Tag Archives: lenders

Recent changes in the home loan sector

Home Buyer, Money, , , ,

Investment lending changes

If you are an investor, you must be following all the changes in the lending sector. This has been going on for a while and you can read my June article here – in case you missed out on what was happening.

A week or so ago, I attended a session conducted by one of the lenders and here are some points that I picked up from the economist.

There could be a rate cut by the Reserve Bank of Australia (RBA) in November 2015, which could see cash rate as low as 1.75%. This will then stabilise and remain there for a while.

Apparently, businesses are growing and this is evident from the increased job ads on different job websites. I guess this is good news for the Australian economy and those of you looking for a job!

As for investor lending, I heard some interesting news on how it came to all the changes that are being made currently.

There are three regulatory bodies trying to control the investor lending – APRA, ASIC and RBA.

Australian Prudential Regulation Authority or APRA is focusing on the servicing side of home loans. Australian Securities and Investment Commission or ASIC is more concerned with NCCP or responsible lending. Lastly, RBA does it part by controlling cash rate.

All these bodies have been asking lenders to curb investment lending since mid 2014. In December 2014, APRA noticed that lenders were not slowing down and still lending increased LVRs to investors. Hence it stepped in to curb investment lending to 90%. The trend still continues where some lenders have now restricted investment lending to 80% and AMP has pulled out of the investment market till later this year. This is seen in the SMSF market and non-resident lending as well.

At the same time, ASIC being concerned about responsible lending saw that investors were still borrowing interest only home loans and hence stipulated rules around increasing servicing buffer and assessment rates to slow down lending. This has affected almost all lenders – but some specific ones who earlier assessed on actual rates like Westpac, Macquarie and NAB Broker.

The regulators are managing investment lending through different pricing structures not just for LVRs, but for investment vs owner occupied loans, sometimes even principal and interest vs interest only loans.

If you have seen interest rate changes for investors, beware that pricing changes are on the way for owner occupied loans as well, says the economist. This can be in the range of 25 bps to 50 bps.

It can be quite confusing with all these changes, so if you have any questions at all, feel free to touch base with us.

Should I use a mortgage broker?

Home Buyer Central, ,

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.

Banks-vs.-Brokers-300x145

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.