Interest Rates

There’s a lot more to Mortgage Brokers than just Interest Rates

I often get calls that start out by asking the same question: “What are your interest rates?”

It reminds me of the time when a distant relative purchased a home.  I quoted him an interest rate and when I called to follow up to see if he wanted to set up a loan application appointment, he told me that he ended up going with a lender who had a lower rate.

Fast forward 6 weeks later.  The same relative called in a panic.  One week before the scheduled settlement date, you know what happened, right?  His loan had been denied by the other lender due to many existing debts.  The other lender told him there was nothing more he could do.  Case closed.

So, the file was transferred and yes, he had too much debt.  But, by paying off one of the credit cards (yes, he got a gift to help him out), he qualified and settled the loan.

Here’s what I have found when a file gets transferred to me from another broker or a lender:

  • Some brokers/lenders “lowball” the interest rate just to get a loan in the door.
  • Some brokers don’t obtain a credit report BEFORE quoting an interest rate.
  • Some brokers don’t review the file before it goes to an underwriter.
  • Some brokers just don’t know the credit policies of the lenders they write loans for.

I want you to know that at Sherlock “’we are more than just mortgage brokers who quotes interest rates!”

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smsf loan

3 Things to Consider Before Applying for SMSF Loans

smsf loanThere are few things more vexing than having your Superannuation fund barely growing when some well placed real estate investments could enable you to retire much earlier.  Self Managed Superfund Loans (SMSF) can help you tap into that retirement fund even if your credit rating is less than perfect.  As good as this may sound, there are three important factors to consider before you begin the application process.

Your Age and Proximity to Retirement

If you are interested in investing, then you know that Australia is a star in many areas of the economy.  On the other hand, people in their 50’s and 60’s that lost everything during the 2007 Recession in the United States can tell you that there are no guarantees when it comes to investment.  Therefore if you are within 10 – 15 years of retirement, try to avoid putting more than 20% of your Super at risk.  An SMSF may still be a viable option at this stage if you can live on 80% or less of your total retirement fund.

Current and 5 Year Projected Value of Potential Real Estate Investments

Foreign citizens and business owners are more eager than ever to tap Australian markets, open shopping centres, and engage in other wealth promoting activities.  From that perspective, having one or two key real estate investments in your retirement portfolio can ensure a wealthy retirement with plenty left for the next generation.  When appraising the value of any given property:

  • ask local business owners about other companies that may be interested in moving to your area
  • take a survey of the local people and find out which products and services they are interested in
  • find out which businesses offer these services and find out how soon they can build in your area

What Limits Will You Set for Property Management?

Regardless of your age, property ownership will also come with a range of expenses.  This includes taxes, building maintenance, and interest on any loans taken using the property as collateral.  Once you know the current and 5 Year projected value of the property, it is time to decide how much money you are willing to spend before leasing or even selling the property.  If you miscalculate the projected value, or wind up taking more loans to maintain the property, you will have to sell it at a loss in order to prevent further financial problems.  At the very least, if you have a target number in mind, making that decision will be a bit easier when and if the time comes.

SMSF loans are a tool you can use to generate increased wealth.  While Australia’s economy may be strong, keeping these three key things in mind can help you protect your investment and ensure that you get the most out of each investment.  As an added bonus, when you start doing basic real estate research, you are sure to find out all kinds of fascinating things that may lead to other money making opportunities.

Contact one of our lending experts to discuss your options and tailor a comprehensive Loan Proposal suited to your specific lending needs.

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Melbourne Suburbs to Watch in 2016

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The REIV’s list of suburbs to watch this year.

The Victorian property market finished 2015 on a high with a record number of auctions held in November and December. While median house price growth is expected to moderate this year, population increases, a robust economy and relatively low interest rates will support buyer interest in 2016. In 2016 the REIV expects moderate growth across the city with further price increases in a range of suburbs in Melbourne’s inner, middle and outer rings.

