Category Archives: Home Buyer Central

Are home loans just about interest rates?

“All home owners should be paying less interest on their home loans”.

That is very obvious, isn’t it?

When you are looking to buy a property and get a home loan, what is the first thing that pops in your mind? I bet it is something along the lines of “I want the lowest interest rate in the market and I don’t care who gives it to me. I will go the person, bank or whoever gives it to me”.

Now, wait a minute – is interest rate the only important factor when you are looking to buy a house?

Let me ask you a few other questions.

1. When you are looking to use the services of a specialist doctor, do you go to the cheapest or the best in the world?

2. When you are wanting to celebrate your anniversary or birthday, do you go to the cheapest restaurant or the one that provides you with quality food and service?

3. When you buy grocery, do you spend less money to buy slightly old food or pay the price to buy good quality food to feed your family?

Of course, there are always arguments that some places have specials and so on.

How is it that when it comes to the biggest debt of your life – your home loan – all you can think about is interest rate? I’m sure most of you are internet savvy and have spent hours looking for all that you could learn about home loans.

I am not sure if the banks want you to understand about other important features of home loans. One example is their other fees – like application fees, valuation fees, settlement fees, exit fees, mortgage insurance amongst other factors like understanding your goals, service, timeframes and what is not working with that particular bank right now! No, they never speak about any of that. Because if they do, then consumers (You) will go away to someone else who offers a comparably suitable product for you.

Home loan service

Unlike them, it is our job as mortgage brokers (at least the good ones) to do our due diligence by asking the right questions to find you the right home loan. Personally, for me, it is all about understanding your goals – what you want in the next few years – how do you want your lifestyle to be – before I can even talk about lenders, let alone interest rates.

Don’t get wrong here! I don’t want you to pay high interest rate and low fees because it beats the purpose. All I am trying to say is that service – talking to one person over the time of the home loan, someone who will consider your goals and needs and wants, year after year is as important as finding the right home loan. Walking into a branch or using online homeloan providers may not be the solution unless you know what you want!

I’d love to hear your thoughts contradicting me!

Renovate or move?

Australians love renovating their homes. Whether it is to improve the house value (investors) or to extend the family home, it all depends on the balance between what you want to do versus the finance required.

Renovating Family Homes

As your family grows, there is a dilemma about renovation versus moving to a bigger house. The cost of selling and buying a house can be more expensive than renovating. Ultimately, it could be as simple as adding another bathroom, kitchen extension or a whole new storey.

Before you can renovate your family home, consider the questions below:

  • Can you live through the disruptions during the renovation period? If you are expecting a baby, the last thing you want is more noise and stress!
  • When you have a family, consider if renovation will help you achieve the desired lifestyle and needs for you and your family. Are you renovating so that your children can still go to the same school and live in the same safe suburb? If so, an architect should be able to help you make the most of the space available.
  • Can you afford the costs of renovation and renting while your property is being renovated?


To renovate or move?

Here are a few general questions you can ask yourself to help you decide.

  • Are your renovation plans likely to be approved by your local council? If not, you might want to make some changes or think of another option.
  • Will your neighbors be supportive? There is nothing worse than upsetting your neighbors. It is social etiquette to let them know that you are renovating and there will be a certain level of noise.
  • Do you have enough time to manage the project? If not outsource it or schedule for another time, unless you have a partner who can help with managing the project.

Renovation for Investors

  • As an investor, consider the end value of your property. Sometimes if you spend $50,000 don’t expect your property to go up by $50k – it could be much less than that.
  • Renovations that are likely to increase your house value include a new kitchen, bathroom, a coat of paint, landscaping/decking. It is good to consider the taste of potential buyers and renovate accordingly.
  • Will the renovation be in style with the other houses in the street? If not, it could lower your house price.

Benefits of Renovating

Here is why you should be renovating.

  • Renovations add resale value to your house. Even if you don’t plan to sell now, when do you end up wanting to sell your house, they could add a substantial amount to your property value.
  • A few months of chaos can get you more space and a new look.
  • If you are an investor, renovations can form a part of your tax investment strategy.
  • Ultimately, renovation can help you achieve your choice and style of living, both interior and exterior, without moving houses.

