1st street Blog

Bridging loans – How to Get a New Property without Waiting for the Old One to Sell - 03/07/2018

It’s best to sell one property before buying a next, right?  Not necessarily.

What if you find your dream property before your finances can handle the purchase outright? Well, you have two choices.  The first is to wait until you can get the funds together and hope that no one else takes it off the market.  The second option is to contact a 1st Street for a bridging loan.

Bridging loans, or relocation home loans, will let you buy your ideal property before you have sold the existing one.  When there is a financial gap between sale and purchase, a bridging home loan can help to close this gap.  They can also supplement finances for building your new home before moving out of the current one.

For a bridging loan, lenders will take the security of both the original and new property and lend against them until the sale can be made.  Most lenders will offer a six month period to sell the home. If you choose to build a new home, most lenders will extend this period to twelve months.  During the gap period, the repayments may be interest-only, depending on the lender, and the rates are generally comparable to or slightly above the standard rate.

In essence, bridging loans allow you to tap the equity of your current home to get a quick injection of cash to help buying or building.  Some lenders will allow you to capitalize on this loan, meaning that you will not have to make loan payments during the bridge period.  You will own both properties at once until the purchase and sale are completed.

Once the sale has been made, the money is applied to the bridging loan.  The remainder then becomes an end loan, or a basic home loan for the new property.  If the interest rate was higher than standard variable, these rates will often drop to the standard variable upon completion of the sale.  If you have chosen to capitalize the bridging loan, then the new home loan may be slightly higher.

Though bridging loans are slightly more expensive than traditional mortgages, they are still quite affordable.  They also allow a buyer to take advantage of openings in the market; however, there are a few risks involved.  If the sale falls apart, then the purchaser may be saddled with two mortgages at once. Also, you will want to make sure that your lender will approve you for a bridging loan before going ahead with the purchase.  Most bridging loans will require a strong credit profile, or force you to recourse to private lenders with higher interest rates.  It’s best to consult a 1stStreet home loan specialist to develop a plan that takes all financial factors into consideration.

Before meeting with your 1stStreet mortgage broker, consider how long you will need the funds and whether or not you will be able to make repayments during the bridging process.  Have you acquired an unconditional contract for the sale property?  Is the bridging loan for an investment property or for a home? The more our home loan specialist knows about your financial situation, the better able they will be to assess how much you can borrow and which bridging loan will suit your circumstances best.

When it’s time for you to consider a new purchase, feel free to contact us.  At 1stStreet, we’re dedicated to helping you find the loan that’s right for you.

Are you entitled to a tax deduction on personal super contributions? - 14/06/2018

This financial year is the first time that employees can claim a tax deduction for their personal super contributions.

Personal super contributions made during the 2017-18 financial year can now be claimed as a tax deduction by most Australian workers.

This follows changes made by the government which came into effect on 1 July 2017.

Previously, only the self-employed, unemployed, retirees, or those who earned less than 10% of their income as an employee, could claim a tax deduction for a personal super contribution.

How tax deductible personal super contributions work

Personal super contributions are made using after-tax dollars, such as when you transfer funds from your bank account into your super. This money could come from savings, an inheritance, or from the proceeds of the sale of an asset, for example.

From 1 July 2017, the “less than 10% rule” was abolished. As a result of this change, if you make a personal super contribution, you can now claim a personal tax deduction for the amount of the contribution in your tax return. This will result in a reduction in your taxable income and, therefore, in your personal income tax liability for the relevant year.

Because personal contributions to your super fund (which you claim a tax deduction for) will only be taxed at 15%, this produces broadly the same tax benefit offered by salary sacrificing from before-tax dollars into your super.

This change is of particular benefit to you if your employer doesn’t offer you the option to salary sacrifice, or if you receive a windfall (such as a bonus), or a one-off capital gain (such as through the sale of an investment), that you’d otherwise pay tax on at your full marginal rate.

The Association of Superannuation Funds of Australia (ASFA) estimates that the rule change means an additional 850,000 people will be able to claim a tax deduction for personal contributions made to their superi.

But while there can be a tax benefit to making a personal tax-deductible contribution to your super, it’s worth remembering that you’re then generally not able to access the money you put into your super until your retirement.

