10 reasons why borrowers need a mortgage broker

In an age when technology helps us research, shop and even – at times – think, we might wonder what other help we could possibly need when it’s time to buy our next home.

But, unless you have weeks of spare time and a brain that can store hundreds of home loans, plus their fees and conditions, and then match them to your situation, log off and set up a time to see a mortgage broker.

Here are 10 reasons why a mortgage broker is as valuable as ever:

  1. It makes financial sense. For the vast majority of home loans, your mortgage broker’s service is free. Lenders pay mortgage brokers a fee when they connect them to borrowers.
  2. Mortgage brokers work for you, not the lender. As keen as banks and credit unions might be to open their coffers, they have an equal interest (pardon the pun) in making as much money as possible from you over the life of your loan. A mortgage broker, on the other hand, will put your financial needs first and look for the loan that best suits your circumstances.
  3. Spoiled for choice. A mortgage broker has access to hundreds of loans from a long list of lenders – far more than you will encounter if you choose to go it alone. Mortgage brokers also have access to more boutique and wholesale lenders who don’t traditionally advertise to mum-and-dad property buyers, have some fantastic products and are eager for a slice of the mortgage market.
  4. Save your legs. Mortgage brokers will do the loan application leg work for you, not only making life easier but giving you a better chance of swift approval because your mortgage broker knows what’s required from the lender.
  5. After-hours service. Most mortgage brokers will come to you at a time that suits, an appealing selling point for busy professionals and families.
  6. Perfect match. Contrary to popular belief, banks generally like to deal with mortgage brokers because they put forward home buyers who meet all the lending criteria. It can often save higher-risk borrowers from being rejected and earning a red flag on their credit history.
  7. Avoid the pitfalls. Honeymoon offers, exit fees and fixed rates are just some of the terms that can confuse and confound. Your mortgage broker will take a long-term view and navigate through all the lenders’ fees, terms and conditions to make sure you’re not paying more than you should over the full life of your loan.
  8. Borrow within your means. You’re less likely to over-stretch and get yourself into financial difficulty down the track when you take out your loan through a mortgage broker. Where some lenders may allow you to borrow to capacity or offer a loan that’s not quite right for your situation, a mortgage broker will always recommend the loan that makes the most financial sense for you.
  9. Switching is simple. If switching lenders, either because you’re refinancing mid-loan or have bought and sold, your mortgage broker will manage the inquiries and all the paperwork. If buying a property, they will also often deal with your conveyancer or solicitor to keep things moving along.
  10. Get a health check on your existing home loan. At any time you request, a mortgage broker can scan the lending environment to make sure you’re still getting the best deal. And if your circumstances change, your mortgage broker can deal with your existing lender or find a new loan to meet your needs.

 

Create your own Christmas cheer

The countdown to Christmas seems an unlikely time to suggest ways to save. But why wait for the New Year to make financial resolutions? We’re tipping the spending season on its head to get your money working harder for you over Christmas and into 2018.

Where does it all go?

Keep tabs on your spending and get into better budget habits ahead of Christmas with ASIC’s Track My Spend app.

Track your household budget or savings for a special occasion, such as a wedding or travel.
The app allows you to nominate and track your progress against weekly, fortnightly, monthly or annual spending limits. You can also set budget limits for various categories and separate wants and needs to identify extra ways to save.

We also have a clever budgeting tool that you might like to check out,  click here for our budget calculator.

Spare some change

You no longer need big bucks to call yourself an investor. New investment platforms are helping people tap into the power of their pennies to gain a toe-hold in the share and property markets. For example, there are apps available that round up every purchase you make on any linked credit or debit card and squirrels the extra cents into an investment account. The stashed cash is then invested in low-cost exchange traded funds, which provide access to Australian bonds and Australian and international shares.

Doesn’t sound worth the effort? That’s the point. There’s no effort on your part, and the savings soon add up. A daily takeaway coffee habit at $4.60 will tip 40c a day (rounded up to $5) into your investment account. That’s $146 a year. Add to that round-ups from grocery, snack, lunch, petrol, entertainment and clothing purchases, and it’s easy to tally a tidy sum without any significant sacrifice.

