Why you should consider making a plan to see a broker in 2021
You can shop for a home loan yourself and you can go to a bank, but a broker might just get your financial needs a little more clearly and help you land a home, writes Leigh Stark, Content Manager for RateCity.
When I visited our local bank for a home loan, I went in with high expectations. I'd been a customer for well over a decade and close to two, and I wanted to have a serious talk about what we could do. I left feeling dejected and broken, as if my money wasn't worth much, and as if the bank was laughing at me. As if the bank didn't actually want to help.
I was determined to change that: to find a way to secure a home loan for my family, and to escape the tenure of renting in Australia, all the while finding a bank that I could connect with.
Going to the bank made my face some hard truths about buying a home, and while many were around the expectations I'd had of my bank, they also made me rethink how I should get my home loan approved.
I'd assumed, perhaps naively, that being a loyal customer to my bank would mean something to the institution. That the dollars in my account and how long they'd occupied a spot on their digital transaction sheets would mean something in the long run.
But that's not what happened at all.
Rather, my attempts to get them to look at my finances, which had steadily improved over the years, became a rather obtuse source they could use to poke holes in any argument of taking a usable chunk of money out, and instead also look to the highest rate they could provide.
It's not as if buying a home is a small exercise, either; the moment you take this step, you're committing to spending and paying off a big chunk of change with a bank or lender. But part of the problem of getting a bank to see your worth is understanding the bank in the first place, and that comes down to some seriously hard truths worth seeing.
You're just a number to your bank: you represent dollar signs, nothing more
One of the problems is that you might see yourself as a valued customer -- the whole "customer is always right" mantra we tell ourselves to believe -- but to a bank, you're just a number. Nothing more.
Face reality: to a bank, we represent the number of dollars and cents that can be pushed behind our name, all of which we can access at a moment's notice, but that is also used as a way for the bank to make more money from your money overall.
To a bank, you're a customer and a bridge to economic and financial success, and they owe nothing to you, more than perhaps the service you pay them for in the first place.
You owe nothing to your bank, and can switch whenever it suits
It goes both ways, though. The bank may owe you nothing more than the service they provide, but you also owe them nothing more than what you actually owe.
You'll need to pay back any loans or debts, clearly -- bad credit is not a goal of anyone, and it can do severe harm to your credit score -- but you don't owe your bank any specific loyalty, and can switch whenever you want to.
Switching banks is easier nowadays, especially now with open banking. It means banking institutions are a little more open than they once were, and so your details can be linked to a different group, transferring from one bank to another without as much frustration as switching banks would have once incurred. Much like switching super, it's a whole lot easier today than 20 years ago.
And because switching banks is easier, looking around is easy, too.
You might want to take out a home loan, yearning for that prized spot of land where you can set up shop, raise a family, and hope to never have to deal with a landlord again. But you don't have to do it with the bank you've been using, the bank you've been begrudgingly bemoaning.
Finding a new bank can be helped with a mortgage broker
If you've already made the decision to switch away from a bank, great. Now you just need to find one that suits your purpose. If that purpose is going to be a home loan, you might want to consider talking to a mortgage broker.
You can always compare your options with comparison tables, as these can provide a solid understanding of what sort of loan options are out there in the world. It's especially handy if your current bank has said you can get one rate, and yet the rate tables say something else.
However a mortgage broker's use goes beyond simply providing the rates, and it's all in the name of what they do: a mortgage broker will "broker" the most competitive rate they can from a lender to help secure the purchase you're after. That means you essentially have someone in your corner, because it's incumbent upon them to succeed otherwise they don't get paid either.
But it can go deeper than that.
A good home loan broker should know the ins and outs of the system. This means they are going to be looking at your finances and potentially work out how best to make your current finances work for you. That might mean looking to what's available, and to suggest other options a bank may not consider, such as paying off current debts in order to secure more money, to look to the parents for a guarantor loan, to consider whether an investment loan is your best chance of beginning, or to explain your career plans to the lender to indicate further ability to pay that home loan in a timely manner.
Meanwhile, your current bank only has direct access to your funds and how you spend them, and it may not be able to see the bigger picture, and may not even care.
In the wake of the responsible lending laws, banks are a little more proactive and diligent about checking, and so won't give you scores of money without a good reason. Buying a home in Australia tends to require scores of money, however if you don't match specific requirements, you might miss out on the amount you desire, and that can leave you feeling like you're a nothing in a market of somethings.
Talking to a broker can help you get past that feeling, and may give you some alternatives you'd not considered. It's their job to understand how your finances can work for you, which in turn gets them paid.
It's not a free service, of course -- brokers make money from what they do -- but it means getting closer to what you envision, and possibly ending up with a bank that can actually help you get there in the end.
