Scared to apply for a home loan? You’re not alone. Fear of rejection has stopped one in five Aussies from applying for finance over the past year. We explain what’s driving this fear, and how you can boost your chances of getting approved.
No one enjoys rejection. But despite this, there are plenty of times in life when we put ourselves in a position where rejection is a possibility.
From applying for a new job to asking the love of your life to marry you, the risk of a knock back isn’t too far away.
Yet we give it a go because the rewards of success outweigh the disappointment of being turned down.
It’s the same when it comes to applying for a home loan.
Sure, you could get a ‘no’ from a lender. But if you get the thumbs up, you’re on the way to buying a home!
This is worth bearing in mind because a new survey by Finder shows that over the past year, one in five (19%) Australians have avoided applying for finance, including home loans, out of fear they’d be knocked back.
The rejection concern that bothers borrowers
According to the research, one key aspect of being knocked back for a loan raises particular concerns for people – and that’s what rejection could do to their personal credit rating.
The thing that is much more likely to impact your credit rating is applying for a loan in the first place.
When you submit a loan application, the lender will usually take a look at your credit report. This is called a ‘hard enquiry’.
It is these enquiries that can lower your score, and they can stay on your credit file for up to five years.
That’s why it makes sense to minimise the number of loan applications you make.
Better still, try and stick to one application and get it right the first time. And that’s where we can really help you out.
How to overcome fear of home loan rejection
Applying for a home loan can be nerve-wracking. After all, there’s a lot riding on loan approval.
But if fear of rejection is holding you back, there is a simple solution. And that’s getting in touch with us.
We can walk you through your credit report to explain any issues that could raise concerns with a lender. And if your credit score is a little low, we can share tips on how to improve it.
Keep in mind though that your credit score is just one piece of the picture that banks look at.
We look at your total position in terms of home loan readiness.
Your income, household expenses, any other debts, and a variety of additional criteria that vary between lenders, all go into the mix of factors that decide whether you get the green light for a loan.
We’ll review it all, help you iron out any kinks in the application, and then line you up with a lender (and loan) that’s a good fit for you.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
As property prices hit record highs across a number of cities, it’s no surprise that new home loan balances are also nudging towards fresh peaks. Today we’ll reveal what the ‘average’ new home loan is in your state, and provide you with some handy tips to help bring down your balance sooner.
It’s great news for home owners, but not so good for buyers, who may have to take out a bigger loan to fund a property purchase.
On the plus side, not everyone is having to upsize their home loan.
In some cities, new mortgage sizes are staying pretty still or becoming slightly smaller.
What’s the average in your state?
Across Australia the ‘average’ new mortgage is at a record high of $626,055 as of May 2024, according to the Australian Bureau of Statistics. That’s up from $584,607 just 12 months earlier in May 2023.
However, ABS data shows plenty of variation in new loan sizes in different states and territories.
Here’s what’s happening across the country:
NSW – the average new home loan size is currently $767,584, up from $720,029 in May 2023.
VIC – average new home loan is $601,891, slightly up from $598,949 in May 2023 but well below the peak of $651,364 in January 2022.
QLD – the sunshine state’s average new home loan size is $586,627, a solid increase on the May 2023 average of $521,609.
SA – average new home loan of $541,775, a big jump on the May 2023 average of $467,438.
WA – average new home loan of $538,860, up from $472,080 in May 2023.
TAS – the Tassie market has seen very little movement in new loan sizes. The current average is $462,324, just a few thousand dollars shy of the $465,313 average in May 2023.
ACT – the average new home loan across Canberra is $614,242, up from $589,130 in May 2023.
NT – in the Top End, the average new home loan has increased slightly, currently sitting at $437,427 compared to $424,873 in May 2023.
How to potentially whittle away your home loan sooner
No matter where in Australia you are buying a home, managing a home loan can be stressful at a time when interest rates are high.
So, it’s important to look for ways to help ease the pressure.
Choosing an offset home loan, for example, can let you put spare cash to work by helping to lower your monthly interest charges.