Get fiscally fit

Give yourself an early Christmas pressie by taking control of some of life’s necessities. It has never been easier to bag a better deal on insurance premiums, energy bills and credit cards thanks to online quotes and comparison sites. Just make sure you are comparing apples with apples and read any fine print. Looking for a better mortgage rate? Talk to us to see if you can save on your home loan. Even in this low-interest climate, it’s worth shopping around. A 0.5 per cent saving on your 6 per cent interest rate $300,000 25-year principal-and-interest loan will put $1,103 back in your pocket each year1.

Sort your super

Are you one of the 40 per cent of Australians with superannuation who have more than one account2?

Not only should you be aware of what super accounts you have, but how much you contribute, where your funds are invested, what fees you pay and what insurance each account provides.

Lost track of your super? Track down your accounts with a MyGov account via the ATO.

Once you know where your funds are and how much you have, you can take stock of each portfolio and make any adjustments. Talk to your financial adviser about the portfolio mix that best suits your retirement goals.

It’s also worth considering consolidating your funds into one to save on fees and enhance your compound interest. Again, talk to your financial adviser before you make any moves as one fund might have a better investment track record or insurance benefits over another.

Budget detox

Okay, this is a cruel one to spring so close to Christmas, Boxing Day sales and the holiday season. Challenge yourself to buy nothing new for a whole month. No new clothes, gadgets, make-up, toys or decor. Limit yourself to essential purchases only. If that’s an impossible feat for this time of year, make it a goal for 2018. The idea is to learn to live on less, so don’t fast one month and feast the next. You will be surprised how much you save when you don’t spend!

MYO lunch

Make a list before you hit the grocery aisles and include lunch items for the work week. Making your lunch can easily save you $50 per week (more if you also buy a drink) or $2,400 a year (deducting four weeks’ holidays). If you struggle to find time during the week, spend an hour or two in the kitchen on weekends to fill both your lunch and money box.

Haven’s simple MYO lunch tips:

  • Google meals you can cobble together with all those herbs, spices and tinned foods in your pantry – tuna, kidney beans, lentils, tomatoes and even good old baked beans.
  • Fridge or freeze left-over curry, bolognaise or chilli con carne and mix’n’match the portions with rice, pasta or mashed sweet potato.
  • Start a salad club at work. Choose one day a week for everyone to bring a different salad to share. Switch it to soup in winter.
  • Poach a couple of chicken breasts in soy sauce and stock, boil some eggs and mix with various salad greens and your choice of dressing throughout the week.

1. https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/mortgage-calculator#!how-much-will-my-repayments-be
2. https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/

What to research before you invest

Despite regulatory attempts to cool their heels, property investors still account for nearly one in three1 residential loans. Even first-time home buyers, who may not be able to own where they want to live, are dipping their toe in the investment market.

With many Australians still eyeing property as part of their wealth and retirement strategy, it’s more important than ever to make a wise investment.

Vacancy rates

Capital growth is important but so too is cash flow. Do your homework on vacancy rates and rental returns in your target market. An empty property won’t repay your loan. A vacancy rate of two – three per cent2 is desirable. A higher vacancy rate may not signal a poor investment – just as a low vacancy rate is no guarantee – but it does mean being prepared to cover any rent gaps if the property sits empty. It also pays to be wary of building booms. A surge in development doesn’t necessarily equal demand, so research the volume of properties in your market, and in the pipeline, against population and jobs growth. Keep tabs on property news websites and real estate research sites for a bunch of useful free stats, including vacancy rates and rental yields.

See for yourself

Reports and recommendations can be helpful but nothing beats first-hand experience when it comes to property. Spend time in the suburbs you’re researching and take note of what’s hot and what’s not. Are the local shops busy? Are the schools in high demand? Are locals out and about in parks and playgrounds? These are each healthy signs of life. Talk to the local newsagent or greengrocer about neighbourhood trends. Are older people moving on and younger people moving in? Remember, it’s not about whether you would like to live there, but rather the suburb or town’s ability to attract and retain others.