Some suburbs across the city to watch in 2016 are:

WEST

Footscray – Close to the CBD and recorded double-digit growth in 2015. Footscray remains affordable given its location in Melbourne’s inner ring. Improving infrastructure and gentrification likely to result in solid longterm growth. Median price: $780,000

Altona – Close to the CBD (13km) and to the bay and has seen double-digit growth in 2015. Private sales market tightened in 2015 and clearance rate increased, despite listings being up 17 per cent. Median price: $710,125

Sunshine – Still offers very affordable buying and is within 11km of the Melbourne city centre. Larger land blocks are proving attractive to both buyers and developers. Median price: $530,000

Spotswood – Another inner west Melbourne suburbs which is poised for further growth in 2016. Despite listings increasing significantly in 2015, the median days on market fell 23 days and clearance rate improved 13 per cent. Median house price remains well below the inner Melbourne median of $1,236,000. Median price: $775,000

NORTH

Preston – Has seen solid growth in recent months, reflected in strong private sales activity (median number of days on market declined seven days in 2015). Located within 10km of the CBD, Preston’s median house price remains well below the inner Melbourne median of $1,236,000. Median house price: $815,000

Epping – Located on the fringe of Melbourne’s middle ring, Epping recorded solid price growth in 2015, driven by a strong private sale market. Poised for further increases in the coming 12 months. Median price: $432,750

EAST

Burwood East – A big growth area with extensive development underway at present. While the median house price is high, days on market continue to fall (down from 37 days in 2014 to 30 days in the past 12 months) showing increasing buyer interest. Median price: $1,004m

Montrose – Has a relatively affordable median house price for those buying in Melbourne’s east and has shown good signs of capital growth in the past 12 months (up 10%). A significant drop in median days on market in 2015 (down 11 days to 19 days) has resulted in a strong private sales market. Median price: $600,000

Mount Waverley – Experienced one of the highest median price increases of any Melbourne suburb in 2015, up more than 20 per cent, but should still see growth this year. Attractive to foreign investors and quality local schools (Mt Waverley Secondary College) are also proving to be a key driver for buyers. Median price: $1.38m

Glen Waverley – Middle-eastern suburb which has been in the spotlight in 2015, and will continue in 2016. Given it is zoned for quality public school Glen Waverley Secondary College, buyer demand is likely to continue for the foreseeable future. Median price: $1.319m

SOUTH

Seaford – Bayside and has experienced strong growth in the past six months. Like Sunshine, is also very affordable. Strong private sales activity and clearance rate. Median price: $530,000

Chelsea – Close to the bay and with good transport to the CBD. Saw a strong private sale market and solid auction activity in 2015 as well as double digit annual growth. Should be a solid year ahead. Median price: $727,000

Source: The Real Estate Conversation and REIV

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bad credit

6 Things Every Credit Card Owner Should Know

6 Credit Card Rules to Always Follow

Credit cards make purchases and paying your bills easier. Using a credit card is also a good way to boost your credit score. However, failing to properly manage your credit cards can lead to a lot of unnecessary expenses.

If you’re tempted to buy things you can’t really afford just because you can charge them on your cards, it will benefit you to leave them at home when you go shopping. When you have an emergency, rely on an emergency fund to avoid charging unplanned expenses on your cards.

Selecting a credit card that’s right for you is also important. This can be difficult, since the cards you qualify for are limited by your credit score. Compare credit card limits, rates, and other fees to figure out which card will work the best for your circumstances.

Follow these tips to avoid spending a lot on fees and interest while boosting your credit score:

 

  1. Pay your bill on time, and pay more than the minimum. Not only will you avoid late fees with this strategy, but you’ll also pay off your balance quicker, thus saving money on interest, too. 
  • For example, if you have a $500 balance on a card with a 15% Interest Rate, you would end up paying $595 over two years if you make the minimum payments of $20/month.
  • However, if you make payments of $50/month instead of the $20 minimum payment, you would end up spending a total of $528 to pay off your balance in a little less than a year.
  • Be consistent with your payments. Missing a payment or paying less than the minimum may negatively impact your credit score resulting in bad credit.
  1. Keep your balance as low as possible. Ideally, your balance should be less than 30% of your available credit limit.
  • Avoid maxing out your credit card or making large purchases unless you plan on making a significantly larger payment to cover these expenses.
  • Consider applying for a credit limit increase if you cannot pay off enough on your card to stay around the 30% mark.
  1. Read the fine print on rewards cards. Credit card providers typically charge higher rates and fees to compensate for the cash back and other rewards. 
  • The best strategy for using a credit card with rewards is to make enough purchases to qualify for the rewards, but then pay off your balance in full every month to avoid paying interest.
  1. Keep it simple. Owning too many credit cards can make managing your accounts difficult. You’ll be more likely to miss a payment.
  1. Be careful with balance transfers. This can sound like a good option if you qualify for a credit card with lower fees and rate. However, some credit card companies will charge you a transfer fee, which is usually a percentage of the debt you are transferring. Paying 3% of the amount you’re transferring to get a slightly lower rate might not save you money.
  1. Avoid cash advances on your credit cards. A cash advance can be a tempting option because this cash is very easy to get, but you’ll have to pay a fee and will have to make larger monthly payments to compensate for this charge. Cash advances often have a higher rate of interest as well.