Costs of renovating

  • Always get written contracts with tradespeople. This can help you keep an eye on the costs without letting them eat into your budget later.
  • One of the most time-consuming parts of the renovation process is getting council-approved plans. Unfortunately, this is a necessary part of the process and you need to take into account the time and effort involved.
  • Depending on how much of a disruption you will have, you may need to move out and rent until the renovations are complete. This means you are paying rent on top of the mortgage repayments and other reno costs.
  • Make sure that you take into account the end value of the project and that you don’t over capitalize.

Borrowing money for renovations

Here are a few different ways to fund your renovation.

1. Home equity loans: Let us assume your house is worth $600,000 and you owe $400,000 to the bank. Technically, you have $200,000 as equity. However, banks will only lend 80% (without LMI) or generally up to 90% (with LMI).

At 80%, your available equity will be $80,000.

80% * $600,000 = $480,000 minus $400,000 (loan) = $80,000 equity.

If this is all you need, then go ahead and top your loan. Banks may want to see contracts before they release the money.

2. Construction loan: Using the same example as above, where your house is worth $600,000, what happens if you need to borrow $200,000 for renovations? Your bank can lend based on the end value of the renovation.

Once build/renovation contracts are ready, they will carry out a valuation based on what they think the value will be post completion – called an ‘AS IF’ valuation.

In this case assuming the valuation is back at $800k, then you borrow 80% without LMI or up to the maximum that the bank will lend for construction (90% or 95% LVR).

Like a typical construction loan, your lender may control the release of funds in stages.

3. Personal loan: If you don’t have equity in your existing property and want to fund a renovation, a personal loan may another option. The disadvantage is that you will pay a high interest rate for a low amount of money.

Consider your options wisely and happy renovating.


Should I use a mortgage broker?

When home buyers think about finance to purchase a property, they have a choice between a mortgage broker or going to banks directly. I am a big advocate of mortgage brokers – not because I am one but because a good broker can help you build wealth through your property portfolio.

Mobile lenders or employees who work for the bank are employees and get paid anyway and may move from one lender to another.


So here are the advantages & disadvantages of using mortgage brokers for your home loan.

Advantage #1: Saves you Legwork

On average, mortgage brokers have around 25 to 30 different lenders on their panel. In terms of the number of loans, this means there are nearly 1000 plus home loan products. If you were to research each lender and their different loan options, you can spend days on end, trying to figure out which one to choose. Besides, you may not even know the names of certain lenders who have really good home loan products.

A mortgage broker can also steer you away from certain lenders who are not so easy to deal with.

Advantage #2: Saves you time

Mortgage brokers not only help you choose the right home loan, they also help you save time by filling out paperwork and liaising with your lender and other parties involved, from application to loan settlement and after.

On average, it can take anywhere between 2-10 hours or more from application to settlement to get your home loan approved. By using a mortgage broker, you don’t need to take valuable time out of your day to get your home loan approval.

Advantage #3: Wide panel of lender access

Some lenders work exclusively with mortgage brokers and rely on them to bring suitable business to the bank. You may not be able to call these lenders directly to get a home loan. Brokers may also be able to get special discounts from lenders due to the volume of business generated than you can get on your own.

Advantage #4: You may save some fees

There are different types of fees that are involved when you take up a home loan including application fees, legal fees, settlement fees, ongoing fees, valuation fees and LMI. Mortgage brokers can help you navigate through this maze and help you either choose loans with minimal/no fees or negotiate with lenders to get some of the fees waived which can save you 1000s of dollars.

Advantage #5: Customer Service

Most mortgage brokers are business owners and hence want to keep clients for the long term. Bank employees get paid at the end of the day whether they do justice or not and hence good mortgage brokers really take care of clients to provide excellent customer service.

Disadvantage #1: Broker’s interests may not be the same as you interest

Your ultimate goal with a mortgage is to get a loan with a low interest rate and fees and aim to pay it off quickly, not having the loan for a 30 year term offered by the lenders. Sometimes, mortgage brokers may suggest lenders who pay them extra commissions or because they need to meet volume requirements.