What do I need to do to benefit?

In order to benefit from the change, there are some steps you need to take – in order – so it’s worth considering your position ahead of the end of the financial year. If you’d like to benefit from a tax deduction on a personal super contribution, in the following order, you’ll need to:

    1. Make a personal contribution to your super. The amount you choose to contribute is up to you, however, you need to bear in mind your contribution caps (for more on this, see below).
    1. Lodge a notice of intent to claim or vary a deduction for personal super contributions formii with your super fund, which your super fund will acknowledge, in writing.
  1. Following the end of the financial year and using the written acknowledgement from your super fund, which will confirm both your intention to claim a tax deduction and the amount you can claim, prepare and lodge your tax return.

What else do I need to know?

There are a few extra considerations to keep in mind. These include:

    • This incentive is available to anyone who is eligible to contribute to their super – although those aged 65 and over need to meet the work test to make a personal super contribution, and those under 18 can only claim a deduction for a personal super contribution if they also earned income as an employee or a business operator during the year.
    • If you’re claiming a tax deduction for a personal super contribution, the contribution will count towards your before-tax (concessional) contributions cap of $25,000. The super guarantee contributions your employer makes on your behalf, and any salary sacrifice contributions you may have made, also count towards this cap.
    • To ensure your ability to claim a tax deduction is not affected, you shouldn’t make any withdrawals or start drawing a pension from your super before your ‘notice of intention’ form has been lodged with your super fund.
    • Personal super contributions that you claim a tax deduction for will not be eligible for a super co-contribution.
  • If you earn more than $250,000 your concessional super contributions will be taxed at 30% (as opposed to 15%).

Speak to us to determine whether claiming a tax deduction on personal super contributions is the best strategy for your circumstances.

i ASFA, New super rules to benefit more than four million Australians, 2017, paragraph 7.

ii https://www.ato.gov.au/uploadedFiles/Content/SPR/downloads/n71121-11-2014_js33406_w.pdf

© AMP Life Limited. First published April 2018

More Sydney Suburbs open up for Middle-Income Earners - 06/06/2018

For several years, Sydney has been one of the strongest property markets in the country.  Each year has seen increases in median property prices across all Sydney suburbs.  This has changed in the last year, with interest from both local and foreign investors dropping to levels lower than anything seen in the last decade.

This means that those looking to sell in the Sydney area may have some challenges ahead.  However, it is a blessing for first-time home buyers and anyone looking to upgrade their home.  High interest rates and property prices have locked middle-income earners in Sydney out of a number of suburbs, but in the current climate, a number of suburbs have recently become more affordable.

Part of the good news is that Sydney’s economy is performing well despite the reversal in trending property prices.  Average national wages have increased by almost 3% over the last year, while Sydney home prices dropped by 3.5%.  In essence, property in Sydney has now become a buyer’s market.  Buyers can get a much better deal in properties due to lowered competition, while sellers are forced to lower expectations – and prices – in order to get ahead of the trend.  Demand has fallen in a number of areas including Bankstown, Holroyd, Canterbury, Mortlake, and Homebush.  Banks are now cutting cash rates significantly for first-time home buyers.  Altogether, this means that this is one of the best times in over a decade to buy a home in Sydney.

One of the most dramatic results in this drop in property values is that several suburbs that were previously inaccessible for middle-income earners have now become affordable.  The median price for units in Burwood Heights, Rydalmere, Dundas, Telopea, Pennant Hills, and Asquith have all dropped below $700,000.  The same goes for units in Annandale, Jannali, Lilyfield, and Condell Park.  Investors in these areas, seeing the current market trend, are dropping prices and rushing to sell, giving buyers bargaining power.  This means that units in 39% of Sydney suburbs are now affordable for those earning an average income, compared to 35% in 2017.

As of yet, this trend applies primarily to apartments, as the affordability of homes has remained the same.  In both 2017 and this year, 15% of homes across Sydney suburbs are affordable for those earning the average income.  However, lowered interest rates and competition are still being seen across the board.  This means that buyers will have more negotiating power and will be able to get better deals than some prospective first-time buyers have seen within their lifetime.