It can also allow you to build up a savings buffer while also reducing the overall interest you pay on the loan, and thus, bring the balance down quicker.
If you are unlikely to have substantial savings, looking for a loan that lets you make small, extra repayments at no additional cost can be a way to pay down the loan sooner, and save on interest costs.
Even something as simple as switching from monthly to fortnightly loan repayments could deliver savings on your interest repayments over the course of the loan.
Paying half the monthly amount every fortnight can mean paying the equivalent of an extra month’s repayments each year, helping you forge ahead with the loan without too big an impact on your household budget.
What matters is that you speak to us about a mortgage that suits your unique needs. One that gives you the benefits of the loan features you need, plus a competitive interest rate.
So if you’ve got your eye on a potential new home – or just want to find out your borrowing capacity so you can start searching – get in touch with us today.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
The new financial year has kicked off with a bang for first home buyers! A whopping 45,000 more places have opened up for them under the Home Guarantee Scheme, as well as 5,000 more spots for single parents. Here’s how it could help you buy a home sooner.
Home ownership has long been the great Australian dream, but high property prices are making it tough to save a 20% deposit for many young families.
That’s where the federal government’s Home Guarantee Scheme (HGS) comes in.
It gives first home buyers a leg up into the property market even if they have just a 5% deposit, and it’s proving to be very popular.
Let’s take a closer look at what’s involved by answering a few FAQs.
What is the Home Guarantee Scheme?
The HGS helps first home buyers and single parents buy a place of their own even when they have a small deposit.
Essentially, the government acts as a guarantor for the home buyer’s loan, so there is no need to pay lenders mortgage insurance, which can be a big saving on upfront costs.
In fact, not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit amount.
Who does the scheme help?
The HGS covers three separate programs, each with a different type of home buyer in mind.
The First Home Guarantee helps eligible first home buyers get into the market with as little as a 5% deposit. From 1 July 2024, an extra 35,000 places became available.
The Regional First Home Buyer Guarantee is dedicated to helping first home buyers who live in regional areas buy a home with just a 5% deposit. An extra 10,000 places have opened up for the 2024-25 financial year.
The Family Home Guarantee supports eligible single parents to buy a home with as little as a 2% deposit. This will help up to 5,000 families this financial year.
Am I eligible for the Home Guarantee Scheme?
You’ll need to tick a few boxes to be eligible for the HGS.
In particular, there are limits around the maximum purchase price for a home under the scheme. The upper limits vary between cities and across regional areas from state to state, and are adjusted each financial year.
One way to find out if you’re eligible is to call us and we can walk you through the various requirements.
Do all banks support the Home Guarantee Scheme?
No. Lenders choose to be part of the HGS, and while there is a reasonably wide choice of banks to pick from, not all lenders have signed up.
The Real Estate Institute of Australia says the “best way to see if you can qualify for the scheme and seek pre-approval is to speak with a mortgage broker”.
To date, mortgage brokers have secured up to 80% of the HGS placements, and we can guide you through the application process, answer any questions you may have about buying a first home, and recommend a home loan option suited to your needs from the lenders that are part of the scheme.
Call us today to find out more about buying with a 5% deposit – and zero lenders mortgage insurance. You could be in your own home a lot sooner than you expected!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
After two years of relentless rate rises, the question that every mortgage holder has is… When are interest rates finally going to start falling?
If we were answering this question even just one month ago, the outlook was a little different. That is the thing about the mortgage market: it is evolving every single day, responding to the economy and evolving as new trends and data points become available.
As of May 2024, this is what is expected of the mortgage market for the rest of 2024.
People are going to fall further behind on their home loans
As expected, when interest rates increased by over 4% in less than two years, the number of households struggling to make their repayments increased.
At Suncorp, home loans in arrears of 90 days or more have climbed $85 million in the first quarter of 2024 to $510 million. It now accounts for 0.73% of the bank’s gross loan assets. At CBA, home loans of 90 days or more were 0.61% in March, up from 0.52% in December 2023 and 0.43% at the end of 2022.
