Tips On Finding the Right Melbourne Home Loan

Worth $1.4 trillion in our $5.7 trillion residential real estate market, home loans are one of Australia’s largest and most important capital markets. With historic low interest rates, and Australia’s continued fascination with home ownership and wealth building through property investment, it’s a market that shows no signs of slowing.  As such, the home loan landscape has adjusted to incorporate the different circumstances of buyers; and competition among lenders has intensified. Finding the right home loan in today’s market can be a complex process whether you’re a first home buyer or a seasoned investor.

Award-winning Melbourne boutique mortgage broker, Picket Fence Finance, assert the right home loan is imperative as the structure you choose can have a significant impact on your bottom line and future financial prospects. They understand, however, that with so many mortgage products to choose from, selecting the right home loan can be overwhelming.  Directors Cameron Stillman and David Kearns offer the following tips to help demystify the selection process:

Borrowing Capacity

The amount you can borrow will vary between lenders. Explains Kearns, “All banks have certain rules they need to abide by to determine how much one can borrow. Different banks have different serviceability calculators, so essentially what could be a borrowing capacity of say, $500,000 at one bank, could be $580,000 or higher at another. That’s why it always pays to speak with us first – we know which banks lend more. Additionally, if you are self employed, Bank A might not lend as much as Bank B, and vice versa.”

Stillman continues, “Other factors include whether your loan is for an investment property; what the valuation of your property – or the one you wish to purchase – stacks up at; and what your credit card limit is. For example, some people have a credit limit of up to $60,000 – they may never use it, but it impacts on borrowing capacity.”

Lines of Credit

Operating on a similar basis to a credit card, a line of credit is an agreed flexible loan arrangement. Stillman advises they’re not the most economical choice, “These days most loans can be treated like a line of credit. They are interest only facilities that attract a higher rate than your typical variable rate with an offset account. In the past we used to write a lot of line of credit loans, but these days more and more people are opting for an offset account, which is cheaper.

Mortgage Insurance

Stillman warns mortgage insurance is an additional expense that comes out of your own  pocket. “You’re not insuring your mortgage; rather it’s the bank insuring themselves against you defaulting – they’re taking out an insurance policy on your loan.”  He adds clients should weigh up if it’s worth delaying their purchase and saving extra towards their loan, “If you’re borrowing over 80% of the purchase price on a full doc loan, you have to pay mortgage insurance. That said, there are some funders who allow you to borrow 85% with no insurance, and in exceptional circumstances some will lend 90% with no mortgage insurance payable, but the parameters are slim.”

The Right Mortgage Advice

The above tips reinforce the importance of consulting with a qualified and experienced mortgage specialist when seeking a home loan. In today’s climate, taking the time to discuss your unique requirements with a mortgage broker is an investment in itself, with the potential to save both time and money.  

Deloitte’s 2015 Mortgage Report noted that customers still gravitate to the trusted relationships provided by brokers. This trend is echoed by Kearns, “Picket Fence Finance has enjoyed a particularly high enquiry level this year, and today’s savvy client understands the full service a boutique mortgage broker can provide. At Picket Fence Finance we not only have access to over twenty lenders; we have the knowledge and experience to secure the best possible match for your home loan needs.”

If you would like more tips on finding the right home loan, or wish to discuss your unique requirements with a mortgage specialist, call Picket Fence Finance for an obligation free consultation (03) 9696 3007 .

Picket Fence Finance Pty Ltd ABN 71 148 870 875 | Credit Representative 411186 is authorised under Australian Credit Licence 389328

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Sources Researched / Cited

• https://www.moneysmart.gov.au/borrowing-and-credit/home-loans/choosing-a-home-loan
• http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5609.0Main%20Features3Feb%202016?opendocument&tabname=Summary&prodno=5609.0&issue=Feb%202016&num=&view=
• http://www2.deloitte.com/au/en/pages/media-releases/articles/deloitte-2015-mortgage-report-let-the-good-times-roll-250315.html