While this trend in pricing is expected to continue, Sydney home loans won’t remain low forever.  Lowered interest rates might soon be restricted and the Financial Services Royal Commission is likely to place stricter conditions upon lending in the near future.  What this means for those looking to buy is that the time is now.  Get your foot in the door, and you can lock in an amazing deal.

At 1st Street, we are dedicated to helping you find the right home loan for you.  We have offices in several states across Australia, and we have the knowledge and relationships to ensure you find the loan that fits your needs.  If you’d like to speak with a home loan specialist about home loans, upgrading, or first-time home buying, feel free to contact us.

How to make money by turning unwanted goods into cash$$ - 03/06/2018

Whether it’s not-quite-right gifts you have received or the results of an annual clean out, your trash might be someone else’s treasure.

A survey by online marketplace Gumtree found that Australians received more than 21 million unwanted gifts for Christmas in 2017 with an average value of $68 eachi.

If that sounds familiar, you might be among – or might want to consider joining – more than 3 million Australians who plan to sell an unwanted gift, and move forward with fewer belongings and a bit of extra spending moneyi.

Why sell secondhand?

Aside from unwanted gifts, a bout of decluttering or a good clean out can also unearth saleable items you’ve been holding onto.

Or perhaps you’re feeling weighed down by material possessions and simply want to live with less.

Whatever the reason, the good news is that in 2017, secondhand sellers in Australia collectively earned $36.2 billionii.

And there are plenty of buyers, with 86% of Australians saying they prefer buying secondhand over brand new, with the main reasons being that they can save money, find something unique and reduce waste by recycling useful itemsii.

With the high cost of housing, electricity bills skyrocketing and wages stagnant, cost of living pressures are another reason it makes sense to find a way to put a few more dollars in your pocket.

Where to sell secondhand

Of the 9.1 million Australians who sold something secondhand in 2017, 7.5 million did so onlineii.

Consider mass market websites like eBay, Gumtree or the Trading Post, search for local buy, swap and sell groups on Facebook or specialty sites relevant to the product you’re selling.

If online isn’t your thing, you could always hold a garage sale, or book a stall at a local market or fete.

Tips for selling secondhand

Wherever you choose to sell your goods, there are a few tips you should remember to improve your chances of a successful sale.

  • Do your research so you can set a realistic asking price.
  • Provide a detailed – and honest – description of the item you’re selling, including good quality photos. The more information you give the less chance there is for misunderstandings, which could bring the sale undone.
  • Ensure you respond to potential buyer’s questions quickly and update the description if necessary to actively manage the sale.
  • Allow potential buyers to view the item, especially if it’s expensive.
  • Be prepared to negotiate.

Happy selling!

i Gumtree, Unwanted Gifts Survey, 2017.

ii Gumtree, Secondhand Economy Report, 2017.

© AMP Life Limited. First published January 2018

Now is the time for tax planning - 03/06/2018

With not much time remaining to the end of the financial year, now is the time to start some serious tax planning.

Getting ready for tax time should go well beyond bundling receipts into a shoe box for your accountant. The run up to 30 June is a critical time for investors to take a good look at their investment portfolio.

Your goals and needs may have shifted over the year, and your portfolio needs to keep up with the right blend of assets to meet your goals. Even if nothing has changed on the personal front, investment markets don’t sit still for long.

Property investors in Sydney and Melbourne for instance, have enjoyed tremendous value gains over the past few years but this may mean the weighting of your portfolio is dramatically skewed towards bricks and mortar.

If that sounds like you, bear in mind rental yields on property are sitting at just 3.7% across our state capitals, and a significant chunk of your wealth could be tied up in low-yielding assets.

Consider new legislation

The need to review your portfolio ahead of 30 June isn’t just about market performance. It can also involve taking advantage of, or responding to, new legislation.

We’ve heard lots of speculation recently about Labor’s plan to scrap cash refunds for excess franking credits on Australian shares.

So far, this policy has been amended to include a so-called Pensioner Guarantee that will exempt full and part-time pensioners including those who are recipients of a self-managed superannuation fund.