Look for a broker near you
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Head Of Content
Leigh Stark is RateCity's Head of Content, and an experienced and award-winning journalist. His work has seen him writing across finance and technology for over a decade, and has been published in the Australian Financial Review, Popular Science, Women's Weekly, Pickr, and across TV, radio, print, and the web.
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How can I apply for a first home buyers loan with Commonwealth Bank?
Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.
You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.
You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.
CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property. The link to download this app is available on the same webpage.
If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.
How to apply for a pre-approval home loan from Bendigo Bank?
Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork.
Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home.
With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances.
To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.
How do I apply for a home loan pre-approval from Commonwealth Bank?
To apply for a Commbank home loan pre-approval, you can either call the bank at 13 2224 or meet one of the bank’s lending specialists. You can set up a meeting online if you wish. You’ll need to do some homework before contacting the bank, such as gathering information on the kind of properties you’d like to buy and their prices.
Preparing a financial summary, which lists all your income sources as well as significant expenses, can also help determine how much you can afford to borrow. You may also want to check your credit score before applying for pre-approval.
It’s worth remembering that a CBA home loan pre-approval doesn’t guarantee that you’ll get the loan. Once you get the pre-approval, you’ll have about three to six months to decide on a property and apply for the home loan. The bank will then confirm that the property is suitable for the loan before fully approving it.
When do mortgage payments start after settlement?
Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.
Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.
Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.
How is interest charged on a reverse mortgage from IMB Bank?
An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.
No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.
The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.
Why does Westpac charge an early termination fee for home loans?
The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee.
The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.
Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.
How to use the ME Bank reverse mortgage calculator?
You can access the equity in your home to help you fund your needs during your senior years. A ME Bank reverse mortgage allows you to tap into the equity you’ve built up in your home while you continue living in your house. You can also use the funds to pay for your move to a retirement home and repay the loan when you sell the property.
Generally, if you’re 60 years old, you can borrow up to 15 per cent of the property value. If you are older than 75 years, the amount you can access increases to up to 30 per cent. You can use a reverse mortgage calculator to know how much you can borrow.
To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.
When does Commonwealth Bank charge an early exit fee?
When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.
The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:
- If you switch your loan from fixed interest to variable rate
- When you apply for a top-up home loan
- If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
- When you prepay the entire outstanding loan balance before the end of the fixed interest duration.
The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay.
What is a variable home loan?
A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.
Can I get a Commonwealth Bank home loan during maternity leave?
The Commonwealth Bank considers several factors like your income, expenses, assets, and liabilities to determine whether you’re suitable for a loan. Being on maternity leave doesn’t mean you won’t get approved for a loan, provided you meet the lender’s other criteria. For example, you may have other savings or spousal income to support your application.
Having said that, it can be slightly more difficult to get a loan while you’re on maternity leave if you’re not being paid for your time off (which is often the case, depending on how long it’s for).
If you are looking to apply for a Commonwealth Bank home loan during maternity leave, here are some things that may help your application:
- Get a letter from your employer including details like your date of resuming work, salary when you return to work, and other employment terms
- Show the bank you have savings. Putting up a 20 per cent deposit may help and you could also avoid Lenders Mortgage Insurance (LMI)
- Calculate your income and expenses to apply for only what you can afford to pay.
- If you have a partner or guarantor to help with your loan, provide their financial details on your application.
Some people like to tell the lender they are on maternity leave before applying to see whether they qualify before going through the full process.
How do I apply for a home improvement loan?
When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying.
Besides taking out a home improvement loan, you could also:
- Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement. Speak with your lender or a mortgage broker about accessing your equity.
- Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
- Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
- Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.
Can I get a home renovation loan with bad credit?
If you're looking for funds to pay for repairs or renovations to your home, but you have a low credit score, you need to carefully consider your options. If you already have a mortgage, a good starting point is to check whether you can redraw money from that. You could also consider applying for a new home loan.
Before taking out a new loan, it’s good to note that lenders are likely to charge higher interest rates on home repair loans for bad credit customers. Alternatively, they may be willing to lend you a smaller amount than a standard loan. You may also face some challenges with getting your home renovation loan application approved. If you do run into trouble, you can speak to your lender and ask whether they would be willing to approve your application if you have a guarantor or co-signer. You should also explain the reasons behind your bad credit rating and the steps that you’re taking to improve it.
Consulting a financial advisor or mortgage broker can help you understand your options and make the right choice.
How do I find out my current interest rate and how much is owing on my loan?
Your bank statements and/or your internet banking should show these details. If you are not sure, call your bank or estimate.
How can I get a home loan with bad credit?
If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.
One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.
Two points to bear in mind are:
- Many home loan lenders don’t provide bad credit mortgages
- Each lender has its own policies, and therefore favours different things
If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.
Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:
- You have a secure job
- You have a steady income
- You’ve been reducing your debts
- You’ve been increasing your savings