It is expected that loan arrears will continue getting worse, which could lead to more bankruptcies and repossessions. Traditionally, this has prompted more housing stock on the market and a correlating slowdown in property price growth.
Interest rates won’t rise
For those of us who currently have a home loan or who are looking to buy a property and take out a loan shortly, what we want to know is: can interest rates possibly get any higher?
In early May, Judo Bank economic head Warren Hogan suggested they could! He predicted that there could be as many as three cash rate hikes over the remainder of this year, potentially seeing the cash rate soar above 5% and home loan rates hitting 7%-8%. He pointed to stubbornly high inflation as the cause. Fortunately, he is in the minority with his forecast, and he did say he would closely monitor data and trends over the coming weekend and months, adding: “Hopefully, I’m wrong.”
Interest rates might fall
Experts and economists are expecting that’s we will see interest rates start to fall in 2024. The Big 4 bank’s current predictions are:
ANZ – November rate cut
CommBank – September rate cut
NAB – November rate cut
Westpac – November rate cut
This is very welcome news for any and all Australians who have a mortgage or plan to have one. A rate cut of 0.25% is equivalent to a saving of around $100 a month on an average $600,000 home loan.
Activity levels are falling
According to Pexa, In the first quarter of 2024, the number of new loans issued fell 17% on the previous quarter. Refinancing levels in the same quarter are down 16.4%.
There’s no denying that higher interest rates have boxed plenty of Australians into their current loans, as they cannot afford to refinance or to move house.
However, many don’t realise there are options to restructure debt and rearrange their financial situation to be more streamlined. We work with hundreds of Australians every year to negotiate lower rates on their home loans, optimise their financial situation and help them pay off bad debts and increase their asset base along the way. If you would like an obligation-free chat, contact us today!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: This information is provided without considering your specific objectives, financial situation, or needs. Therefore, it’s essential to evaluate its suitability in light of your individual circumstances before taking action.
We all love the idea of landing a bargain property, but for most home buyers, the real issue is whether they are overvaluing a place and paying too much in the process.
Buying a home is exciting, but it’s perfectly natural to be nervous given that you are likely committing to spending hundreds of thousands of dollars (or millions!). But with a bit of research, and some other handy tips, you can help protect yourself when the bidding or negotiation begins.
Why it is important to pay a fair price
Paying above the odds for a home can have serious financial impacts. The more you pay, the more you may need to borrow to fund the purchase. That can mean paying higher loan repayments, potentially leaving your budget stretched, especially if interest rates rise.
The worst case scenario is you get caught out by a bank valuation that comes in lower than the purchase price, leaving you facing a funding shortfall.
The question is – how do you know if the asking price for a home is in line with the market or if it is completely over the top?
Research helps you nail the market
One way to understand what a home is worth is to have a pre-purchase valuation. This involved a professional valuer examining the property and arriving at a value based on factors such as the location, size and condition of the home. The catch is that a valuation can cost between $200 to $600. It also takes time to organise and in a fast-moving market, the delay could see you miss out on a property.
A cheaper option is to do plenty of your own research. Websites like realestate.com.au or domain.com.au can show the median house and apartment values for individual suburbs. This will give you as good starting point, though as each home is different, you will need to drill down further.
Factors that can impact market value
Some factors can see broadly similar properties have very different market values. Things to watch out for include:
The lot size a house sits on.
The number of bedrooms and bathrooms.
The condition of a home.
Availability of parking (off-street parking is a plus!)
Orientation. North-facing homes receive more natural daylight, and so often require less artificial lighting or heating.
Energy efficiency. PropTrack found that three out of five (59%) buyers say eco-features such as solar panels are important to help save on power bills.
The street. Be wary of streets that become a commuter parking lot on weekdays.
Views and outlook.
Zoning and planned developments.
Bearing all these features in mind, check out recently sold properties like the one you are interested in buying. Pay particular attention to the final sale price, not the asking price. It is the selling price that sets the market.