Ripple pond

We’ve all heard about the worst house in the best street, but what about the next best or even third-best suburb? Keep an eye on sought-after suburbs and, particularly, those surrounding it. As popularity drives up prices in one postcode, it’s not uncommon for demand to eventually ripple out one or two suburbs further. Use the current hotspots for renters and buyers as pointers to more affordable, emerging locations.

What should you pay?

The adage that a property is only worth what someone is prepared to pay rings true. But what should you pay? An independent property valuation might have the answer. For $300 to $600, a reputable valuer will inspect the property inside and out and make an assessment based on local property data to inform your offer. Just be mindful your lender may still want to get their own valuation, which they could ask you to cover in the cost of the loan.

Pipeline projects

Infrastructure is key when it comes to property. Renters are looking for convenience and connectivity, which means reliable public transport, easy shopping and proximity to jobs. Ask the local council what projects are on the slate to improve access, drive economic growth or regenerate disused zones. You can also check on big-ticket public projects at Infrastructure Australia.

Capital gains vs rental return

Many would argue it should be “and” not “or”. Rent is your cash flow to retain the property, but capital gain is what creates equity and an opportunity to secure other investments. New investors should aim to strike a balance between a sustainable rental return and a steady increase in value over time.

Get your strata straight

If buying an apartment, make sure you know exactly what’s included in the strata title and have it included in the sale contract. Is there, for example, a garage, parking space or storage facilities? Apartments also attract body corporate fees. Usually, the fancier the complex – pool, gym, plush gardens – the higher the fees. Ask to review the financials in the body corporate disclosure. This will tell you how much is in the sinking fund for building repairs or upgrades, and what projects are being planned. An insufficient sinking fund could mean owners are asked to cough up for extraordinary expenses such as roof replacement or external rendering. You should also check the disclosure for adequate insurance cover on the building and other communal assets. If underinsured, and disaster strikes, owners could be asked to make up the difference on repairs.

Talk to us

The Australian Prudential Regulation Authority (APRA) asked lenders to limit growth in investment loans in late 2014. In March this year APRA clamped down further3, calling on lenders to limit interest-only loans (favoured by investors) to 30 per cent of new residential mortgages
The new landscape, combined with low interest rates, means interest-only loans may no longer be the smartest option for investors. Talk to us to navigate the lending options and track down the most competitive rate and suitable loan structure for your investment strategy.

1. See ABS data in article: http://theconversation.com/three-charts-on-who-is-the-typical-investor-in-the-australian-property-market-81319
2. http://kbre.com.au/2012/06/what-is-a-reasonable-vacancy-rate-for-a-rental-property/ & https://blog.realestateview.com.au/2016/10/what-is-a-vacancy-rate/ & https://www.domain.com.au/news/vacancy-rates-remain-tight-to-start-the-year/
3. http://www.abc.net.au/news/2017-03-31/apra-clamps-down-on-interest-only-mortgage-loans/8403712

Investing: the information in this article does not constitute advice. As investing can be complex, we recommend you speak with your financial advisor for expert advice regarding your personal circumstances.

David Bailey, CEO of AFG – AFG National Broker Conference 2017

David Bailey joined AFG back in 2004, becoming our Chief Executive Officer in the inaugural year of our National Broker Conference 2017. It seems fitting his speech would, therefore, be titled The industry today, the industry tomorrow, and the importance of championing competition.

The mortgage broking industry has much to be confident about and much to celebrate, a consumer’s desire for a broker in their corner continues to grow. The need for competition within the marketplace is more important than ever and a topic we champion. With our industry under the regulatory spotlight, AFG is proud to have taken the lead in this space, on behalf of each one of our brokers, and the industry as a whole.

David spoke on these topics, as well as his view of the mortgage broking space today, and what this may look like tomorrow. He also touched on several business efficiencies and initiatives to help you continue to future-proof your businesses and continue your growth trajectory in the years ahead.

Watch David’s talk:

Women in Broking: Katrina Rowlands, Mortgage Success in New South Wales

Our Women in Broking series continues with an interview with Katrina Rowlands, director of Mortgage Success, in Wollongong, NSW.

What inspired you to pursue a career as a mortgage advisor?

