provide the right advice

bring a list of all your requirements

and future plans and come prepared with

lots of questions

get the broker to explain how each loan

option works what it costs

and why it's recommended to you

if you're not happy with any option ask

the broker to find an alternative

you don't have to take the first loan

you're offered you may have a preference

for a particular lender such as your

current bank

ask to see loans from other lenders as

well so you can compare

a home loan is a long-term debt

so even a small difference in interest

adds up over time

if you can get a lower interest rate

from another lender you could save

thousands of dollars your mortgage

broker will not only be able to assist

you with your current requirements but

also potential future property purchases

and refinancing

whether it's an investment property or a

commercial property

once your mortgage broker is up to date

with your requirements the second step

of the brokering process would be to

investigate your borrowing capabilities

in today's episode of the mortgage

brokering process

we'll look at how your broker will

complete a preliminary assessment of

your financial situation

the preliminary assessment is a very

detailed process where the mortgage

broker will identify any possible

problems from a lending point of view

they'll look at your income and expenses

your banking behavior and ability to

fulfill your commitments as well as your

saving patterns

they'll also calculate your borrowing

capacity or borrowing power

your borrowing capacity is the amount of

money a lender will loan to you

lenders calculate your borrowing

capacity using an assessment rate to

examine your application

generally they have their own assessment

rate based on how much risk they're

willing to take on

this is why your borrowing capacity may

vary from one lender to another

some lenders might also require you to

add a buffer to your home loan

this buffer helps protect you and the

lender from uncertainties in the future

to avoid defaulting on your loan or if

you were to face financial hardship due

to various factors

to calculate your borrowing capacity you

will likely need to provide information

about the number of applicants applying

for the mortgage

the number of dependents you have

how much your annual salary is before

tax

including other regular income from

investment properties for example

they'll also look at your living

expenses other financial commitments and

your combined limit of credit cards

store cards and overdrafts

let's look at an example

sandy would like to apply for a mortgage

herself

she has two dependents and earns 82 000

annually before tax

sandy doesn't have any other income

aside from her annual salary and her

monthly living expenses amount to two

thousand five hundred dollars and her

monthly repayments total to one thousand

dollars

she also has credit cards store cards

and overdrafts with a combined limit of

one thousand five hundred dollars

based on that a lender calculated that

sandy could borrow two hundred and

twenty six thousand and twenty two

dollars based on a five percent interest

rate over 25 years

remember

this is only an estimate of sandy's

circumstances you need to consult your

lender to get the exact amount you can

borrow

from there your mortgage broker can

assess which lenders can assist and

compare the most suitable loans at the

lowest interest rates

stage three of the mortgage brokering

process involves seeing if you qualify

for any government concessions and

grants

in today's episode of the mortgage

brokering process we will look at the

different grants and concessions on

offer to first home buyers across

australia

please note that the information

provided is current as of the time this

video was created

let's start with the first home owners

grant

this is a one-off government payment

designed to encourage and assist

would-be first-home buyers across the

country to purchase a property

it's a national scheme funded and

managed by each state and territory

under its own legislation

so the size of the grant and the

eligibility criteria attached to it

differs in each state and territory but

in most places it applies to first-time

property owners who are either

purchasing an existing home that has

never been lived in or building an

entirely new home

you'll generally have to plan to live in

the property as your home for at least

six months

each state government's website will

have all their first home owner grant

conditions listed so make sure to visit

the website below for more information

the grant is not means tested which

means your eligibility isn't subject to

financial considerations such as your

income

also several australian states and

territories also offer eligible

first-time home owners reduced rates or

exemptions on stamp duty which could

further reduce your costs

stamp duty is the one acquisition

expense that is likely to poke a big

hole in your budget

so it's worth checking with your

mortgage broker if you qualify for this

concession as well

next we have the first home loan deposit

scheme which launched on the 1st of

january 2020

under this scheme the government

partially guarantees some low deposit

home loans each year for eligible low

income and middle income earners who

