What to do if I’m struggling with loan repayments?
Here are a few things you might consider doing if you find yourself struggling with loan repayments.
Contact your Bank if you’re struggling with loan repayments
With consumer protection legislation in place since July 1 2011, all lenders have a hardship clause in their mortgage contracts, which in essence, encourages empathy from the lender to help you get through this short term issue. Give your Bank a call and be honest and upfront with them and you’d be surprised the leniency they will show. There are options for you, one being your Bank may agree to defer your minimum contracted repayments for a few months. Anyway, please contact your Bank.
Reset your mortgage term
You can ask your Bank to reset your current loan balance over 30 years again, thereby reducing your minimum repayments. It may, in some instances cut your monthly repayments by up to $500.
Switch to interest only repayments
Request a short interest-only term (say 12 months). You can still pay principle and additional repayments at any time but at least the required minimum repayment will be much less than what it is now.
This comes back to budgeting and having a good understanding of where you can cut down on any unnecessary expenses and enlighten you as to where your money is going. Download our comprehensive budget planner to start getting yourself on the right track.
Increase your mortgage to pay off all other personal loans and credit card debt can seriously reduce your overall monthly repayment commitments.
Consider taking on a second job to earn some additional income, or working more overtime, or ask your boss for a salary review. You may even come up with a way to earn additional income from home.
Seek help if you’re still struggling with loan repayments
The last resort would be to seek professional advice from a specialist financial counselor which you can find one by simply doing a google search.
How do I calculate stamp duty and other costs?
Easy – Go to our stamp duty calculator as this will calculate stamp duty and other Government costs for a property purchased in any State of Australia, whether you’re a first home buyer, second time buyer or an investor.
Stamp duty is a State Government tax on the transfer of property and is assessed on the sale price. The amount of stamp duty varies from State to State. Your Conveyancer / legal representative will advise you of the amount payable and if you are entitled to an exemption, or you can check your State’s website in the below table for more information.
Calculate stamp duty
What do I need to supply for a loan application?
Documents required for any loan application, really depends on each individual’s circumstances, but at least this will give you a guide of where to start.
100 POINTS OF IDENTIFICATION
- 70 points of I.D (No more than one of these can be used): Birth Certificate, Citizenship Certificate, Australian Passport (can be used even if expired for < 2 years) or a Foreign Passport
- 40 points of I.D: Drivers Licence (front and back), Student I.D, Proof of Age Card, Pension Card, Concession Card or a Health Care Card
- 35 points of I.D: Rates Notice (Can be used only if it’s not in arrears)
- 25 points of I.D: Electricity/Gas/Water/Phone Bill, Medicare Card, or a Marriage Certificate
If any of the identification you supply has a different surname/maiden name on it than what will be stated on your loan application form then provide a copy of your marriage certificate also
- Your 2 most recent & consecutive pay slips (the recent one to be less than 4 weeks old, and as a minimum it must show your employer’s name on it, their ABN and your own name)
- If you have a salary packaging arrangement, please provide evidence of the arrangement
- If you have a company car that is fully maintained by your employer, provide a signed letter from your employer on their letterhead detailing the company car arrangement
- Your most recent “PAYG Payment Summary”
- All the pages of your latest “Tax Notice of Assessment” issued by the Australian Taxation Office
- If you receive a Centrelink allowance, then a copy of all the pages of your most recent Centrelink statement
- Proof of rental income: Copy of current lease agreement, OR last 3 months of rental income statements, OR a letter from the real estate office which is less than 6 weeks old confirming the amount of rental income
- (If applicable) Child support agency letter
If you are self-employed:
- All the pages of your last two years tax returns and financial statements (for Partnerships, Companies & Trusts)
- All the pages of your last two years personal tax returns
- All the pages of your most recent “Tax Notice of Assessment”
SAVINGS / PROOF OF FUNDS TO COMPLETE SETTLEMENT