The fact that I could self-manage my time, as a broker, and self-manage my success really appealed to me. I had been told in my previous company role it would be difficult for me to move into senior management because I was pregnant with twins. Someone else decided to limit my abilities due to babies! I also loved that I could really help people personally and enjoyed the challenge of helping all parties win in a transaction.

I loved the challenge of helping all parties win in a transaction, especially difficult matters in which I could dissect and discover issues and solutions. I started with clients who others left behind, which was a fantastic learning curve and so rewarding. To this day, I love helping the client who has good character and strong integrity, but maybe their life has had a hiccup or two.

What challenges did you face when starting out or along the way?

Pretty obviously – managing the birth of twin daughters whilst already having two other children and learning a brand new role. Challenges of meeting all of my life priorities at once is a continued aspect of my life but pretty happy with how things have gone so far. Gaining the confidence of key partners in such a young industry was an initial challenge 20 years ago. All these years later I still have a lot of my original network working with me.

The ongoing challenges have been around multiple changes going on for too long, I really am looking forward to just focussing for a while back on clients rather than the constantly changing paperwork. One of my pet issues now is the total lack of bank service consistency – seriously since starting this business I have gone from 2 day approvals (best I ever had was from submission to unconditional prior to upfront valuations in 4 hours) now we are being told to manage with 10 day approvals and we have done all the work upfront. I am not finished with this issue yet – trust me. It just isn’t good enough and I am really not sure how we have allowed this to happen.

Which aspect of your role do you love the most?

I love making a difference and helping people achieve their dreams and success in such a huge part of their life. I love really talking to people, understanding what they really want and helping them visualise it and then experience it.

I appreciate strong support from my lending partners when I ask for help, and who care as much as I do about an individual client who deserves that extra touch.  I love this industry and my friends in it – from business partners to lenders and clients.

Describe your career highlight to date and what it meant to you.

I believe my best is still to come, especially with family coming through our company.

I am incredibly proud of being named AFG’s first Hall of Fame recipient and the first Women in Business award recipient, as well as having the first Scholarship for Women in Mortgage Broking named after me, which has allowed me to work with wonderful new entrants to the industry.

Why should other women consider a career in the mortgage industry?

Being a mortgage broker requires empathy. You have to hear more than words when a client tells you their story.  You need to be able to encourage a client to be honest and ask them to trust you to guide them. I really believe that to build and hold a strong book you need to constantly nurture your clients and respond to them according to their changing needs.

Managing someone else’s priorities ahead of your own is a constant reality. Managing compromise and enjoying someone else’s success is all part of the game. Having the respect of the industry, good remuneration and flexible self-managed work hours (in most cases) allows you to be the best you can be.

In your view, why is it important to have a mix of male and female mortgage brokers?

I love working with my peers and hearing their viewpoints. We all think slightly differently and I realise some of that is gender, but also regional versus metro thinking and old versus young thinking, and banking background versus new-to-industry thinking. Having a great mix of males and females is crucial to any industry.

The Hon. Jeff Kennett AC – AFG National Broker Conference 2017

The Hon. Jeff Kennett AC, former Premier of Victoria and founding Chairman of beyondblue is a change merchant. He spoke at our National Broker Conference about the increasing speed of change and how it is neutering the political process from delivering good government

In a talk titled With an increasing speed of change, should we change our priorities? Jeff illustrated how good, consistent leadership can deliver positive outcomes for all aspects of life.

As founding Chairman of beyondblue, the national organisation that promotes good mental health and seeks to reduce the stigma surrounding depression and anxiety, Jeff will challenge our thinking of what he believes should be the priorities in our lives.

Watch Jeff’s talk and learn how you can prepare yourself and your staff for change:

How to be a first home buyer

While many first home buyers might feel thwarted by escalating property prices in some capitals, plenty are still taking the plunge, spurred by low-interest rates and the great Australian dream of owning your own piece of turf.

According to the Australian Bureau of Statistics1, first-time buyers currently account for about one in six home loans. So just how do you get into the market when affordability is an issue?

While not easy, for most the keys are sacrifice and compromise. Here are our tips to help first home buyers make a move.

Saving for a deposit

There is no time like the present to start stashing your cash for a deposit. The longer you put it off, the harder it can be to develop good savings habits.

