A showcase of the work I did for LWP and their first home buyer and builder's guide. This project demanded I be able to work to a tight deadline and tested my ability to create original content for their publication. All design work was created by SoapBoxPR who hired me as a freelancer to create this content.
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Money, money, money Deposits, mortgages and banks: it can be the toughest thing for first time buyers to get their heads around. However, getting your first home loan does not need to be as difficult as you think. Today’s lenders require full disclosure of your financial position to ensure that you are able to service mortgage debt. They put your complete financial history under the microscope and things like HECs/HELP debts; personal loans, credit card repayment history and savings etc will all be checked out before they say ‘yes ‘ or ‘no’ to your application. Your credit rating (obtained through a credit agency) is one of the biggest determinants of whether or not a bank will offer a home loan. You can get a copy of your credit rating by visiting mycreditfile.com.au. Knowing about any issues upfront allows you to discuss and explain them with your financier before making an application. WORKING OUT HOW MUCH YOU MIGHT BE ABLE TO BORROW » Check bank websites for borrowing calculators. They can be useful to give you a rough guide on what you might be able to borrow. » You’ll usually require a 5% deposit of the property’s value – the more the better. Generally the more you have saved, the more loan options available to you. » Unless you have saved up more than 20% of the loan amount needed then you will need to budget for mortgage insurance (it protects the bank in case you can’t make repayments for any reason). » Transfer Duty (a government tax) is not applicable on property purchased by First Home Buyers if the land component of the house and land purchased is less than $300,000 (if not, First Home Buyers should refer to www.osr.wa.gov.au in order to calculate their transfer duty liability). » Budget for a number of fees – registering mortgage documents, cost of title searches, settlement agent’s fee and bank loan application fee to name a few. BANK VERSUS NON-BANK FINANCIAL INSTITUTIONS (Major vs 2nd Tier) Generally speaking, there is very little difference in the home loan products offered by banks compared to non-banks (eg building societies). Some may argue that non-banks offer a greater degree of personal service due to their smaller client base but even this distinction doesn’t hold the same level of truth it once did. As with any financial product, you should never accept the first deal you are offered. You are more likely to find a mortgage that suits you by approaching a range of lenders. Did you know? » You usually just require a 5% deposit, not the 20% that many people think. However if your deposit is less than 20% remember you will be required to take out mortgage insurance. » If the land component of your house and land package is under $300,000 then you won’t need to pay any stamp duty, which is a great saving! » When purchasing your first home, it is worth considering the services of a mortgage broker to guide you through the process. Many people think this service costs you money, but it doesn’t! » For the most up to date information about the First Home Owners Grant and Transfer Duty, please visit www.osr.wa.gov.au. This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice. Finance 101: Borrowings, Brokers and Banks WHAT DOES A MORTGAGE BROKER DO? A mortgage broker can answer any questions you may have about mortgages, help you to find the best deal to suit your needs and warn you about hidden costs. If you choose to use a mortgage broker, they will act as an intermediary between you and the lender. A mortgage broker will: » Identify your needs and analyse your current financial position » Identify lending options that suit your needs » Negotiate on your behalf with the lending institutions » Organise finance pre-approval » Arrange all necessary documentation in order to finalise a mortgage for you. The benefits of using a broker are considerable. Generally, there is no charge to you in using a broker. Great deal! A broker is paid directly through commissions from the lending institutions on settlement of your home. A mortgage broker has the expertise and considerable market knowledge to be able to provide advice on the benefits and structure of many different mortgage options. This not only improves your chance of selecting the right loan for you, it also saves you time! A final note, make sure that do your homework when it comes to selecting the right broker. West Australian brokers are licensed and must be a certified mortgage consultant through the Mortgage Association of Australia (MFAA). It always best to ensure you have the right person working for you. Deposits, mort their heads ar as you think. Today’s lend service mor things like all be chec Your cred of whet visiting explai
Transcript
Money, money, money
Deposits, mortgages and banks: it can be the toughest thing for first time buyers to get their heads around. However, getting your first home loan does not need to be as difficult as you think.
Today’s lenders require full disclosure of your financial position to ensure that you are able to service mortgage debt. They put your complete financial history under the microscope and things like HECs/HELP debts; personal loans, credit card repayment history and savings etc will all be checked out before they say ‘yes ‘ or ‘no’ to your application.