Disadvantage #2: Some lenders do not work with mortgage brokers

There are a few lenders who do not offer loans through mortgage brokers. Since GFC, there are a few lenders who have come back to offer loans through mortgage brokers. If you want a home loan from a very specific lender not on the broker’s panel of lenders, you may have to approach them directly.

Disadvantage #3: Not doing their due diligence

A majority of brokers are comfortable using 3-4 lenders on a regular basis whose policy they are familiar with. So, even though they have 25+ lenders on their panel, they actually don’t use the full range to check suitable options for clients – which means you may miss out on a good deal.

In conclusion, mortgage brokers are able to find you a suitable loan, but check out the person to see if he/she is the right person to help you. Work with a reliable mortgage broker with solid references and you should be able to secure the loan of your dreams.

Tips on easy home loan approval

I am a big fan of building relationships – be it with family or clients or anybody I come across (as long as I like the person). So I regularly schedule meetings with bank BDMs (Business Development Managers) to see how they can help me help my clients with their home loan approvals.

A couple of days ago, I met one of the BDMs and this was due an issue I had recently with the bank.

The basic discussion was around how the bank screwed up a loan approval for one of my best clients. She was a dentist and was borrowing less than 80% (no LMI) and they wouldn’t approve the deal until the last minute. The assessor kept asking for document after document and it got to a stage where I had to get higher authorities involved. This client had the capacity to buy a $700k property with cash and the bank wouldn’t approve the loan. How ridiculous!

Mortgage Application Approved Stamp Shows Home Loan Agreed

I want to summarise here some of the points discussed – hopefully it gives you some idea of how the banks work and why some applications are approved and some not..

Scenario 1: You may have the borrowing capacity and have the basic 5% deposit that you have saved. You assume your deal is straightforward and should be approved quickly.

Possible reason for decline: Bad conduct on your bank account(s) – meaning you frequently overdraw your account and pay late fees or overdrawn fees.

This indicates that you cannot live within your means and if the lender provides you with a bigger debt, there is the risk that you won’t pay it back.

Scenario 2: Another popular one that I often see is single applicants who want to buy a property. They are usually living with their parents rent free.

Possible reason for decline: No savings at all plus one or two credit cards. A bank assessor always looks for your capacity to save when they assess your file. If you are living with your parents and not pay any rent and yet don’t save much, how will you manage to make repayments on your mortgage debt?

Scenario 3: You have good conduct on your bank accounts, have saved the 5%, are in a steady employment but have two or three credit cards – all maxed out plus a car loan and a personal loan. Your servicing is very tight.

Possible reason for decline: The number of credit cards and other loans indicate that you are struggling to live within your means and it can be risky approving your home loan.

Apart from the above scenarios, sometimes bank may not approve your loan because of credit scoring. This is different from your credit file. A combination of external and internal factors may result in a loan decline.

So click here to download my top twenty tips to get your loan approved.

Happy shopping and remember I’m only a phone call away ((03 9005 3983)- should you want to discuss your home loan needs.

No LMI loans?



Most home buyers have heard of LMI or lender’s mortgage insurance.

Lenders consider it a risk when they have to lend you money more then 80% of the property price. They will then insure this risk through a mortgage insurer and they pass on this charge to you in the name of ‘lender’s mortgage insurance’ or ‘LMI’. This is a one off premium you pay your lender for the privilege of being able to borrow more than 80% up to a maximum of 95%.

However, recently one of our lenders advised that if you belong to any of the fee for service industries below and fulfil their lending criteria, you may be eligible for a mortgage without paying any LMI.

  • Accounting
  • Doctors
  • Commercial real estate
  • Medical specialists
  • Corporate transactional banking
  • Other Health care professionals
  • Financial planning
  • Dentists/Orthodontists
  • Insolvency
  • Veterinarians
  • Insurance broking
  • Engineers
  • Legal Architects
  • Not-for-profit
  • Quantity surveyors
  • Strata Environmental sciences
  • Residential real estate
  • Geological/geotechnical sciences Resources
  • Valuation services
  • Private and property clients
  • Actuarial services

If you would like to know more, contact us on (03) 9005 3983 or via our form on the contact us page.