Nonetheless, jumping the gun and altering your portfolio based on what may – or may not – happen further down the track is a gamble, and on this particular score it could be worth taking a wait and see approach.

In the meantime, plenty has happened in other areas that could directly impact your portfolio.

As a guide, since 1 July 2017 property investors can no longer claim the cost of travel to inspect a rental property. This could be a significant downside for investors who own an interstate property – especially if part of the appeal was a tax break on an annual trip to check out the property.

Also, from 1 July 2018, those aged 65 and over may be able to contribute up to $300,000 from the sale of their main residencei to super without the money counting towards contribution caps.

Each member of a couple can take advantage of the $300,000 limit, potentially adding $600,000 to their combined nest egg. It could be an option worth considering if you’re thinking about downsizing.

Get your portfolio in shape for a new financial year

Fine-tuning your portfolio ahead of 30 June can mean paying costs, and capital gains taxii may apply to any profit you make on the sale of an investment. The upside is hitting the new financial year with a portfolio that’s in tune with your goals and lifestyle.

Set a date to speak with us to review your portfolio before the end of the financial year. It can be a valuable step to ensure your money continues to work hard for you.

– by Paul Clitheroe AM
Paul Clitheroe AM, co-founder and Executive Director of ipac securities limited, Chairman of the Australian Government Financial Literacy Board and Chief Commentator for Money magazine.

https://www.amp.com.au/news/2018/march/new-rules-to-benefit-those-downsizing-for-retirement

ii https://www.amp.com.au/news/2016/may/what-is-capital-gains-tax

© AMP Life Limited. First published April 2018

How to deal with financial stress - 03/06/2018

 Close to one in three Aussies is feeling the pinch financially, with money worries reportedly leading to sleep loss, conflicts in relationships, isolation, as well as a range of other things.i 

These were the findings from the inaugural Financial Stress Index, compiled by global research firm CoreData on behalf of Aussie group, Financial Mindfulness, which indicated financial stress is not only being experienced by low-income households in 2017.i

Findings from the research

Statistics from the Financial Stress Index revealed the following about financially-stressed Aussies:i

  • More than 66% felt money worries led to feelings of fear, anxiety and/or depression
  • More than 60% felt their physical health was affected by financial stress
  • About 75% said they argued about money with their partner or family
  • More than 70% said they had problems sleeping due to money concerns
  • Nearly nine out of 10 said they often avoided social functions due to financial stress

What defines financial stress?

According to the Australian Bureau of Statistics, there are two financial stress indicators—these include financial-stress experiences and missing-out experiences.ii

Examples of financial-stress experiences:

  • You’re unable to pay various bills on time
  • You spend more money than you receive
  • You can’t raise $2,000 in a week for something important
  • You seek assistance from friends, family or welfare and community groups.

Examples of missing-out experiences:

  • You’re not able to afford a night out once a fortnight
  • You can’t afford a week-long holiday once a year
  • You can’t afford friends or family over for a meal once a month
  • You aren’t able to cover any recreational activities.

Actions that could help turn things around

Create a budget

Writing down what you earn, owe and spend could help you to create a workable budget, and at the same time let you quickly identify areas where you could be saving.

Save a bit of money regularly

Even a small amount of cash deposited on a frequent basis could go a long way towards your savings goals. In fact, 41% of Aussies say they save just a little at a time.iii

Pay cash and avoid credit card use

Credit cards are handy but they’ll often cost you as they typically charge high interest rates on top of the amount you’ve already taken out.

Put some emergency cash aside

This will help next time you bust your phone or need a last minute trip to the dentist. Plus, an emergency fund means you won’t have to rely on high interest borrowing options.

Talk money with your partner

One in two Aussie couples admit to arguing about moneyiv, so if you haven’t already, sit down and make sure you’re on the same page, and that both parties’ goals are being considered.

Call other providers

You more than likely have several product and service providers, and figures show you could save more than a grand annually on energy alone just by switching from the highest priced plan to the most competitive on the market.v

Consider the value of a back-up plan

Whether it’s life insurance, income protection (which provides up to 75% of your income if you can’t work due to illness or injury), or contents insurance to cover items that may be lost, damaged or stolen, there are a range of insurances that could help should the unexpected happen.

