Home loan pre-approval, also called an approval-in-principle, means getting your home loan approved prior to selecting a property.
It sounds straightforward but there are some facts you need to know to ensure you have the best start to your property purchase venture such as:
- Types of pre-approvals – which one will you need?
- When should you apply for a pre-approval? Before or after you find the property?
- What do I need to apply for a pre-approval?
It’s actually better to get your loan sorted beforehand. You’ll know exactly how much you can afford to pay for a property. Once you find the right property, you’ll be able to focus on the purchase—rather than having to sort out the finance at the same time.
You’ll have a better idea of what properties to look for, because you won’t waste time looking for something outside your price range. With a pre-approved loan, there are fewer chances of hiccups with the sale process.
Sometimes, sellers will accept an offer below list price, because they have peace of mind that the property really is sold. The seller can take the property off the market with confidence knowing the buyer is serious.
If you decide to make an offer you’ll be in a position to move quickly if your finances are sorted – this will help you avoid being gazumped.
There are many ‘versions’ of home loan pre-approvals and many are only indications of what the bank will lend you.
Be very wary of fast or instant pre-approvals as they cannot always be relied upon.
Essentially a lender will take one of three approaches to Pre-Approvals:
- A computer assessed system-based approval without the intervention of a human assessor.
- A fully assessed pre-approval of the application involving both the lenders assessment system and a human assessor.
- Some lenders will not process pre-approvals at all, or they may make exceptions for existing customers.
Whilst the comfort of a fully assessed pre-approval is often desirable, that lender may not have the most suitable product for your situation. Once we understand your goals and objectives and have assessed your financial position, we can give tailored advice on how best to proceed.
It will take a little longer but is worth the time you invest as it will reduce the time spent proceeding from pre-approval to full approval once you have found your perfect property and that is when you need things to move quickly.
Almost all pre-approvals are conditional to a satisfactory valuation of the property you are to purchase. In slower real estate markets, valuations can often come in lower than you might expect.
Given this, it is always advisable that you have a valuation undertaken and obtain full approval prior to an unconditional exchange on a purchase. In some instances, such as a live auction this is not possible so it’s important to understand the risks and how to mitigate them. That’s where team navigator comes in.
The length of time a pre-approval lasts for depends on the lender. It can range from 3 months to 6 months and remain valid only if your circumstances remain unchanged.
So don’t think that once you have a pre-approval you are able to change your financial position such as a change in employment or a new liability and still rely on your pre-approval, this is not the case.
If you are considering a change after you obtain your pre-approval, always discuss the repercussions on your approval with us. We can assist you to make educated decisions.
Every application is unique and given this, the documentation required for pre-approval varies from application to application. As a rule, the following documents are almost always required:
- Copies of identification such as your drivers licence, passport and/or birth certificate
- Copies of income documents such as pay slips, tax returns, employment letters and rental statements
- Verification of any assets such as rates notices for properties owned and statements for savings accounts
- Recent statements for any liabilities such as credit or store cards and personal loans
To find out what loan is right for you and to obtain a pre-approval, contact us and we can arrange it for you and even organise the first home owners grant.
Home and / or land purchase – ‘mortgage for life’
Navigator Home Loans can assist with financing a range of new home purchases.
Of course you have the standard established home purchase where your borrowing options are pretty much as broad as the home loan options available and your choices will naturally be driven by your personal situation.
But there are also non-standard new home purchases which we can also assist with:
Construction loans are really a version of a standard home loan which rolls out in stages as the different phases of your land purchase and house construction unfold.
While you can readily get a loan for land purchase alone, if you are buying land with a view to construction and require funds for the land purchase, most lenders will try to set up the entire approval process for you from the outset.
Construction loans need to be planned and structured correctly to ensure you have adequate funds throughout construction. Let us help.
When you buy a property off the plan, you effectively enter the contract of sale BEFORE construction of a building on the property has been completed. It generally relates to land development or building development.
The main point that it is generally not possible to obtain an unconditional approval before the property development/construction is completed. This means that the development/construction process is to be monitored closely and great care is taken to ensure your financial circumstances do not dramatically change before completion which could hinder your ability to obtain an unconditional approval.
Careful planning and communication is required to ensure the best possible outcome, this is where we can help.
Buying your first property is an important part of your life.
Regardless of whether you are buying for your own occupation or for investment. For many, it can be quite an emotional and stressful process as you deal with real estates, banks, solicitors and the like.
This is where Navigator Home Loans can help with one of the most important decisions of your life.
We act as your key partner, we can assist with all third parties (including answering any of your parent’s questions) and ensure the entire property purchase is as easy and enjoyable as possible. We will always go the extra distance for our clients.
Before you begin to look for properties, speak to us to understand the process and find out your maximum purchase price. This will give you added confidence when you step out into the marketplace.