Unless you win the lottery, inherit or receive some other windfall, chances are you will need to make sacrifices to save. This may mean finding cheaper rent or moving back in with parents while making some tough choices about how you spend your disposable income.

Start with a budget. Make an honest appraisal of all your living expenses and decide where you can cut back. Once you know how much you can actually save, set up a direct deposit from your pay into a separate savings account with no card access. That way you won’t be tempted by ATM withdrawals or EFTPOS purchases.

It may not be easy but it will be satisfying to watch your nest egg grow, knowing your homemade lunches and big nights in will eventually reap financial rewards.

Most lenders require at least a 10 per cent deposit. You will also need to cover the cost of Lenders Mortgage Insurance (LMI) if you need to borrow more than 80 per cent of the property’s value. The insurance covers the lender (not you) should you default on the loan and the property has to be sold at a loss.

Make sure you also have enough saved to pay for stamp duty and conveyancing or legal fees associated with the purchase of the property.

Find a mortgage broker

While you sock away your savings, talk to a mortgage broker about how much you may be able to borrow. A mortgage broker can access a wide variety of lenders, many of whom offer competitive loans but do not necessarily promote the fact. A broker can help navigate the competitive landscape and negotiate a loan that suits your needs.

Once you have saved enough for a deposit, work on securing pre-approval for a loan, so you can start house-hunting with a firm budget and peace of mind.

What and where to buy

When it comes to the type of property and location, many first buyers find they have to compromise. A stand alone home in an established, convenient, leafy neighbourhood near a CBD, great transport, family and friends might well be out of reach first time around.

If convenience is important, you will probably be looking at apartments instead of houses, remembering the closer you get to a CBD, the higher the demand and price. Your budget, for example, might only stretch as far as an older, walk-up unit if you want a property within 20 minutes of a major capital city.

If you definitely want a house and yard, you will most likely be restricted to the outer suburbs or regional areas.

Consider what is most important to you now and over the next five years. Are you looking to be part of a community that’s similar in age to you? Is it important to get to and from work as quickly as possible or can you cope with a long commute, providing you have a great lifestyle when you get home? Do you have children or are you starting a family? All of these, in addition to your budget, will influence where and what you buy.

Research is essential. Do your homework on suburb demographics and price trends over the past 10 years, plus existing and planned infrastructure, such as public transport, shopping centres and schools. If property values in one suburb have really taken off in the past five years, find out why and whether neighbouring areas have similar potential.

Taking on a mortgage

It’s a big commitment and many may find it daunting, so it helps to consider your home loan as paying off an asset, rather than paying dead money on rent.

If you budgeted successfully to secure a deposit, chances are you will transition smoothly to managing your mortgage.

Your broker can help you determine whether you take on a fully variable or fixed interest rate, or split your loan between the two. A fixed rate provides certainty, which can mean additional peace of mind for first buyers, while a variable rate allows you to save should interest rates drop. On the flip side, you pay more with a variable loan if rates rise. A split loan is a bit of an each way bet, which suits many newbies while they settle into life with a mortgage.

With interest rates at record lows, first home buyers should be banking on and budgeting for rates rising. If nudging the edge of your affordability from the outset, chances are you will struggle at the first rate hike. Build a buffer and budget for repayments at about two per cent higher than the current rate to ensure you can sustain any increases.

One of the best ways to prepare for interest increases is to inject additional savings into your mortgage. Talk to your broker about loans with a redraw facility, which allows you to make extra payments and redraw them if needed. If rates remain the same, leave the money where it is and reap the reward of shortening your loan and/or paying less interest.

Safety in numbers

With property affordability slipping, many first home buyers are pitching in with friends or family to close the gap. Buddying up can reduce the financial burden and may mean you can afford a better quality property with greater growth potential than if you bought solo. But it’s not a move you should make lightly. Even if buying your first property with family, seek legal advice and ensure each party understands their financial and legal obligations. Discuss what would happen if one of you was unable to cover their share of the mortgage and whether you each need to take out income protection insurance to mitigate against this risk. You should also contemplate scenarios such as one of you wanting to sell or move out sooner than planned.

