FHBs trust mortgage brokers the most: survey. by Julia Corderoy When it comes to purchasing a first home, mortgage brokers are the most trusted professional by consumers, a new survey has revealed. A national first home buyers survey conducted by First Home Buyers Australia (FHBA) shows that more than a third (38%) of first home buyers found mortgage brokers “the most useful” service provider. Mortgage brokers were most trusted by those aged 24-31 years, with almost 60% of this age group saying mortgage brokers provide the most useful service. FHBA co-founder Daniel Cohen said FHBA wasn’t surprised by the results. “Over the years, a lot of education has been done to teach consumers about the benefits of using a mortgage broker. Sometimes in the property industry it’s hard for a consumer to know who they can trust. But most mortgage brokers fortunately act with the best interests of consumers in mind,” he said. Seeing how important home loan advice is to first home buyers, FHBA have announced a partnership with mortgage broking provider, Mortgage Australia Group (MAG), to develop a new, personalised mortgage broking service dedicated to helping first home buyers. “This service really will make buying your first home easy. First home buyers will have access to top experts who can help their great Australian dream come true,” FHBA co-founder Taj Singh said. Managing director of MAG, David Ham,said he was looking forward to working with FHBA to provide this exclusive home loan service for first home buyers. “From our experience of helping thousands of first home buyers, I can unequivocally state that for almost everyone, buying your first home is the single most important thing you can do for your financial future. “Once you have your foot on the property ladder, the potential to safely and reliably build wealth is now yours, you are no longer on the outside looking in.” The partnership will ensure complete home loan comparison and application assistance for first home buyers, assistance with grant eligibility and application, access to the latest ways parents can use their position to help their children and complimentary access to FHBA Concierge.

Recent changes by the Australian Prudential Regulation Authority (APRA) have led to significant tightening of investment lending criteria by the major lenders. Fortunately, there are still numerous ways for investors to discover a loan that's right for their circumstances. Don't be disheartened First things first, don't let the tightened lending criteria deter you from entering the market or advancing your property portfolio. This isn't the first time Australia has seen stricter lending policies, nor will it be the last. It is a savvy investor and their mortgage broker's job to navigate these changes and adapt to the ever-changing market. Reduce debt One of the key ways to improve your investment borrowing power is to minimise any debt. Any debt you are carrying impacts your ability to service an investment loan. Credit cards in particular can affect your bottom line. When calculating your ability to repay a loan, many lenders will assume your credit cards are maxed out. So if, for example, you have two cards each with a $10,000 limit, they will count as a $20,000 debt on your application, regardless of your actual balance. Get rid of any cards you don't use and reduce your existing credit limit if it is higher than you practically need. Take a good hard look at your expenditure and consider getting rid of any 'nice to haves' that you really don't need. Lenders will ask for a breakdown of your living expenses and while necessities such as food, transport, insurance and utilities are non-negotiables, you may be willing to sacrifice some luxuries such as holidays, gym memberships and pay TV subscriptions. Minimise your Loan to Value ratio The Loan to Value ratio (LVR) examined by the lender is simply the amount borrowed in relation to the property's value, usually expressed as a percentage. Tighter restrictions on investment borrowing has seen the generally accepted loan amount drop from around 90-95 per cent of the property's value to in some cases as low as 80 percent. The simplest way to minimise your LVR is to save a larger deposit. If your parents or other family members are financially secure you may also consider asking them to go guarantor on your loan. But there are significant risks for the guarantor and you should beware the family friction this may cause if things don't go according to plan. If you have an existing property, ensure you are paying down principal to build up equity. Pay ALL your bills on time Ensuring all your bills are paid on time not only helps your credit rating, it is good practice and gives lenders a solid picture of your spending and saving habits. Why not use a financial app to get you started. Mint – one of the most popular personal finance apps – gives you a complete overview of your finances, from bank accounts and credit cards to loans. It tracks and categorises your spending and alerts you when you approach your budget limit. Others you may like to try include Money View, Qapital and Level. Talk to your broker Your broker is privy to a wide range of financial information, together with access to hundreds of products and funding arrangements that might suit your current circumstances. Opportunities with lenders are again surfacing following the slowdown in investor lending last year with lender appetites and policies continuing to change on a regular basis. Your broker is best placed to steer you through these changes given their extensive networks across the wide lending panel they have access to. Don't forget it is important to get it right the first time, as applying unsuccessfully for loans can leave a mark on your credit history. Maximise your earnings and keep your records up to date Again, this is one where your broker is best placed to have all the information as lenders vary in how they classify income streams, such as dividends, child maintenance, bonuses, commissions, government benefits and rental incomes, which can all go towards boosting your earnings. Remember to always keep your book-keeping and tax up to date so the lender has a clear picture of your financials. QUICK TIPS • Reduce credit card limits. • If you have any overtime or bonus income or a car allowance, consider a lender that will include these forms of income when assessing your application. • Save for a larger deposit. The higher your deposit, the higher your borrowing capacity. • Engage a broker that understands the different policies that lenders offer and the key ways to maximise borrowing capacity. • Be patient. Finding the right property that fits your long term financial plan can take time. Use that time to save for a larger deposit.

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 us 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 allow you to make extra payments and redraw them if needed. If rates remain the same, leave the money where it as 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.

Is your rate competitive as this. Give me a call to discuss how to put more in your own pocket, than the banks! 3.99%p.a.^^ 3 Year Fixed Rate Home Package Plus, 4.23% p.a. ∞ Back to Basics Investment