Whether you are a seasoned property investor or just starting out in the real estate game, getting some help along the way is always advisable. This is especially true now that the property market is cooling – and making a mis-step can be costly.
Over the last month, combined capital city values fell by -0.7% while the combined regional markets logged a -0.4% drop. In March, dwelling values were down across all capital cities except for Canberra, where they were steady and Hobart where they rose.
Over the past year, national dwelling values have fallen by -6.9% which is their largest annual fall since February 2009.
While there are still plenty of investment opportunities in the market, getting strategic advice from an investment advisor and/or buyer’s agent is a smart move. Similarly, working with a mortgage broker could improve your options when securing finances, by presenting you with numerous suitable loan products.
When it comes to property investment loans, mortgage brokers are paid a commission from the lender, and that commission is not passed on to investors as extra costs.
Getting insights on lenders to secure a great deal
Mortgage brokers can help you in many ways. They act as a mediator between you and the lender. If the lender needs clarification about something in the application or more documents, then the broker manage this process and get back to you in simple terms about what they require from you.
The role of a mortgage broker is to help you choose the home loan that is right for your needs. While there is no shortage of loans, it becomes challenging to find the time to compare even a fraction of the loans available.
Importantly, brokers make an effort to understand a client’s situation and ask the right question so they can find you the right solution. For instance, if you have recently had maternity leave or you are self-employed, this could create a more complicated loan application – and your broker can direct you towards a bank or lender that has policies best suited to your situation.
The right lender may not necessarily be the one that will offer you the cheapest or most competitive interest rate, and getting the lowest rate isn’t always the main priority. It may be the case that only one or two lenders will approve your home loan, especially if you were already rejected in the past because you were not able to meet standard bank lending requirements.
Matching you with the right lender
Brokers work closely with a panel of lenders including the big banks as well as smaller lenders that are not as high profile.
They explore the home loan market for you, saving you time. Shopping around could lead to a better deal, but it can be time-consuming – so a broker takes the hassle out of the process and researches the market.
This is very important at this time when borrowers are experiencing a tightened lending environment. Australian Prudential Regulation Authority (APRA) announced in 2017 additional regulations to be able to manage financial risks in the property market.
Since December 2014, the statutory authority, together with Council of Financial Regulator members, has closely monitored residential mortgage lending trends. This increased scrutiny has been in response to an environment of heightened risks, reflected in an environment of high housing prices, high and rising household indebtedness, subdued household income growth, historically low interest rates, and strong competitive pressures.
Addressing risks that continue to build within the mortgage lending market, APRA introduced new measures on top of the 10% annual cap on investor credit growth that was first established in December 2014.
APRA decided to limit the flow of new interest-only lending to 30% of total new residential mortgage lending, and within that place strict internal limits on the volume of interest-only lending at loan-to-value ratios (LVRs) above 80%; and ensure there is strong scrutiny and justification of any instances of interest-only lending at an LVR above 90%.
Lending to investors has been regulated to comfortably remain below the previously advised benchmark of 10% In addition, restraining lending growth in higher risk segments of the portfolio (e.g. high loan-to-income loans, high LVR loans, and loans for very long terms) has been continued.
During the same period, the Australian government established the banking royal commission pursuant to the Royal Commissions Act 1902 to inquire into and report on misconduct in the banking, superannuation, and financial services industry. Through the commission, frauds concerning the sector were exposed and lenders were pressured to implement tighter lending standards.
As a consequence, low and middle-income Australians have a hard time in getting the funds needed for housing or investment.
Furthermore, brokers could cater to the many changes in lenders requirements and could ensure your chance in applying for certain loans. If you were looking for loans yourself, you would have to go through your scenario several times with different lenders to identify what loan and rate you qualify for. When you have a broker, on the other hand, he or she can take your information, call the lender and put your “scenario” to them before to applying to make sure that it matches.
Helping with paperwork to secure financing
When you have finally pinned down the kind of loan that you want for your investment, your mortgage broker will help you to complete the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the ongoing communication between all parties until your home loan is approved and settled.
A broker could also fill in the application form with you. If you are hesitant to borrow because you struggle with forms, then brokers could aid you.
This way, you can also make sure that there are no mistakes made in your application. A good broker would keep you updated on your application.
Should there be numerous deadlines to meet, a broker can work with the lender to ensure that these are met and the process is smooth and hassle-free.