Factor in additional costs
Remember it’s not just the cost of the property that you will be paying. You also need to consider the additional costs including solicitors, settlement agents, surveyors, moving costs, service connection fees and insurance. Establish a good saving pattern before buying. Track your expenses and train yourself to think about where your money is going. Set yourself a budget and cut down on your expenditures. Small sacrifices along the way help, for instance using public transport instead of taxis.
Set yourself a limit
So saving doesn’t seem like a lengthy ordeal set yourself a time limit to save for a deposit (say, minimum six months) for your property. Get advice early.
Live at home
If you are lucky enough to have generous parents, this is a great way to save money. Put aside the money you will be saving on rent for your first deposit and don’t spend it.
Start with a lump sum
Saving is always easier if you have something to start with. Before you start you may want to sell anything you don’t need. Make it a fun experience – maybe hold an auction or garage sale and invite friends and family.
New account
Start a totally separate savings account to the one you use on a daily basis so you are not tempted to use it for everyday life. Think of it as a deposit account and choose one that rewards savings with a high interest rate return such as a term deposit or cash management account.
Borrow within your means
Speak to Navigator Home Loans and your accountant to work out what monthly repayment you can really afford. Your first property should add to your happiness – not be a burden.
Be aware of your other loans
Any other loans you take out, such as a car or personal loan, will decrease the amount you can borrow for your property. Consider your goals carefully before committing and be aware of implications. Talk to Navigator Home Loans about how other loans affect your borrowing power.
Consider buying outside the area you want to live in
Although you probably have a good idea of where you would ‘like’ to live, properties in that area may be selling at a premium. If saving for a deposit is proving to be a challenge, consider buying in an area that may not be quite as developed or as ‘popular’ as some for an initial purchase to get into the market – work hard to put a dent in the mortgage and, together with capital growth, use your equity to move into the suburb of your dreams.
What is debt consolidation?
Debt consolidation is the process of combining multiple debts into one loan.
Why consolidate debts?
You would usually consider debt consolidation to reduce monthly repayments or just to simplify your financial structure.
In many cases this may increase the term or interest paid on the overall debt but can make the liability easier to manage. This is an option to consider if you are finding it hard meeting your repayments each month or just find it difficult to juggle numerous debts and repayments.
If you have adequate equity available in your property, you can consolidate personal debts such as car loans and even credit cards with your mortgage which simplifies your liabilities into one debt.
To weigh up the pros and cons of debt consolidation, we recommend you meet with one of our lending specialists, so contact us to arrange an appointment anytime.
Funding your home upgrades
Whether you’re planning a major renovation, a small refresh, or need flexible options later in life, we’re here to help you explore the right finance for your goals. We’ll walk you through what’s available and what fits your needs.
If you’re building a new home or planning major renovations to your existing home, a construction loan is generally the most appropriate funding option.
The difference between a ‘construction loan’ and a ‘standard home loan’ is that instead of a lump sum payment at settlement, the loan is usually drawn down in stages. Payments (or draw downs) coincide with the initial purchase of the land (where applicable) and at the completion of a number of key construction stages.
Interest payments
This type of loan is ideal for building, as you only pay interest on the amount you draw down.
For instance, if you have borrowed $950,000 for a house and land package but have only drawn down $500,000 to pay for the land, you only initially pay interest on the $500,000. Then as each construction stage drawdown occurs you pay interest on the outstanding balance.
The process
Before building starts, you will need to pay a deposit to your builder (as well as paying a deposit for the land if applicable). As work progresses you will need to make payments to the builder.
Your ‘contstuction loan’ Lender will make these progress payments as each stage of construction is completed and verified by the Valuer. Your Navigator Home Loans Mortgage Advisor can help manage the ‘progressive payments’ process.
If you have some of your own funds to contribute to the construction project, these will normally be expended first before the Lender draws down funds from your approved loan.
The question of how to pay for home improvements is often the obstacle that delays or limits what you would like to achieve. There are several ways to finance all or part of the project costs and Navigator will be happy to provide advice on the most suitable options to suit your needs.
Home improvements loan
More often, we are able to best accommodate your finance needs by restructuring your home loan with your current lender or an alternative if more advantageous to you.
If you own your home outright, a new home loan can be arranged to achieve the best result. Using a home or home improvement loan to fund your project is preferable due to the considerably lower interest rates available.
We are often able to extend the loan term, if desired, to keep repayments at their current level. Very often, we are able to arrange a better loan at a lower interest rate than might apply to your current home loan.
Line of credit / Home equity
For customers who wish to undertake multiple home improvements over an extended period, we will often recommend approval for a larger sum to accommodate all your needs.
This enables you to avoid lender fees and simply draw the funds in the future without needing to be re-approved by the Lender for each new project. Interest is charged only on your actual debt, not the approved credit limit.
For smaller finance needs (less than $20,000) a personal loan might be the right solution.
Reshape your mortgage
You would trade-up your mortgage for the same reason that you would trade-up your job, car, or living arrangement-because circumstances change. What you need out of a mortgage today may be different from what you needed five years ago.