- (Where your ‘deposit’ is held), all the pages of your last 3 months official savings account statement plus an internet printout of transactions on that account commencing from the end date on your last statement up to today’s date (make sure your name and account number is printed on any online statement and it shows the running balance next to each entry)
- Stat dec from the giftor stating their relationship to you, the amount of funds they want to gift you, that it is non-repayable, and it is for the purchase of a property
- If we are refinancing your home loan debt then provide all the pages of your last 6 months official home loan statement plus an internet printout of the transactions on that account commencing from the end date on your last statement up to today’s date (make sure your name and account number is printed on any online statement and it shows the running balance next to each entry)
- If you want to consolidate any of your credit card debt then provide all the pages of your last three months credit card statements for each credit card
- If you want to consolidate any of your personal loan debt then provide all the pages of your last six months official personal loan statement plus an internet printout of the transactions on that account commencing from the end date on your last statement up to today’s date (make sure your name and account number is printed on any online statement and it shows the running balance next to each entry)
- Confirm your current HECS/HELP outstanding balance
- Proof of rent expense: Recent one month transaction statement showing a clear narrative of your rent expense, OR letter from the real estate agent, OR current lease agreement
- Your Annual rates notice on all properties that you own
- Find out what your approximate superannuation balance is and with which Provider it is with
- A full copy of your fully signed contract of sale
- A receipt copy of any deposit you’ve already paid
- Sign your current lender’s “Discharge Authority Form” (We’ll complete the rest of the form for you)
What is Lenders Mortgage Insurance?
No one likes paying extra costs, and a home is one of the cases where many people are already stretching themselves to the limit on the property sale price alone. Lenders Mortgage Insurance (LMI) is a one-off insurance payment which protects your lender against your default. LMI is commonly paid when the Loan to Value Ratio (LVR) is 80% or more. This occurs when more than 80% of the value of the property is borrowed from the lender by a buyer.
There are only two ways to avoid paying Lenders Mortgage Insurance:
- Save 20% or more as a deposit; or
- Have someone go guarantor for your loan.
Let’s break that down into some detail and see if you can save yourself from paying LMI.
How a 20% or more deposit saves you from Lenders Mortgage Insurance
Saving 20% of a property price is a tough task for the average first home buyer. To buy a property at $400,000, requires a deposit of $80,000 even before stamp duty, conveyancer fees and other expenses are tacked on. For a first home buyer, these sums can be unrealistically high. LMI functions as a much necessary lower rung on the property ladder for those who don’t want to go down the guarantor path.
How Guarantor loans work and can save you paying Lenders Mortgage Insurance
A guarantor loan is when a buyer has a loan guaranteed by someone else, usually a family member. This allows a borrower the option to borrow more than the value of a property to cover expenses, stamp duty and, even in some cases, costs for renovations or consolidate current debts. The guarantor is not liable for the full amount of the loan, only an agreed amount. Collateral for this guarantee is usually a guarantor’s property. We have ten lenders that offer guarantor loans.
The ins and outs of Lenders Mortgage Insurance
On a property worth $500,000 with a deposit of $30,000, a first home buyer can expect to pay around $12,500 for LMI, according to Genworth’s LMI estimator. Most lenders will allow this to be capitalised on the loan. This means that the borrower doesn’t pay the sum upfront, but it is added to the original loan amount.
LMI is calculated based on property value, location and loan amount. Typically LMI is paid on properties where 80% or more of the property value is borrowed. However, LMI may be applied to properties well below the Loan To Value (LVR) ratio of 80% if the bank deems it to be a higher risk, which to the borrower can often seem a little needless and arbitrary, such as a warehouse conversion or low doc loans.
LMI only covers the risk of the lender. If the borrower defaults, they are still liable. Refinancing with an LVR above 80% can attract LMI again, although in some cases a partial LMI refund may be paid out by the lender you are switching from. Mortgage Protection Insurance is insurance which can be taken by a borrower to insure themselves against mortgage default.