Don’t be afraid to negotiate
If you have done your homework, you should have a reasonable idea if the asking price of a place is close to the mark or if it is wishful thinking. Remember, you may also have scope to pay less by negotiating on price. Bear in mind though that the longer negotiations take, the greater the danger of someone else jumping in and snatching the property.
Get in touch with us about pre-approval
Give us a call to discuss some of the benefits of home loan pre-approval. It can help you act quickly when you see a home you are interested in buying, and it sets a buying limit so that you can negotiate with confidence.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any
There is something very special about moving into a newly built home or putting the finishing touches on a major renovation. Maybe it is the look and feel of new paint and fresh flooring, or just knowing you have kicked a worthwhile goal.
Whatever the motivation, plenty of Australians are rolling up their sleeves, with the value of building approvals jumping 14.7% from December 2023 to January 2024. Meanwhile, on the renovation front, we are not just pimping our pads for looks and lifestyle. Almost half the home renovations carried out in 2023 were designed with a ‘green’ focus to improve energy efficiency, according to Houzz Research.
The upshot is that planning a new build or renovation can be exciting and rewarding. But long before you kick back and enjoy it, you may need to decide how to pay for it all. And a constriction loan could be the right tool for the job.
How do construction loans work?
Construction loans work a bit differently from regular home loans. Instead of receiving a lump sum from the lender, which is usually the case with a traditional home loan, a construction loan drop feeds funds in line with various stages of the project.
If you are building a new home, a lender will typically make progress payments across give main stages:
Laying the slap
Erecting the frame
Reaching lock-up
Fitting out the home, and
Completion of construction.
This arrangement can offer valuable advantages.
For starters, paying out smaller sums during the construction period may provide a level of protection for the borrower against a building being paid for work that is not completed. In addition, while the project is underway, the loan interest is only calculated on the funds drawn down, not on the final total value of the loan.
During the constriction period, you will generally be asked to make interest-only payments. This can be a lot kinder on your budget than principal plus interest payments, especially if you are renting while builders are at work.
What to watch for with construction loans
Building projects do not last forever, and neither do construction loans. When your home or renovation is complete, your construction loan will typically roll into a regular home loan.
It can all sound very simple, and usually it is. However, a key challenge with construction loans is that they are not offered by every lender.
It is important to speak to us at an early stage. We can help you identify lenders with construction loan options that meet your needs and budget, plus guide you through the application process. Our support can save you time and leave you free to focus on the project.
If you are looking to build or renovate, talk to us about your funding options and we will aim to help you get the ball rolling on your construction project sooner.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Do you need a home loan in a hurry? You could be in luck. Plenty of lenders are keen to crunch loan approval times, but there is a lot of borrowers can do to potentially speed up the process too.
Finding a home to buy can take time, and when the right place comes along it can feel as though you need to sign the sale contract fast to stake your claim. But from there, you are going to need a home loan, and that’s where timing becomes critical.
The good news for home loan applicants is that average turnaround times have reached new record speeds at some of the bigger banks, while processing periods for smaller lenders have also reduced, according to the latest Broker Pulse Survey. But don’t let that lull you into a sense of complacency.
It is important to have your loan ready to go to by settlement, usually six weeks after you have signed and exchanged congrats (however this period of time can potentially be negotiated with the seller). Otherwise, if you don’t have finance sorted by settlement date, the seller may be able to charge interest and penalty fees.
So, there can be a lot riding on getting your home loan approved in a timely fashion.
The general rule for loan approval times
How soon your home loan can be arranged often varies between lenders. Some lenders boldly claim that it can take as little as an hour, but that is not usually the case.
To play it safe, allow about four to six weeks from the time you submit your application to have the funds available.
But if you require funds sooner than that, then it could be a matter of us helping you line up a lender with quicker turnaround times (and then having us hassle them a bit for good measure).
What is usually more important is that you focus on the home loan that matches your needs, rather than racing in for a mortgage that can be arranged in record time.