Your credit rating (obtained through a credit agency) is one of the biggest determinants of whether or not a bank will offer a home loan. You can get a copy of your credit rating by visiting mycreditfile.com.au. Knowing about any issues upfront allows you to discuss and explain them with your financier before making an application.
WORKING OUT HOW MUCH YOU MIGHT BE ABLE TO BORROW » Check bank websites for borrowing calculators.
They can be useful to give you a rough guide on what you might be able to borrow.
» You’ll usually require a 5% deposit of the property’s value – the more the better. Generally the more you have saved, the more loan options available to you.
» Unless you have saved up more than 20% of the loan amount needed then you will need to budget for mortgage insurance (it protects the bank in case you can’t make repayments for any reason).
» Transfer Duty (a government tax) is not applicable on property purchased by First Home Buyers if the land component of the house and land purchased is less than $300,000 (if not, First Home Buyers should refer to www.osr.wa.gov.au in order to calculate their transfer duty liability).
» Budget for a number of fees – registering mortgage documents, cost of title searches, settlement agent’s fee and bank loan application fee to name a few.
BANK VERSUS NON-BANK FINANCIAL INSTITUTIONS (Major vs 2nd Tier)Generally speaking, there is very little difference in the home loan products offered by banks compared to non-banks (eg building societies). Some may argue that non-banks offer a greater degree of personal service due to their smaller client base but even this distinction doesn’t hold the same level of truth it once did.
As with any financial product, you should never accept the first deal you are offered. You are more likely to find a mortgage that suits you by approaching a range of lenders.
Did you know? » You usually just require a
5% deposit, not the 20% that many people think. However if your deposit is less than 20% remember you will be required to take out mortgage insurance.
» If the land component of your house and land package is under $300,000 then you won’t need to pay any stamp duty, which is a great saving!
» When purchasing your first home, it is worth considering the services of a mortgage broker to guide you through the process. Many people think this service costs you money, but it doesn’t!
» For the most up to date information about the First Home Owners Grant and Transfer Duty, please visit www.osr.wa.gov.au.
This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice.
Finance 101: Borrowings, Brokers and Banks
WHAT DOES A MORTGAGE BROKER DO?A mortgage broker can answer any questions you may have about mortgages, help you to find the best deal to suit your needs and warn you about hidden costs.
If you choose to use a mortgage broker, they will act as an intermediary between you and the lender. A mortgage broker will: » Identify your needs and analyse your current
financial position » Identify lending options that suit your needs » Negotiate on your behalf with the lending
institutions » Organise finance pre-approval » Arrange all necessary documentation in order
to finalise a mortgage for you.
The benefits of using a broker are considerable. Generally, there is no charge to you in using a broker. Great deal! A broker is paid directly through commissions from the lending institutions on settlement of your home.
A mortgage broker has the expertise and considerable market knowledge to be able to provide advice on the benefits and structure of many different mortgage options. This not only improves your chance of selecting the right loan for you, it also saves you time!
A final note, make sure that do your homework when it comes to selecting the right broker. West Australian brokers are licensed and must be a certified mortgage consultant through the Mortgage Association of Australia (MFAA). It always best to ensure you have the right person working for you.
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Today’s lendservice morthings like all be chec
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Money, money, money
FINANCE PRE-APPROVAL So what is a pre-approval anyway? It’s an indication from a lender that you meet their basic criteria for a loan up to a specified amount, and provides comfort to you that you can obtain finance once you find the right property. Pre-approval is similar to full finance approval however the difference is that, at this stage, you may not have decided which property to purchase.
Why would you get it? It’s helpful when you’re going to look for a block of land or a house and land package to know how much you can spend based on your current income level. Also, when you’ve chosen, it should be a quicker process to get full financial approval. Additionally, most land developers request a pre-approval these days before securing your block of land.
How long does it take to get it? Usually 24 - 48 hours (if you have all the info the lender needs to evaluate you).
What do you need to do to get it? You will need to complete a home loan application form and include relevant documentation. Your finance broker or bank representative will guide you through this process.
Before giving you pre-approval, most lenders require you to provide them with documentation that substantiates your identity and your ability to repay the loan.
This includes: » proof of identification » proof of income » proof of residence » proof of current assets and liabilities » proof of other assets (not held with that
lending institution) » proof of savings/deposit for your purchase
Top Tips » Be organised. Compile your
documentation as soon as possible to speed up the process of approvals.
» The two most important factors for the lender are SERVICEABILITY and EQUITY — what is your financial ability to repay the debt and what is the value of the property you want to buy. It is important to understand this up front.