If you do buy a property on your own, you can still offset some of the costs by renting a room. Again, make sure you obtain legal advice and have a proper tenancy agreement in place. You should also secure financial advice around potential tax implications.


When nothing but new will do

The First Home Owner Grant (FHOG) scheme was established in 2000 to help offset some of the impacts of the GST. Offered by the Federal Government, the FHOG is administered and packaged differently in each State and Territory and has morphed over the years.

The FHOG was once offered to first home buyers purchasing both established and new properties but is now offered to only those buying or building new homes, to help fuel the building cycle.

The grants apply to apartments and houses up to a certain value. These thresholds vary depending on the type of dwelling and the state or territory in which the property is located. The savings can be significant – for example, a saving of $15,000 on transfer duty in Queensland – so the scheme is certainly worth exploring if buying a new property, or building is something you would consider.

Visit www.firsthome.gov.au to find out what’s on offer under the FHOG scheme in your market.

You should also check if your state or territory offers stamp duty exemptions or concessions for first home buyers.

1 www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0 ABS, Housing Finance, Australia, October 2015

Peter Kell, ASIC – AFG National Broker Conference 2017

In light of the ASIC report into broker remuneration and in his role as ASIC Deputy Chair, Peter Kell spoke at our National Broker Conference this year on the key themes of competition and positive customer outcomes.

Peter focused on how brokers can ensure they are meeting these objectives, as well as how they can continue to meet them. He also touched on other topics under the ASIC spotlight at the time of the Conference.

Watch Peter’s talk The ASIC review into broker remuneration:

AFG announces new referral arrangement with Lifebroker

Australian Finance Group (ASX:AFG) is pleased to announce the appointment of Lifebroker to AFG’s life insurance referral program. The new arrangement will make it easier for AFG’s 2850 brokers to offer life insurance referrals to clients, providing them with a wide choice of options for their needs from Lifebroker’s range of comprehensive life insurance products.

Mark Hewitt, AFG General Manager Broker & Residential, said, “I’m delighted to announce that we have chosen Lifebroker, a TAL Group company, for our new life insurance referral service. This new arrangement strengthens our 10-year relationship with TAL and I’m pleased that we have been able to evolve our life insurance offering to better meet the needs of our broker’s clients.

“Lifebroker offers specialist life insurance comparison services, featuring eight of Australia’s leading life insurance companies. With an extensive range of fully-underwritten products – equal to those accessed through a financial adviser – our clients can be confident that they are being looked after by the best in the industry,” said Mr Hewitt. “This is a great value-add to the services our brokers provide to their clients.”

The service for life insurance referrals will give clients access to the price and product comparison services provided by Lifebroker across the following types of insurance: life insurance, income protection, total & permanent disability insurance, trauma insurance, business expense insurance, and life insurance through superannuation.

Alex Homer, Lifebroker CEO, said, “We look forward to working with AFG to give their clients more choice and control over their insurance options. Lifebroker’s goal is to help Australians make better-informed decisions when it comes to life insurance and income protection cover, and this partnership will play a key role in enabling us to do this.”

The life insurance referral program commences today and brokers can opt-in by contacting their AFG relationship manager.

Download Media Release: AFG announces new referral arrangement with Lifebroker.


Media Contacts

AFG
Alison Clarke
Head of Corporate Communications AFG
+61 402 781 367 | mdmedia@afgonline.com.au
www.afgonline.com.au

Lifebroker
Brannon Valmadre
Illuminate Communications
+61 2 8583 6905 | +61 439 688 863
Brannon.Valmadre@illuminatecomms.com.au

 

Reserve Bank of Australia has again opted to leave the official cash rate on hold at 1.5%

With celebrations for the race that stops a nation in full swing, the Reserve Bank of Australia has made this decision.

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5%. The rate has not changed since September 2016.

This outcome was widely predicted by financial commentators. With inflation seemingly well under control and the Sydney property market now showing signs of cooling, many are predicting that the next rate change may not come until well into 2018.

Regardless of whether rates move up, down or stay the same, your mortgage broker’s role remains unchanged. Your broker is always on hand to ensure you still have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with your broker.