5 ways to help speed up the home loan process
Borrowers can do plenty to try and speed up the loan process. Here are five steps you can take to help keep application and approval times tight:
1. Talk to us first
We can explain your borrowing power, let you know how big a deposit you may need, and check if your finances are in the shape it takes to get the green light from lenders. We also have access to resources that estimate how long approval times currently are with potential lenders.
2. Get your paperwork together
Gather all the documents a lender is likely to ask for, including copies of payslips, birth certificates and other ID, plus bank account statements for the past 36 months. If you are unsure, this is a step we can help you with.
3. Try and hold off on any major changes
Big life changes, such as starting a new job or business just before you apply for a loan, can leave lenders asking questions. Try to maintain your budget – your usual spending/saving patterns – and your current job, to avoid a ‘please explain’ from lenders, which could delay the loan approval.
4. Double-check that you have completed the application accurately
Any mistakes on your application form can see the paperwork returned to you for corrections, putting the brakes on the whole process. Once again, we can help minimise any potential discrepancies in your application.
5. Ask us about loan pre-approval
Waiting until you have paid a deposit to apply for a mortgage can be a high-stakes high-stress strategy. Loan pre-approval is a way to help you speed up the loan application process while also potentially boosting your bargaining power with vendors.
Call us today for more tips on getting your loan across the line, we would love to help you move into your new home sooner!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Applying for a mortgage when you are self-employed can have you jumping through more hoops, but it does not need to deter you from getting into the property market. Here are 4 tips to help you apply for a mortgage like a boss.
Being your own boss does have its advantages: the flexibility of setting your own hours, building your own business to represent your values, having someone else get you a coffee… but when it comes to home loans, you may have more to prove than the average applicant.
Lenders may view you as a little more risky. That is because, in their eyes, you may not have a steady paycheck to make those all-important repayments. But being self-employed does not need to stop you from getting your slide of the great Australian dream. Planning ahead and knowing what lenders generally look for could give you an edge when it comes to mortgage application success.
Get your finances in order
As a self-employed applicant, having rock-solid finances is important. Even if your business is booming, most lenders will see you as more of a risk for defaulting. That is because self-employed incomes can be less consistent.
Lenders want to know if the likelihood of making regular payments is high. To mitigate risk, loan options available to you may have a lower loan-to-value ratio (meaning you may need a higher deposit) and/or have a higher interest rate.
To prepare to apply, consider getting your finances in check by:
Building up a healthy credit score.
Lowering your living expenses by focusing on the essentials.
Saving up a healthy deposit (aka genuine savings) and cash buffer.
Running your business on accounting software such as Xero, MYOB etc, so that you can provide up-to-date and accurate profit and loss statements.
Gather your documents
It is important to keep your business and personal finance documents up to date. For verification of income, many lenders need two years’ worth of lodged business and personal tax returns.
It is a great idea to tell your accountant in advance that you are planning on applying for a home loan. That is because some of the financial wizardry they apply to lower your tax bill might work against your application and lower your borrowing capacity. Also, keep in mind that business owners who do lots of “cash jobs” can find it harder to obtain a home loan because they have less income to show for their work.
On top of running your credit score, some lenders may want statements from loans and credit cards for proof you can make regular repayments. They may also want to see verification of assets such as any property, savings, and investments.
Some lenders may want to see everything when applying for a loan and some may need less. Some offer low-doc loans if you don’t have extensive documentation, but they may come with higher interest rates or the need to pay lenders mortgage insurance (or both).
Exactly what documents are required depends on the lender and the type of loan.
Choose your lender wisely
Not all lenders are comfortable providing self-employed loans for the reasons mentioned above. And every time you apply for a home loan your credit history is “pinged”. The more this occurs, the more of a red flag this may pose to lenders.
So, targeting lenders that have a track record of approving self-employed loans might be a wise move.
Having a reputable mortgage professional on your side may be helpful here.
Get in touch with us today
Just as you will want to give your accountant plenty of notice, so too will you want to reach out to a mortgage broker sooner rather than later. That is because we can help you work out your borrowing capacity and provide you with other tips that you can start working on that may eventually help make your application more attractive to lenders.