There are two major LMI providers in Australia which support the majority of the LMI-backed loans in Australia; Genworth and QBE.
How is interest calculated?
How is interest calculated is simply on your outstanding balance on a daily basis and charged to your home loan account once a month. For this reason, and because of the number of days between interest charges varies, the amount of interest charged each month may also vary.
To calculate interest only repayments, your loan balance is multiplied by the interest rate, then divided by 365 days in a year, then multiplied by the number of days in the current month.
Go to our loan repayment calculator to make this job easy for you. This calculator will also calculate your weekly, fortnightly, and monthly principle & interest repayments.
Where can I find out my interest rate?
You can find out your current interest rate on the first page of your home loan statement or on your internet banking screen.
Why does interest exist?
The person or company lending money is giving up other uses for that money until the loan is repaid. The interest is supposed to make up for the fact that the person or company could have spent that money in ways that brought in extra value.
Learn the difference between simple interest and compound interest.
You’ve just calculated simple interest, in which you only pay interest on the principal you borrowed. Many credit cards and other loans, however, utilise compound interest, where the interest you owe gathers interest of its own. Compound interest can result in much higher interest over time than simple interest. Use our borrowing capacity calculator to help you calculate principle and interest repayments.
Here’s a side-by-side comparison of interest only vs principle and interest:
- You take a loan out for $100 at 30% simple interest. You’ll owe $30 interest after the first time period, $60 after the second, $90 after the third, and $120 after the fourth.
- You take out a second loan of $100 at 30% compound interest. You’ll owe $30 interest after the first time period, then $69, then $119.70, then $285.61.
- Multiple other factors can come into play when calculating more complex forms of interest, including credit risk and inflation.
Talk to us
Contact us on 03 9700 7033 8:30am to 8:30pm Monday to Friday to arrange a free Home Loan Health check.
How do I reduce loan quicker?
Everyone deserves to learn as many suggestions on how to reduce loan quicker, let’s face it, who wants to have an owner occupied debt in retirement?
Here’s some of the main tips we want to share with you now on learning to reduce loan quicker:
Reduce loan quicker
- Pay more frequently than monthly – with fortnightly repayments you will actually be making one additional repayment a year. However, for this to be effective it is important that you ask your lender to halve your monthly repayments rather than recalculating them
- Make extra repayments above the minimum – even $80 a month on a $200,000 loan at 7.32% will save you 3 years and 3 months off your loan term
- Extra money like inheritance, a good tax return, a bonus from work should be credited into your home loan. If you have a redraw facility you still have access to this extra repayment when needed
- Make your first repayment at settlement
- Consider a 100% savings offset account
- Salary crediting: you can use a credit card with a good interest free period to pay for your regular living expenses and at the end of the month have the card ‘swiped’ (or paid off) against the home loan
- If interest rates fall ask your lender to leave your repayments as is
- Do a regular stock take on your home loan. A loan may start off as good but have its competitiveness eroded by increased fees or rates, or by the introduction of better priced products on the market
- Interest repayments on an owner occupied home loan are non tax-deductible, which means it makes good sense to give priority to paying off your home loan quickly instead of directing funds towards paying off investment loans or having them sit in low interest-bearing deposit accounts (where any interest received will also be taxed).
Can i get a loan if I have a default?
Blue Key Finance has been in business since 2004, and we remember once you had a mark on your credit file there was nothing you could do about it other than to put your plans on hold for five or more years.
Now, we have a few specialist lenders on our panel who can offer home loans to you even if you have a default or two. They begin with slightly higher interest rates yet with a good repayment record you can move on to a standard home loan with a lower interest rate 18 months later.