Care about your future income

The government’s Age Pension alone is unlikely to be able to cover a comfortable or even modest lifestyle in retirementvi, so putting a little extra into super could reduce the potential of further financial stress later on.

Where to go for assistance

If you or someone you know are feeling financially stressed, there is help and information available. We are always here to assist. Alternatively, visit the beyondblue website or phone Lifeline on 131 114.i CoreData / Financial Mindfulness Financial Stress Index – 2017 full press release

ii ABS – Household Expenditure Survey, Australia: Summary of Results, 2015-16

iii ASIC’s MoneySmart – How Australians Save Money table 1

iv Finder – Heated conversations: 1 in 2 Aussie couples argue about finances

Mozo: Sick of high energy bills? Aussies willing to change providers could be saving over $1,000 a year

vi The ASFA Retirement Standard – June quarter 2017

© AMP Life Limited. First published January 2018

Up and Coming Sydney Suburbs in 2018 - 21/05/2018

Sydney properties have steadily increased in value over the last decade, and it’s no wonder why.  Sydney offers excellent schools, a diverse night life, and a wealth of natural beauty for people who want to stretch their legs and soak in the wonders of the natural world.  In addition, properties in some Sydney neighbourhoods are set to raise in value as some of the planned developments of 2018 come into play.

These developments mean huge increases in value for certain suburbs in the following years.  In addition to making Sydney a major player in both travel and industry, they offer the wise investor a chance to get a hefty return on a timely purchase.  Here are the suburbs that are set to experience major changes this year:

  1. Badgerys Creek

Badgerys Creek is about to be the home of a new international airport.  Hands down, this is big news.  The construction has already begun, and soon this suburb and those that surround it are set to become prime real estate.  To accommodate these new developments, the New South Wales government has announced the creation of an entirely new suburb.  This suburb, South West Creek, will be placed along the southern fringe of the airport and will feature 30,000 homes.  And that’s not all.  The northern fringe of the airport is planned to feature another 300 homes and a town centre.

Homes in the suburbs close to the airport have already dramatically increased in value, and this is just the beginning.  In Silverdale, the suburb just west of Badgerys Creek, the median house price has increased in value over 20% in the last six months alone.  Liverpool, a suburb a short drive east of Badgerys Creek, now features a new office for the Western Sydney Airport Corporation.  The values of residential properties in this area are set to skyrocket before the end of the year.

  1. Marrickville

While the recent construction of WestConnex has caused the market value of many residences in the Inner West market to plummet, Marrickville has continued to boom.  In 2018, construction is planned for hundreds of apartment complexes and nearly 3000 new high-rises along Carrington Road.  To top it off, legislation is currently underway to rezone Marrickville’s industrial area into a creative complex housing offices, restaurants, cafes, and small bars.  The decision hasn’t been finalized yet, but if the plans go through, expect Marrickville to become one of Sydney’s new high-value residential suburbs.

  1. Edmondson Park

Edmondson Park is the site of one of Sydney’s new master-planned communities.  But, it’s not the only suburb to have this distinction.  However, Edmondson is also the site of a new railway station, a station that houses the South West Rail Line to link the residents with Liverpool.  This makes Edmondson Park an ideal suburb for those who prefer to use public transportation rather than cars.  Plans are also in motion to construct schools, a cinema, and more than a hundred shops.

The residential land in Edmondson Park has already been bought up by developers, and homes are currently being constructed in anticipation of a massive inflow of new residents.  There are high odds that the value of homes in this suburb will increase rapidly over the next year, so you may want to get your foot in the door while you can still get a good deal.

  1. Frenchs Forest

The key change driving the transformation of Frenchs Forest is the Northern Beaches Hospital.  The hospital is set to open this year, and with it will come massive rezoning and around 5000 apartments, as well as a large town centre.  A proposal has also been put forth to the New South Wales government to construct the Beaches Link Tunnel in order to connect the hospital with the Lower Northern Shore.  If the proposal goes through, French’s forest will house more than 10,000 apartments.