If you are self-employed and think you will be seeking a home loan in 2024, get in touch today!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
Advanced Strategies to Pay-Off Your Mortgage Sooner
Owning a home is a significant milestone, but the journey doesn’t end with just acquiring property. The next big step is to pay off your mortgage, and the sooner you can do that, the better. Not only does it bring a sense of accomplishment, but it also means financial freedom and peace of mind. If you’re looking for advanced strategies to pay off your mortgage faster, you’re in the right place.
Understanding Your Mortgage
Mortgages might initially seem complex, but at their core, they’re straightforward, revolving around essential elements: the principal amount, the interest rate, and the loan term. Understanding the mechanics of your monthly payments, particularly how much is allocated to the principal versus interest, is vital. This knowledge empowers you to formulate effective strategies on how to pay off your mortgage faster, ultimately reducing the total interest paid over the life of the loan.
Refinancing Your Mortgage
One of the most effective strategies to pay off your mortgage sooner is refinancing. By refinancing, you might secure a lower interest rate, which can lead to shorter loan terms and faster payoff. However, it’s essential to consider the costs associated with refinancing and ensure that the savings outweigh the expenses.
Making Extra Payments
Every dollar counts when it comes to mortgages. Consider making bi-weekly payments instead of monthly ones. This simple change means you’ll make 26 half-payments or 13 full payments in a year, essentially making an extra payment annually. Additionally, rounding up your payments, even by a small amount, can shave off months or even years from your loan term.
Optimal Use of Windfalls and Bonuses
Have you recently received a tax refund or a bonus at work? Rather than succumbing to the temptation to splurge, consider a more financially prudent approach by utilizing these windfalls in the best way to pay off your mortgage. Making a substantial lump-sum payment towards your mortgage can have a profound impact, effectively diminishing your principal balance, and thereby minimizing the long-term interest burden.
Cutting Expenses and Budgeting
Reviewing and optimizing your expenses is a crucial step towards achieving financial stability and securing a brighter future. By identifying areas where you can cut back and making conscious choices, you can free up resources to improve your financial situation.
Analyzing Your Monthly Expenses
Tracking Your Spending: Begin by meticulously tracking your monthly expenses. This includes bills, groceries, entertainment, and any other outlays. Use financial apps or spreadsheets to streamline this process.
Categorizing Expenses: Categorize your expenses into essential (e.g., housing, utilities, groceries) and non-essential (e.g., dining out, entertainment, subscription services). This helps you distinguish where you have flexibility.
Identifying Patterns: Look for patterns in your spending. Are there areas where you consistently overspend? Identifying these can be a first step in reducing costs.
Cutting Back on Non-Essential Expenses
Dining Out Less: Consider cooking more meals at home and reducing the frequency of dining out. This not only saves money but also allows for healthier eating habits.
Cable Cord Cutting: Explore alternatives to expensive cable TV packages, such as streaming services or digital antennas. You can often get the same content at a fraction of the cost.
Subscription Services: Evaluate your subscription services. Are there any that you can do without or replace with more affordable alternatives?
Avoiding Potential Pitfalls
While making extra payments, ensure they go towards the principal amount. Some lenders might apply them to the interest first, so it’s crucial to specify. Also, be aware of any prepayment penalties and always read the fine print of your mortgage agreement.
The Role of Mortgage Brokers
A mortgage broker can be an invaluable resource in your journey to pay off your mortgage sooner. They can provide personalized strategies, insights, and even help you find opportunities for better rates or terms. Regular check-ins with a broker can keep you on the right track.
In conclusion, the dream of paying off your mortgage early is achievable with the right strategies and mindset. Every step you take towards this goal brings you closer to financial freedom and peace of mind.
Frequently Asked Questions
What are the benefits of paying off my mortgage sooner?
Paying off your mortgage earlier can save you thousands in interest, improve your credit score, and provide peace of mind by eliminating a significant monthly expense.
How can refinancing help in paying off my mortgage faster?