These lenders offer loans to those with paid and even an unpaid default and even to discharged bankrupts, but before you apply be sure to consider why you ended up with bad credit, if there are possible credit repair options and how to keep a clean credit history. We would love to recommend you a trusted and reputable credit repair agency by visiting www.princeville.com.au . They will charge a small fee, only if they can guarantee the likelihood of removing your bad credit. This can take up to six 6 weeks which will ultimately put you in a better position for a better home loan. On the flip side, read on to see our top tips for getting approved for a home loan with bad credit.
9 tips to apply for a home loan with a default and get approved
When applying for a home loan with a default, there are a number of things you should consider doing before applying for any home loan.
1. Get a copy of your credit file
Before you even apply for a home loan, you’ll want to ensure that you’re familiar with your credit history. All of your prospective home loan lenders will have a close look at your history before granting you a home loan, so you want to be able to discuss the negative marks on your credit file with confidence. You can get one free copy of your credit file each year. This gives you the advantage of exposing negative listings which you can fight against using a credit repair service.
2. Take steps to settle any outstanding debts
New lenders will want to know what you’ve done to address your past credit mishaps, so ensure that any defaults are paid and you do the right thing by your previous creditors.
3. See if a credit repair service can help you
Some default listings, if placed on your file without proper adherence to the relevant laws, can be removed from your file. A credit repair specialist can help you in this regard. Removing negative listings from your credit file can see you apply for a regular home loan, avoiding the higher fees and interest rates of a bad credit home loan.
4. Apply for a loan with a specialist lender who looks beyond the numbers
Certain lenders in Australia specialise in bad credit home loans. These lenders, such as La Trobe Financial, Bluestone, Pepper and Liberty Financial, look at your credit file and take into account that a default or two can result out of a lifestyle change, such as divorce or illness, and will take into account your income and other factors to still grant you a loan, even if you’re a discharged bankrupt or have negative listings on your file.
5. Don’t apply for too many loans in one space of time
Your credit file includes all previous enquiries for credit, which includes past loan applications. Be careful with who you apply for a home loan with if you already have bad credit, as too many enquiries in the same space of time can present another red flag to prospective lenders, as it could indicate money management problems.
6. Tell your Finance Broker about your bad credit listings honestly
Tell us about each of your bad credit issues before we help you apply. If need be, you might have to organise a face-to-face meeting with us to give you the right opportunity to explain your credit history. This will give your lender more information to go on when deciding whether to approve or deny you a loan.
7. Think about Lender’s Mortgage Insurance (LMI) before you apply
In Australia there are only two major LMI providers, Genworth and QBE. They have their own lending criteria which they use to evaluate your loan, which can in some cases be stricter than that of your lender, leading to your application being rejected. Some lenders don’t use these insurers, meaning there’s no third party risk of being rejected for a home loan because of LMI. In most cases, these lenders, such as Liberty Financial and Pepper, will have their own LMI alternative.
8. If you can avoid applying with a spouse with bad credit do so
If your partner is the one with bad credit, sometimes you can avoid rejection and the higher interest rates of a bad credit loan by applying as a single applicant. This will obviously reduce your borrowing power, so consider this before applying this tip.
9. Eliminate your other debts to make your file look better
When your chosen lender looks at your application, they’ll take into account all of your current credit accounts, including credit cards and personal loans. If you can pay these off and close them before applying it’ll be one less factor that will work against you when your lender decides whether to approve or reject you. This is because your lender will look at your total capacity to pay off a loan, and if you have a number of credit cards – even if they’re not currently being used or maxed out – your lender could see this as a red flag.
Are there self-employed loans without a tax return?
Self employed loans or better known as Low Documentation (Low Doc; which means low proof of income required) Home Loans are designed for self-employed customers and small business owners who may not have access to the financial statements and tax returns usually required when applying for a home loan. These products now attract interest rates equal to those who actually verify their income.
Our Finance Brokers will help you choose a home loan with a Low Doc option suitable for you. Today, the Low Doc option is available on a wide range of home loan products. We specialise in low doc loans but even for self employed clients with bad credit we cans till help – call us now.