There are many reasons why people refinance their home loans including:
- The option to roll all your debts into one.
- To take advantage of a cheaper interest rate or lower fees.
- To take advantage of other features offered by other products.
- To switch from a fixed to variable rate loan, or vice-versa.
- To access the equity in your home to use for renovations, holidays, other investments etc.
Refinancing can be useful and financially rewarding but it can also carry risks. It takes time and costs money, so before you decide to change to another lender, ask yourself if it is really the right thing for you.
- Are you happy with your existing lender? Have they been professional and helpful in all the dealings you’ve had with them
- Are you happy with your existing loan? Is the interest rate comparable to other lenders? Could you use some extra features offered with other products?
- Has your financial situation changed? Maybe you’ve started a new job or become unemployed.
Refinancing an existing loan comes with many fees and charges. These include:
- Application, establishment and handling fees when applying for your new loan. These can be substantial.
- Early settlement fees on your existing loan. These vary depending on your lender but many fixed rate loans have significant penalties for early repayment.
- Valuation fees; still required by some lenders.
- Mortgage insurance. Required by many lenders if the loan is more than 80% of the property value.
- Discharge fees on your existing mortgage and registration fees on your new one.
- Stamp duty.
Many people also get caught out with the hidden cost of additional interest payments.
If you only have ten years left to pay on your existing home loan and you refinance, taking out a twenty year loan instead, do not forget to consider the additional interest that will be charged over the extra ten year period your new loan runs for. These additional amounts can soon add up.
If you have decided that refinancing is the answer for you, or wish to discuss your personal situation with one of our lending specialists, contact us any time.
Considering a commercial loan?
Commercial Finance covers a broad range of property and business finance such as:
- Car and Equipment Finance
- Business Loans
- Debtor Finance
- Commercial Property Finance
- Property Development
Commercial finance generally attracts a higher interest rate and higher fees than a standard residential home loan. Given this, negotiating the right package and structure for your requirements is vital. Navigator can assist with a wide range of commercial finance and has direct relationships with specialist lenders to ensure you can access a wealth of knowledge, support and assistance for your requirement even if it is outside our area of expertise.
If you want to buy a commercial property or refinance your existing loan, Navigator Home Loans can help. Our expert team provide professional investors, developers and experienced owner occupiers with simple through to complex loans sourced from over a dozen lenders.
Some of the benefits of using Navigator Home Loans to arrange your commercial mortgage includes:
- Access to Australia’s commercial lenders
- Up to 75% LVR
- Full doc and low doc commercial loans
- Experienced commercial mortgage specialists
Whether you are borrowing $500,000 for your first property development or refinancing a $50,000,000 equity line of credit, it’s all about the critical factors used in assessing funding application outcomes. Understanding these will give you a much improved chance of obtaining commercial funding.
Risk
It may well be a great project, but if there are delays, cost increases, lower sale prices, how will the lender recover their money? What is the history of the developer, the area, and similar projects?
Reward
See as above. Lenders actually lend money to make a profit. Sounds obvious, but many borrowers forget this to their great cost.
Equity
If you can demonstrate you have a significant amount of your own funds invested in the project it always helps in getting to the front of the queue.
After all, if the lender wanted to build anything from a rainforest retreat in the jungle or an apartment complex in using 80%, 90%, or 100% of borrowed funds, they could do it themselves.
Summary
Various weighting factors & averages are applied to all the above. Knowing how to present this information is a key element, and can add much to your chances of success.
Make a smart investment
When it comes to investing in property, you need to ensure you have a plan that ticks all the boxes. you need to consider many aspects such as location, age, depreciation, tax benefits, finance structure and capital gains just to name a few.
This requires cooperation and contribution from your advisers. These might include your accountant, a financial planner, a buyer’s agent and, of course your mortgage broker.
At Navigator Home Loans, we are happy to work in conjunction with your advisers to ensure the best outcome for your financial circumstances.
Drive it home
Navigator Home Loans has partnered with Australia’s leading car finance broker who offers a car buying service together with tailored finance packages to suit from a panel of lenders.
- Access to thousands of cars.
- Vehicle locator service to help you find the car you are looking for.
- Trade ins are treated as separate transactions.
- Source the car of your choice, any make and any model and then negotiate a great price!
- Select from an extensive panel of lenders who can assist you to secure the best possible finance outcome to suit your needs.
- Available for consumer and commercial loans.
- You can finance a Private Sale and gain preapprovals, so you have clear direction on your vehicle options.
- Finance available for leisure items such as boats, jet skis and caravans
- Finance for yellow goods, trucks, excavators and other business use equipment.
- Ability to secure funding for a range of equipment, tailored funding also available.
- Refinancing your existing vehicle loan can save you money or increase your current cash flow.
- In need of a holiday? Or maybe some home improvements? Did you know you can use your existing vehicle as security for a loan?