The hospital alone will provide jobs for more than 1300 people, so the residences near it will become prime real estate before long.  New roadway construction will make Frenchs Forest easily accessible, and current residents have seen the trend.  Residences in the neighbourhood are already hot commodities for investors, and if the tunnel is approved, you can expect the prices to rise even more.

  1. St Ives Chase

Recently, one of New South Wales best-ranked schools, St Ives Primary School, reduced the size of its catchment zone.  The suburbs surrounding St Ives Chase are now excluded, and this dramatically increased the value of residences in the suburb.  Over the last year, the median house price has risen almost 10%, and this trend is expected to continue through the following year.

With the chronic overcrowding of schools on the Northern shores, St Ives Primary has become even more appealing for parents.  As a result, St Ives Chase, once the cheapest suburb in the area, has now becom ethe most expensive and highly sought-after.  If you can find a property in this neighbourhood, you’ve got an investment that’s sure to increase in value over the coming years.

It’s a major investment to purchase a home, and wise investing is key for both retirement planning and providing for your children.  When considering how and when to invest, it helps it look at the predictions offered by home loan specialists.  Here is a breakdown of some of the main trends in Sydney for property prices and interest rates for 2018.

Given the high prices of homes in the current market, you’ll want to make sure you can get the best Sydney home loan you can.  For this, you’ll want a qualified and experienced Sydney mortgage broker, someone who’s familiar with the area and can act on your behalf to secure home loans with the lowest interest rate, in suburbs that will increase in value over the years.  Home loan specialists can make sure that you know about the intricacies of the real estate market, giving you all the information you need to find a basic home loan tailored to your needs, and helping you to invest in a home that will increase in value over the years.

When it’s time to invest in your new home, make sure to find a qualified Sydney mortgage broker that understands both your needs and the current market.  With home values across Sydney raising steadily, you’ll want to find the best deal you can on your home loan.  If you have any questions or would like more information, contact 1st Street.com.au  anytime.

If you have an Interest Only Loan, it’s time to get smart! - 01/05/2018

In the current lending environment, borrowers need to carefully look at whether their interest-only mortgage stacks up.

Lenders have lifted rates for interest only loans and are now offering incentives for principle and interest loans to make them more attractive to borrowers.

While interest on investment properties can be tax deductable, interest only loans make it harder to build equity. So therefore borrowers are heavily reliant on a property’s price to rise to improve their position.

For those currently with interest only loans, they should consider switching to principal and interest repayments to start paying down the loan plus gain a reduced interest rate.

Borrowers not yet ready to switch their interest only loan repayments should at least begin to prepare and budget for future principal & interest repayments.

The decision to switch to principal and interest repayments is an important one for borrowers so please speak to your 1st Street mortgage broker today to discuss your options.

Why you need a digital wallet - 03/04/2018

The concept of currency has come a long way and digital forms of currency are rapidly substituting traditional banknotes. But what exactly is a digital wallet and is it something you should think about getting?

  1. Digital wallets are just a digital version of your wallet

Just like your everyday wallet, you can fill your digital wallet with credit or debit cards by manually entering your card information or uploading a photo of your card. When it’s time to make a purchase you simply tap it at the payment terminal and use a fingerprint or PIN code to authorise the transaction. Not all retailers accept this technology yet but this is rapidly expanding across Australia. They can also be used to store payment information (eg. credit card or bitcoin) for exchanges to anyone else in the world securely, quickly and affordably.

  1. They don’t have to be on a smartphone

Despite smartphones being one of the biggest platforms for digital wallets, the technology is expanding amongst other large tech corporations. Fitbit has now adopted the digital payment platform so that you can access a digital wallet on your wearable device. Similarly, Paypal have introduced e-wallets in the form of wristbands for party goers at festivals to pay for food, drinks and merchandise using their wristband.  

  1. They save money and time

Perhaps the biggest advantages to recognise about digital wallets is that they save money and time. Excessive costs of international money transfers as well as many other banking transactions are reduced, whilst offering a much faster, more streamlined and efficient user experience. It also takes away the hassle of having multiple cards for numerous accounts – this way you can operate them all at the same time.