What you’ll need for self employed loans with a Low Doc option
If you’re looking for one of our many self employed loans involving a Low Doc option, there are some conditions that apply. What follows is a general list:
- You need to have been self-employed in the same industry for at least one year and supply details such as your ABN and/or Certificate of Incorporation. If your ABN is registered for less than a year, don’t worry, we can still help.
- You may need to provide your Business Activity Statements (BAS) for the past 6 consecutive months, verified by the Australian Tax Office (ATO).
- You need to confirm that your income has been registered for GST for a minimum of 12 months. Once again, if you do not satisfy this requirement, don’t worry, we can still help.
- You may be asked to provide six months’ worth of statements for your primary business or personal transaction account.
- The maximum amount you can borrow on a Low Doc Home Loan is 80% of the property value.
- If you are borrowing more than 60% of the property value, you will incur the once off Lenders’ Mortgage Insurance premium.
How can I improve my chances of obtaining finance?
If you haven’t refinanced recently, you may find that you have to jump through a few extra hoops when obtaining finance. Likewise, if you’re trying to get a home loan for the first time, it’s useful to know what can improve your chances of getting that all important loan.
So we’ve compiled a list of ways you can turn yourself into a more appealing borrower…
1. Refinance before changing jobs
When obtaining finance, the length of time you have been with your current employer can help determine if you’re eligible. As a general rule of thumb, when lenders mortgage insurance is involved then at least six months with the same employer is sufficient, but this will vary depending upon an individual lender’s conditions.
A good idea, then, is to stall any thoughts of that job move until after obtaining finance has been sorted. Incidentally, if you’re thinking of going self-employed in the near future, consider a mortgage that won’t need changing in the near term, as it will be difficult to refinance during the first couple of years you are in business.
2. Repay other debts before obtaining finance
It’s best to get into the habit of repaying credit cards, store cards, and overdrafts anyway – it’ll save you money – but having less of this kind of debt will also increase your chances of obtaining finance.
Lenders take into account the amount of outstanding debt you have, and the monthly payments you make, when assessing whether you can afford a new home loan. Worryingly, some lenders may even assess affordability using the potential amount of debt you could have, assuming that you have maximum balances on all your cards and overdrafts, instead of the balances you do have.
If you don’t use a certain credit card or overdraft, why not close it? Also, try to put all expensive debts onto the cheapest card you have (applying for a new 0% balance transfer credit card will impact your credit score – so leave doing this until the new mortgage has completed) and close the rest instead of repaying several and having lots of opportunities to spend.
3. Check your credit report
It’s important to check your credit report before applying for a mortgage as there may be items that have been repaid but appear outstanding, or even fraudulent applications made in your name. Getting this all dealt with prior to applying for a mortgage, before any money is lost, is a simple thing you can do to improve your chances of obtaining finance.
4. If you already have a mortgage, overpay
If you’ve got some money collecting little more than dust in a savings account, consider making extra repayments on your current mortgage instead.
If you have a particularly high loan-to-value (LVR) – the amount of mortgage in relation to the value of your property the higher the mortgage rate is likely to be, and it could also make refinancing more difficult. So, by paying extra you’re reducing the amount of mortgage you have and lowering the level of risk that a lender has to take on, and both of these could work in your favour when a lender is assessing the application.
As an added bonus, by paying extra and reducing the LVR you’ll be able to repay the mortgage quicker and will have access to cheaper deals, thereby helping you repay your mortgage more efficiently and cost-effectively.
5. Buying for the first time? Can your parents help?
The explosion of property prices has had a severe impact on how big mortgages are in relation to wages, and securing that big mortgage could be even harder.
But while you may be able to afford the monthly repayments, another side-effect of high property prices is that it’s really tough saving a deposit, even just 5 or 10%. So enlisting the help of financially-supportive parents can really make the difference, and there are several ways they can help:
- They could help by giving or lending you part of the deposit. Borrowing money from family can sometimes cause trouble though, so be sure to agree repayments that all parties are happy with. Borrowing from family will usually work out cheaper than borrowing elsewhere, and of course, it doesn’t appear on your credit report.