Refinancing can allow you to secure a lower interest rate, which means more of your payment goes towards the principal. Additionally, if you refinance to a shorter-term loan, you’ll pay it off quicker.
How does increasing my monthly payment impact my mortgage term?
By increasing your monthly payment, even slightly, you’ll be paying more towards the principal, which can significantly reduce the overall term of your mortgage.
Are there any penalties for paying off my mortgage early?
Some mortgages have prepayment penalties. It’s essential to check your mortgage agreement or consult with your lender before making extra payments.
Is it a good idea to allocate bonuses or tax refunds towards my mortgage?
Yes, using unexpected income sources like bonuses or tax refunds can be an excellent way to make additional payments on your mortgage without impacting your monthly budget.
How does setting a payoff date goal help in mortgage repayment?
Setting a specific payoff date can motivate you to stay disciplined in your repayment strategy and make necessary adjustments to meet that goal.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Why Home Loan Turnaround Times Are About to Blow Out Further
One of the biggest mortgage challenges that bubbled up during COVID-19 was the blowout in banks’ turn-around times. While most lenders were previously able to process and approve loans in several days to a couple of weeks, many of their processing times blew out to weeks and weeks – and for some banks, the turnaround time stretched on for months.
That bad news? These challenges are set to continue. With so many banks’ putting an end to pre-approvals, it’s putting extra pressure on other lenders, who can’t keep up with the demand.
As mortgage brokers, we do our best to help our clients navigate these choppy times, but it can be really volatile. We put a home loan deal forward to a bank recently and after submitting, this particular bank stopped taking applications, because they are at capacity in terms of being able to process loans.
Even though we submitted the deal before they announced this temporary cut off, they have refused to assess the deal. This is obviously really frustrating for the borrower, but it also makes us look really unprofessional in front of our client.
Add to this the fact that many banks have support staff based in India, in the grips of a harrowing COVID-19 outbreak, and it’s causing extra delays and dramas across the industry.
Frequently Asked Questions
Why are home loan turnaround times expected to increase further?
The home loan turnaround times are expected to increase further due to the ongoing impacts of the COVID-19 pandemic, increased loan applications, and the extensive verification processes lenders are implementing to ensure borrowers can service their loans.
How has the COVID-19 pandemic affected home loan processing times?
The COVID-19 pandemic has led to a surge in home loan applications due to low-interest rates, causing a backlog in processing. Additionally, lenders are exercising more caution, implementing extensive verification processes to assess borrowers’ ability to service loans, contributing to longer turnaround times.
What are lenders focusing on during the home loan application process?
Lenders are focusing on extensive verification processes to assess borrowers’ financial stability and ability to service loans. They are scrutinizing income, expenses, employment stability, and existing debts to ensure that borrowers can manage repayments even if circumstances change.
How can prospective homebuyers prepare for longer home loan turnaround times?
Prospective homebuyers can prepare by maintaining a stable employment history, having a clear understanding of their financial situation, reducing existing debts, and ensuring all required documentation is accurate and readily available to avoid any delays in the application process.
Are there any strategies to expedite the home loan application process?
Yes, having a clear understanding of your financial situation, maintaining a stable employment history, reducing existing debts, and ensuring all required documentation is accurate and readily available can help in expediting the home loan application process. Additionally, working with experienced mortgage brokers like Zippy Financial can provide guidance and support throughout the application process.
How does Zippy Financial assist clients in navigating through extended home loan turnaround times?
Zippy Financial assists clients by providing expert advice and guidance throughout the home loan application process. They help clients understand their financial situation, prepare necessary documentation, and liaise with lenders to ensure a smooth and efficient application process, mitigating the impacts of extended turnaround times.
We are dealing with an environment that is constantly changing, and if we, who are in the industry are finding it confusing and challenging, I can only imagine how borrowers feel! If you are concerned about your home loan, need advice or you are having trouble working out your next steps, we are on hand to help as much as possible. Contact our team of experienced brokers today on 1300 855 022 for a chat about how we can help you move forward.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
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Navigating the Path to Your Ideal Australian Home Loan
Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.