These tips will help you stay on the right track with your credit cards. Keep in mind that you can easily avoid fees and spend less on interest by being responsible and planning your expenses and payments in advance.

Shop around for a better credit card every two years or so. You will qualify for better products as your credit score improves from following these strategies.

If you are looking to consolidate debt, or discuss any of your finance options, one of our expert lending specialists is here to help you.  Call or email us today!

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What Is Bad Credit?

When it comes to impaired credit, there are many kinds; the main ones include:

  • Bad Credit History – Negative marks like bankruptcy, defaults, court writs, judgments and an excessive amount of credit enquiries could lead to mistrust in your loan application…
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low doc loans

Home Loan Options for the Self Employed – Low Doc Loans

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Low Doc Loans - Why you need a Broker

Being self-employed has many perks, but securing loans often isn’t one of them.

Regardless of the success and standing of your business, if you are self-employed, then there is a high chance that your home loan application will not be approved through the traditional mortgaging route.

But don’t be disheartened yet. Read on to know all the options available for you:-

Self-employed Home Loans

The current lending landscape is very different from how it used to be decades ago. That’s why it is very important to talk to a broker before submitting a loan application.

While most lenders tend to offer loans only through conventional routes, which involves a lot of paperwork that a self-employed person may not have, your broker can direct you to a specialist lender who offers self-employed home loans.

Traditional lenders always ask for documents that prove a steady source of income, like payslips or employments contracts, loans specifically for self-employed people do not require these. Low doc loans are one such type, which can be obtained through submitting business activity statements or financial declarations signed by your accountant.

Make Your Broker Your Friend

Many times self-employed borrowers will not be upfront about their credit history because they may have defaulted on a few payments in the past. But this can actually hamper your chances of securing a loan instead of boosting them. (This is particularly true of low doc loans as these lenders already perceive you as a higher risk borrower.)

This is because everything will come to light as soon as your lender has a look at your credit report. Therefore, be honest with your broker even if you feel certain aspects of your credit history is not up to the mark. This will not only enable them to advise you more accurately about your options, but will also help them to direct you to the best lender based on your financial position.

If you are self-employed and lack the current financial documents required for a traditional home loan, contact one of our lending specialists today to discuss sourcing low doc loans as an alternative to your lending needs.

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interest rates

How Do I Save Money on My Mortgage? (It’s not all about Interest Rates!)

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If you are looking at buying a home or refinancing your existing home, you have probably been having a lot of conversations about interest rates. If you enjoy talking about interest rates, fine, go ahead. It’s like talking about the weather: it won’t make any difference, but it gives you something to talk about.

The simple truth is that the variance in interest rates on standard home loans from one lending institution to another is so small that it will not make a big difference in the total cost of your mortgage.

As a matter of fact, the average difference is only about .06%, which is a saving of $240 per year on a $400,000 mortgage.

With all the emphasis lately on credit scores and credit ratings, it is surprising that a lot of people still believe that shopping around for the best rate will make such a big difference. Credit scores are based on a consumer’s credit worthiness: whether you pay your bills on time, if you have ever defaulted on a loan, whether other lenders have been willing to lend to you, etc.  So apart from a few points difference, all the banks are going to quote the same or very similar rate for one applicant if they present the same as another. Lets’ look at that interest rate savings of $240 per year. If you look around for more than a day, you are paying yourself only $10 per hour for your time.

The only way to have a real savings on your mortgage is to have an overall mortgage strategy. There are many types of mortgages being offered, and the combinations of benchmark rate used, terms of payment and duration of loan can have a great overall impact on the loan over time. This is what is more important to look at. Finding the mortgage expert who will discuss more than just the interest rate, but instead will understand the economic markets and examine your financial situation and longer term plans will achieve much more savings on your mortgage. Choosing the right mortgage strategy can save you tens of thousands of dollars, as compared to the $240 cited above that can be saved on a lower interest rate.

How can you find out the best strategy? Working with a mortgage consultant who understands the economic markets, who works closely with you, who understands your needs and particular circumstances, and who combines this knowledge and information with the best rates available is the secret to finding the right mortgage strategy. Understanding this concept can save you tens of thousands of dollars in home loan costs, rather than tens of dollars.

Not convinced? You can get more details and understand how this is true by having a brief, no obligation, chat with one of our lending specialists today.

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Click here to request a free no obligation quote from one of our specialist lending advisers to see just how much you could be saving on your loan!

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