- They could act as a guarantor on your mortgage. This means that they guarantee that the mortgage payments will be made, so they become fully liable as well (although in some instances this liability may be limited to a certain percentage of the mortgage amount). Guarantors normally have to be able to cover their own bills and your mortgage payment.
- A number of providers offer schemes for families to help get first-time buyers on the property ladder – do your research or ask us what the options are.
- Your parents could borrow to help fund your deposit. The least preferable option, but an option nonetheless, they could take out an unsecured loan. However, this should be thought through very carefully as your parents will be out of pocket, and you may not be able to pay them back in the near term, or at all. You could set up an arrangement whereby you pay this loan as well, but remember that you’ll have your mortgage and bills to cover, so you need to consider if this is really affordable for all parties.
With any sort of arrangement where somebody takes a financial interest in your mortgage, we would strongly recommend seeking financial and legal advice.
6. Keep your house in order
When going through the application process, your property’s value will be assessed. If you need to borrow at a high LTV this will almost definitely mean a valuer physically coming round to inspect the property.
It’s the same as if you were trying to sell your house – it needs to look its best to command the highest price. So make sure the outside of your property is well maintained and that the interior is also. For the purposes of a basic mortgage valuation, they are looking at saleability of the property. The higher the value of the property, the more likely you are to secure a lower mortgage rate.
7. When obtaining finance enlist the services of an experienced Finance Broker
As opposed to going directly to a lender, making use of a good Finance Broker can improve your chances of getting a mortgage.
At Blue Key Finance we will search the market and will have knowledge of lending conditions particular to each lender, which, as well as your personal financial situation, they will take account of before making any recommendations to you.
What affects my borrowing capacity?
There are seven factors that affect your borrowing capacity:
- Your income and minimum monthly contracted repayments
- Your lifestyle/living expenses
- Your credit history
- Your property deposit
- The type, term and interest rate of your home loan
- Your assets
- The value of your property
Income & commitments:
Before a lender will give you a home loan, they will want to assess how much you can afford in mortgage repayments.
To determine exactly how much you can afford in mortgage repayments, they will look at your income as well as any outstanding debts and other commitments you have. As such, if you are buying a property with another person your repayment capacity may be greater, which would mean greater borrowing power.
In addition to looking at your income, you lender will also review your current commitments, which includes all of your outstanding debt, credit and store card limits, personal loans, car finance and any other ongoing financial commitments you may have.
It may sound extreme but lenders will look at the credit limit on your card or cards as a liability you may have in the future, even if you don’t owe a solitary cent currently.
For instance, if you have a card with an $8000 limit and another with a $4000 limit, a lender will write down $12,000 as a debt against your name. Reducing your credit card limit by $10,000 may increase your calculated monthly disposable income by $300, which has the effect of having a net pay rise of $3600 per year.
When working out your borrowing capacity, a lender will also look at your living expenses – things like what you spend on groceries, utility bills, school fees, child care fees etc all have to be taken into account.
Once a lender has identified how much you can borrow, it is a good idea to work out what your living expenses are and make sure you can meet your mortgage repayments while still retaining a good standard of living
Your credit history will play a big role in determining what your borrowing capacity is. If you can prove you are a reliable customer who meets their financial obligations on time, you may be able to borrow a higher amount. Of course, if you have missed a few bills or credit card payments in the past, this may work against you when you are trying to obtain finance.
Before seeing a lender, it is a good idea to get a copy of your credit history and see if there are any red flags or problems you can address before you start looking for finance.