have saved up at least a five percent

deposit

if you don't have a 20 deposit you would

usually need to pay lenders mortgage

insurance

so under this scheme eligible applicants

would need to cover 5 of the deposit and

the state government will provide a

guarantee to the lender of up to 15

percent of the loan

the scheme does have property price

thresholds so it's important to check if

the price bracket you're aiming for

falls below the cap

there are generally only 10 000 scheme

places available in a financial year

however the 2021 federal budget added an

additional 10 000 places to the scheme

and updated the price thresholds better

reflecting the property values in

capital cities

for more information please visit

www.nhfic.gov.eu

and navigate to the first home loan

deposit scheme as shown on screen

now that it's time to choose a product

how do you choose the right loan product

for your situation

in stage 4 of the mortgage brokering

process your broker will lay out the

framework for your next purchase

once you've rerun through your goals and

objectives your broker will move on to

an explanation of your loan options and

an eventual recommendation

you'll go through the deposit

requirement what banks will lend to you

based on policy what rates and features

may be most appropriate and how to

structure your home loan to be most

flexible and cost effective

remember

these options are based on your

borrowing capacity assessment results in

stage two of the process

a mortgage broker will help you decide

whether a fixed variable or even a split

loan is ideal based on your

circumstances

a fixed rate loan simply means the

interest rate is fixed for a set period

usually between one to five years

a variable rate home loan means the

interest rate rises and falls over the

life of your mortgage

this may happen in response to the

reserve bank changing the official cash

rate or it may merely be a business

decision by your financial institution

another example could be if you're

already an owner occupier

so you own the property you're living in

but now you're looking to purchase an

investment property

if your owner occupier property is

almost paid off

the lenders will likely suggest that you

use your home as security leverage to

secure the new loan

in cases like this finance hub and

networks have helped their clients avoid

needing to pay lenders mortgage

insurance by using their existing

property to secure 20 of the loan

either way your broker should always

look at the minimum amount of risk you

should take to meet your objectives and

goals

understanding your options is the most

important step of the process so once

your mortgage broker has run through the

different options and recommendations

take some time to go over all the

options again

consider all the pros and cons as well

as the recommendation from your mortgage

broker so you've met with your mortgage

broker and gone through all your loan

options

now it's time to prepare and submit your

application to the lender

in today's episode we'll cover the final

part of the mortgage brokering process

and explain how loan applications and

processing works

after choosing your home loan product

the next step in the home loan

application process involves completing

the bank application form

lenders also generally require a broker

to ensure that you complete a privacy

consent form that allows them to collect

and disclose personal and credit

information about you

you'll also need to submit documents

disclosing your income expenses assets

and liabilities

once your mortgage broker has all your

supporting documents and application in

order they'll submit it to the lender

and wait for conditional approval

at the conditional approval stage which

can last up to three months

you've met most of the bank's lending

policies subject to a few conditions

typically it means that you still have

to find a property so your home loan

will only be approved once you've

completed a property valuation

after the valuation subject to meeting

or the lender's requirements the lender

will generally give you unconditional

approval on your loan

this is when the lender has everything

they need and can confirm that they are

willing to approve your loan

they will issue a letter confirming

their approval so at this stage you can

relax

once you've signed the loan contract

your broker will return it to the lender

with any requirements that they need to

settle the loan

once the lender has certified that all

of your documents are in order

they can then advance the loan funds

they'll call your solicitor or

conveyancer who will book a settlement

time and date

as soon as the loan is advanced the

settlement has occurred and you're

officially a

homeowner mortgage brokers typically

provide ongoing service to their clients

long after the initial loan has been

settled

we can help review your interest rate

switch loan products

and monitor your property's value so you

can make good decisions about accessing

equity if you're looking into buying an

investment property

and there you have it the five stages of

applying for a home loan with your

mortgage broker

make sure to like and subscribe to learn

more about what's involved in your

property purchasing journey

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