FIRST HOME BUYERS
The ‘ground work’ starts with getting the proper information in relation to your finance options. The amount you can borrow, for example, can vary dramatically from lender to lender. Understanding the true cost of purchasing a home extends beyond the purchase price – there’s stamp duty, transfer fees, lenders mortgage insurance in some cases, valuation and application fees, are just a few that you need to allow for. At RateOne, our mortgage brokers will put together a complete Funds Position Report in relation to your anticipated purchase price and assess your maximum borrowing power.
Generally speaking, First Home Buyers are eligible for the same types of loans as standard borrowers. There are however, very specific policies that do apply – mostly in relation to your savings (both the amount and the length of time you have been saving for). This is what lenders and mortgage insurers refer to as ‘genuine savings’. It isn’t limited to how much you have in the bank however. In certain circumstances, your share holdings, term deposits, rental repayment history and even gifts from family members or friends can all be considered. Other factors such as length of employment, credit history and debt levels are all considered by lender credit assessments.
Importantly, each lender weighs these factors differently when determining your eligibility for a home loan.
INVESTMENT FINANCE
Our property markets have turned the corner and there are more people interested in taking on an investment property as their wealth creation strategy.
However, if history repeats itself (and it most likely will), while some will develop financial freedom through acquiring investment properties, however many investors won’t get past their first or second investment property.
There are several factors to consider whether you are investing in property for the first time, or planning a multi-unit development, getting the right advice on your investment loan is extremely important. Ensuring you have the key structures and strategy in place beforehand will help maximise the profitability of your investment.
We understand that an appropriate structure is often critical to investment success and will work with your accountant, if required, to ensure your facilities are set up to be the most tax effective.
Getting the lowest interest rate is not always the only consideration to your investment property strategy.
CONSTRUCTION FINANCE
Building your own home can be a wonderful experience, however the process can be long and expensive. Obtaining finance for something that doesn’t exist can also prove to be tricky. As a result, a standard mortgage isn’t offered by the bank, but you may be eligible for a special type of loan known as a construction loan.
The banks are cautious of construction loans for a variety or reasons. One of the key risk factors is the trust and reputation of the builder. The banks are financing something that doesn’t exist yet with the assumption that once completed, it will have a certain value when it is finished.
The banks want to avoid a position where the builder does a poor job or if the property value falls, the bank will be exposed with a loan that is more than the worth value of the property.
As a result of the above, the banks aims to prevent these occurrences by enforcing a strict credit guidelines on the requirements for a construction loan:
A qualified builder must be involved – a qualified builder is a licenced contractor with an established reputation for building homes. This is in contrast to if you choose to act as the qualified builder for you own project, in these cases the banks view this as an owner/builder situation and usually limit the borrowing to only 60% of your project value.
Lender needs detailed specifications, plans – Building specifications detail what materials, finishes, will be present in the completed home. Building plans document what the property will look like and include information such as ceiling height, room dimensions etc.
The construction project must be valued through an independent valuation. – The lender must have the construction project valued based on the building specifications and plans and the land it is to be built on. This is then compared to other properties in the area to reach an appraised value.