The more money you have in savings and can thus contribute to your property deposit, the easier it will be to obtain finance and increase your borrowing capacity. Lenders like to see that you are able to save money over a period of time – otherwise referred to as “genuine savings”, usually in the form of 5% of the proposed purchase price held in your savings account for at least 3 months,
Home loan type, term and interest rate:
The amount you can borrow may also depend on the interest rate and the term of your home loan. The lower the interest rate, the lower your repayments will be. A longer-term home loan will mean lower repayments, but a shorter-term loan may save you interest. You need to think carefully about what is most important to you.
Your lender will want to know what you have in the way of assets before they determine how much you can borrow. Having assets like a vehicle, an investment property or shares can significantly influence a lender’s decision, especially those who credit score.
Value of the property:
Finally, once you have found the property you would like to purchase, how much a lender will lend to you will depend on what the property is worth, most borrowers don’t know this.
The lender will find out how much a property is worth by conducting a valuation of the property. That valuation will then determine exactly how much they can and will lend to you.
Effective strategies to boost your borrowing capacity
Keep financial records up to date
One of the most common reasons borrowers find themselves well short of their anticipated borrowing levels is that they don’t have up to date financial information to prove their income levels to the lender.
Simply completing your tax returns on time can help us secure the loan you’re after. It’s also important to show your overall income to your lender, not just your last two payslips.
In many cases, the last two payslips required by a lender may not give a clear picture of your true income. In the situation where you may have a low base salary but high bonus payments, providing your last two payslips could be a disadvantage. Most lenders will be able to provide an alternative way to assess your income which can be based on the group certificate from your employer or even notice of assessment from the Australian Tax Office.
Concentrating on the bigger picture of annual income rather than the most recent payslips will help.
Select the right loan product
Even within one financial institution there can be a big difference in borrowing capacity levels based on the product you select. Product features such as interest only repayments, fixed rates, variable rate discounts and lines of credit can all impact how much the lender will offer.
Be aware that income type is treated differently by nearly every lender
Lenders can be very selective when it comes to the type of income they include in their repayment capacity calculations. Some income types may be excluded altogether by one lender and fully included by another.
Almost every lender treats income derived from dividends, second jobs, child maintenance payments, company profits, bonuses, commissions, government benefits, annuities and rents differently. Navigating your way around this maze is very difficult and every dollar that a lender accepts improves your borrowing capacity.
It may sound obvious but paying a low interest rate will save you hundreds of dollars on annual loan repayment commitments and thus increase your initial affordability.
A decrease of one per cent on your home loan rate may free up your cash flow by $260 a month on a $400,000 loan. This has the same effect of getting a net pay rise of $3,120 per year.
Allow us to shop around for you.
Split your liabilities with your partner
If you’re planning to buy a property under your name only, you can split your expenses on paper with your partner.
For example, two children as dependants may not be counted as your dependants if you can prove that your partner does and will continue to provide for them financially.
Use your properties as cross collateral
Using your property as cross collateral, or cross security, means you provide an existing property as a security to buy another property.
It’s increasingly requested by lenders because it minimises their risk of lending money against one single property. In other words, it’s a form of diversification for a lender. But be warned, there are pros and cons with this strategy.
The good thing is it may increase your serviceability to the extent you may borrow at a higher loan-to-value ratio. This may also save you money on lenders mortgage insurance when you borrow above the lender’s threshold.
The bad thing is, in the event of you being unable to meet the loan repayments, the lender may repossess the securities, which could put your properties at risk.
Another disadvantage with this option is that it can restrict your ability to refinance with another lender, so make sure you understand all the implications.
Extend the term of your loan
The longer the loan, the less the monthly repayments.
Thirty year loans for property are considered normal. You may want consider refinancing your current mortgage to a better product and interest rate and at the same time set it up for a 30 year term.
Save, save, save
Build up as much deposit or equity as possible. If you’re using a deposit to secure your loan, be sure to have saved consecutively over at least three to six months, depending on the lender.
Mind you, there is a large range with borrowing capacity between lenders. Go to our borrowing capacity calculator to get a rough idea on how much you can borrow.
Get an accurate borrowing capacity by contacting us.