This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice.
Finance 102: Pre-approvals
Once you have received your pre-approval, the lender will issue you with a certificate verifying that your finance has been pre-approved for a specific length of time. The amount you will qualify for will depend on your financial situation as well as the lender’s criteria.
In order for pre-approval to proceed to full financial approval, in addition to information provided for pre-approval, you will also need the following: » The provision of a contract of sale for the
purchase of the land » Any other information the lender may request » A copy of the fixed price building contract and
plans/specifications of the property you intend to construct
What is it not? A pre-approval for finance IS NOT a guarantee that you will get finance, it is an evaluation of information that you have supplied, that suggests you are capable of repaying a loan of a certain amount.
NOTE: » Not all pre-approvals are the same » They are conditional to the terms and
conditions of the bank providing the pre approval
» A pre-approval is usually valid for between 60 and 90 days
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Money, money, money
FINANCIAL APPROVALWhat is it?The following documents will be required by your financial institution or broker in order to obtain finance approval. This documentation should be compiled and presented to them as soon as possible to speed up the approval process. » Proof of Income – If you have been in the same
job for six months or more (or two years in the same industry), copies of the payslips you have received in the last six months showing your name, year to date earnings and name of employer on them; if less than six months, you will also need to provide the same documents from employment prior to current. Also you will need to confirm employment status – full time, part time, casual or self employed.
» Evidence of any other income (rental income, share dividends etc)
» If you are self employed, you will need to provide the most recent two years’ financial statements and your accountant’s name and contact details.
» If your deposit is a gift, a statutory declaration advising that it is a gift and does not need to be repaid will be required from the person gifting the money. Gifted money will need to be in your savings account for a minimum of three months.
» Credit card and personal loans – latest statements for any current debt that demonstrate your repayment.
» Evidence of any other personal debt. » Previous two years’ tax returns
Other questions they will ask are? » Have you owned property before? » Are you a permanent resident or Australian
Citizen? » Are you currently on probation as part of your
employment?Did you know? » Finance pre-approval is
required by many developers and builders now. It usually only takes 24-48 hours to get, so it’s not as difficult as you might think.
» Pre-approval is only valid for between 60 and 90 days usually.
This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice.
Finance 103: Approvals
» Have you been in the same industry for two years?
» Have you ever had any problems with your credit history? If so, be prepared with how you have resolved problems. Defaults with credit cards, mobile phone accounts and service providers (eg Alinta, Synergy) will impact on your credit history.
» Do your parents have an investment property? » Do you think they would be prepared to help
you? Consider getting a personal guarantee from your parents — by providing a limited liability mortgage over their property.
The two most important factors for the lender are SERVICEABILITY and EQUITY — what is your financial ability to repay the debt and what is the value of the property you want to buy.
PROVING WHO YOU AREYou will need to be able to prove who you are in order to obtain a home loan. You will need:One primary photographic identification document — current passport, current Australian driver’s licence (with photo), current Australian Government issued Proof of Age card or international travel document (having same characteristics as a passport)Or One primary non-photographic identification document – birth certificate, birth certificate extract, citizenship certificate, current Australian benefits card, together with one secondary identification document – current international driver’s licence, current foreign driver’s licence, Australian Taxation Office notice, current interim Australian driver’s licence, current Australian learner’s permit, current rating authority bill, public utility (phone, electricity or gas) record less than three months old, or an Australian bank statement less than three months old.
FINANCIAL APWhat is it?The following dyour financial iobtain financeshould be coas soon as p
Money, money, money18+ onlyYou need to be 18 years and over to get a mortgage and have a suitable income to meet the loan repayments. Most financial institutions offer home loans that will enable you to buy a house and land package, with a variety of different home loan options available.
Repayments If you plan to make mortgage payments in addition to your scheduled payments, make sure you check that your home loan allows for additional mortgage repayments, increased monthly repayments, or occasional lump sum repayments; and also check for any fees that may apply. If you plan to pay off your home loan ahead of time, check that you can do so and check for any fees that may apply.
Your mortgage repayments are determined by the amount borrowed, the term (generally 25-30 years) of your home loan, frequency of repayments and the interest rate (although you will need to review the terms and conditions of your particular mortgage).
Most banks and building societies offer mortgages. You will find a list of mortgage providers in the business section of any of the major newspapers, specialist mortgage magazines and online – trying Googling it.