  1. They do more than just transfer money

Digital wallets actually have various functions, much more than just the transfer of financial funds from one party to another. Other features include:

  • Store and use coupons, loyalty cards and gift cards
  • Store and use tickets, transport cards and boarding passes
  • Access keys like hotel rooms, front door and car (if yours use digital access)
  • Identity documents like passports and driving license
  1. They are secure

Digital wallets utilise the same technology used in mobile banking which has proven to be very secure. They encrypt the data (like your credit card number) using tokenization, making it difficult for any third part to intercept the data. They also rely on extra security features like two-factor authentication to approve transactions.

  1. They minimise risk of theft

Having a digital wallet means there is neither physical money, cards or personal identification documents to be stolen. However, if the phone or device itself is lost or stolen, some digital wallets have the capability to delete all data to protect your personal information from being spread.

Finding the right Mortgage Broker - 03/04/2018

Buying property can be a confusing and overwhelming experience, from finding the property to getting the extensive documentation ready for the home loan, exchange and settlement. Using the service of a mortgage broker can make the experience a stress-free and smooth transaction.

So what exactly do they do? Essentially, a mortgage broker acts as a go-between for lenders and borrowers and their services of usually free of charge. They have access to a range of products through a panel of lenders that they are associated with. They’ll listen to your requirements, help you decide what features you’d like in your loan and source a number of options most suited to your individual needs. They will also take care of the paperwork necessary to confirm your home loan, lodge the documents on your behalf and provide all the tools and advice for repaying the loan efficiently.

But how do you choose the right mortgage broker for you? These useful tips will help you select the best professional for your needs ensure you get the best value from your mortgage broker.

Analyse each Mortgage broker

There are a growing number of mortgage brokers in the industry, so take your time and shop around for the best fit for you. Ask your family, friends and colleagues for recommendations they may have or have heard of. Reputation and past performance are very strong indicators of their value so do your research online first, find some client testimonials and then opt to go and meet a few brokers face to face for an initial consultation.

Trust building and rapport is a critical factor when deciding on your mortgage broker so get a feel for whether you can work with them in the long term and whether they’ve got your best interests at heart. Use your meeting to find out if the broker is punctual and organised, has a solid knowledge of the products they offer, has excellent communication and customer service skills and is confident in their overall approach.

Also ask for the broker’s accreditations. All brokers must be accredited under the National Consumer Credit Protection Act, be a member of the Mortgage & Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA) as well as being a member of the Credit Ombudsman Service Ltd (COSL).

Be the talker

Go to each meeting with a list of questions you want answered. Don’t let the broker do all the talking and make sure you get all the information you need in simple terms that you can clearly understand (especially if it’s your first time taking out a loan).

A few keys questions to ask can include:
● How long have you been in the industry?
● Can I speak to another one of your clients?
● How does your service work?
● Do you specialise in any particular type of client?
● How will you look after me in the process of getting a loan?
● What happens after the loan has been settled?
● What qualifications do you have?

Find out their lending panel

Good brokers should have access to an extensive range of reputable lenders, this increases their validity within the industry and if not, you could be missing out on better mortgage deals. Ideally, they should have access to a mix of both traditional (banks, credit unions and building societies) and non-traditional (wholesale or non-conforming) lenders.

Ask the broker to tell you about all the lenders they coerce with and how many of them they like to use and why. Also find out which products they will be comparing for you and from which lenders. Ensure the product your broker is offering matches your needs and ask for an explanation of all the documentation surrounding your loan application and contract as well as a loan product fact sheet. This will outline the critical points about the loan being offered, including interest rate and features of the product.

Asking for a comparison rate table is also useful so you can see for yourself which loans and and lenders are being analysed. This can help you determine which home loan will work best for you financially and give you that extra confidence that the broker has comprehensively sought out the best deal for you.

Fees and charges

Most mortgage brokers offer their client services free of charge and are paid a commision by the credit providers. They must disclose the commission paid to them by lenders, so ask your broker about the benefits they receive.

Overall, when selecting a mortgage broker that’s best suited to you, focus on the essential criteria of integrity, reliability and trust. A mortgage professional with an exceptional reputation within the industry as well as among the client community are also strong indicators of value and desirability for you as a potential customer.

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