What’s on offer in terms of loans? Online and phone Some banks are now focusing on providing mortgages online and/or over the phone, as many people find it more convenient and timely than making appointments for branch visits. One of the advantages of seeking an online mortgage is that you have access to detailed information and application forms 24 hours a day, 7 days a week. Most financial institutions have call centres that operate beyond normal business hours, providing you with greater flexibility and convenience. If you need brochures or application forms, you can ask call centre staff to mail these to you. Alternatively, most banks allow you to order information packs online through their website.
Branches and bank mobile lenders If you prefer to meet with someone face to face to discuss your mortgage, many banks will provide this service to you. You can meet the bank’s lender at most branches or you can organise for them to visit you at home or work. Unlike brokers, bank lenders only offer the home loans of the bank that they work for, which is a good option if you know what you are looking for or what bank you want to deal with.
First Home Owner concessions If you are buying your first home (house and land) and you intend to live in it, then you may be eligible for the First Home Owner Grant (FHOG), which is a tax-free grant. If you are eligible for the First Home Owner Grant your bank/broker should be able to provide you with the appropriate forms to complete in order to apply.
For more details about the FHOG, or to check your eligibility and how to apply, go to www.finance.wa.gov.au
And a useful fact sheet can be downloaded at: www.finance.wa.gov.au and searching for FHOG factsheet.
A note for people from overseasIf you are not a citizen or a permanent resident of Australia, and you are considering purchasing real estate in Australia, there are special requirements that you are required to meet. Please visit the Foreign Investment Review Board website for more information before proceeding. Visit www.firb.gov.au
This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice.
Mortgage Basics
Brokers Mortgage brokers act as ‘middle-men’ between you and the mortgage provider. Their job is to help you find the best home loan that’s suited to your needs. You will usually meet with a broker face to face, but a limited number have online facilities. It’s a good idea to ask friends or colleagues for a recommendation when looking for a mortgage broker. There should be no charge to the buyer from the broker — the financial institution chosen should pay the broker fee.
Finding a mortgage that suits youYou need to choose a mortgage that’s just right for you. Work out what features are important to you and then compare the cost/benefit of various options. Once you’ve thought about what you need in a mortgage, you need to decide where to get your mortgage. The mortgage application form will ask you for information such as: » name » date of birth » spouse’s name » drivers license number » address » number of dependants » total value of your assets including
superannuation » total value of your liabilities (personal loans,
credit card debts etc) » occupation » income » current place of employment and length of
time working with current employer » employer’s contact details » if you’re self-employed, how long you have
been self-employedThe mortgage lender will also want you to provide a range of documents to support your home loan application.
Costs of getting a mortgage It is important to know all costs, in addition to the price of the property, for which you are liable. An example of the costs you may incur are: » Stamp duty on the mortgage » Loan application fees » Mortgage insurance
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Now comes the exciting task of planning your budget! It’s important to draw up a budget so you get a clear picture of where you’re at financially. You’ll get a feel for how much you can afford in mortgage repayments and it allows you to see where your money is going.
Writing up a list of your monthly expenses is a good place to start – car repayments, phone bills, even your morning coffee all need to be recorded as well as special occasions like birthdays, Christmas and entertainment. Writing it all down will help you see where you can afford to cut back – simple things like making your own lunch can save you over $50 a week and remember, every little helps.
As many land developers require a pre-approval letter from your lender it’s important to draw up a budget early and to be as accurate as possible.
We’ve put together a monthly Expenses and Income chart to help you with your budget.
Expenses $/month Income $/month
Bank fees You
Car running costs Partner 1
Christmas, Birthdays, special occasions Other income/dividends etc.
Clothing, uniforms, shoes Total combined income $
Entertainment (dinner, movies etc.)
Hairdressing subtract Total combined expenses
Travel fares from Total combined income
Food and groceries $
Health insurance, health costs
Hobbies
Home maintenance costs
Insurance (contents)
Lunches
Phone (land line, internet and mobile)
Power costs (electricity and gas)
Rates (council and water)
School fees and costs
DVDs, CDs, downloads, magazines etc. mortgage expenses $
Holidays
Other items monthly mortgage payment $
Safety net (what you keep for a rainy day)
Total combined expenses $
This guide has been put together by LWP Property Group to give general advice about the process of buying land and building a house on it. All advice is only general in nature and it is advised to always seek additional professional advice.
Budget Planner
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