Pink Finance

Buying your first home is very exciting but can be daunting and overwhelming.

At Pink Finance, we want to make the process as stress free as possible. We listen to you so that we fully understand your needs and priorities. We will answer your questions and provide you with options that match your requirements, submit the loan on your behalf, following it through to approval, check your mortgage documents and ensure settlement is effected on time. We even follow up post settlement to make sure everything is set up correctly.

 

How much can I borrow?
Which home loan is the best one for me?
Costs associated with a mortgage
How much deposit do I need?
First Home Owners Grant
Mortgage definitions

 

How much can I borrow?

In a short answer, “borrow what you are comfortable borrowing.” You will be amazed at how varied your maximum borrowing capacity will be with different lenders. Each lender has different standards which will influence your borrowing power. Factors such as other ongoing debt will all affect how much you can borrow. After consulting Pink Finance you will have a clear picture as to what your maximum borrowing capacity will be. It is important to disclose all income and expenses so that an accurate borrowing capacity can be provided to you.

 

Which Home Loan is the best one for me?

There is no “best” home loan – as we would all have this one! But there is at least one that will be relevant to you. There are many different home loans all designed to cater for different needs. Pink Finance can help you find the one suited to you. In brief, the different types of loans include:

• Basic home Loan – a simple variable rate home loan which can usually be principle and interest or interest only . Most do provide the option of making extra repayments and accessing them through redraw. Typically with low or no ongoing fees a basic home loan is often good for first home buyers where getting used to making mortgage repayments may be the priority.
• Fixed Rate loan – a facility which has a fixed interest rate for a specified period – typically 1-5 years. You have the security of knowing what your repayments will be for that given time, even if interest rates rise. It can be helpful for those who like to budget but there may be limitations on making extra repayments. If you break your fixed contract, you may need to pay a break cost fee. You can also lock or secure the fixed rate by paying a rate lock fee.
• Standard Variable Rate – a flexible loan which may vary according to the Reserve Bank cash rates. These loans offer many different features and benefits such as offset accounts, repayment holidays, and construction facilities. The standard variable rate is often used in conjunction with a professional package in order to get a more competitive interest rate.
• Discounted Variable Rate – with some lender packages, variable interest rate discounts can be applied depending on what you borrow. This may incur an annual or monthly fee but the package offers additional benefits on other financial products such as credit cards, transaction accounts and insurance. Each lender provides different packages, products and discounts and Pink Finance will discuss which ones will most benefit you.
• Line of Credit or Equity Loan – an ongoing interest only facility which has a maximum aproved limit. With your line of credit you can draw down the funds for any purpose you require and you will only pay interest on the balance you have used.
• Split Facility – this offers the flexibility of having more than one loan type under the same facility. Typically part fixed and part variable, this product can offer peace of mind with some of your repayments remaining stable whilst you can make unlimited extra repayments on your variable loan portion. A split loan may be most economical when linked with a package.

 

Costs associated with a purchase

There are other costs associated with your purchase and home loan. You will need to cater for costs such as:

• Purchase Stamp Duty
• Conveyancing
• Mortgage Insurance
• Home Contents and building insurance
• Title registration
• Mortgage Registration
• Strata Rates and levies
• Application Fees AND settlement fees
• Monthly / Annual Fees
• Early Exit Fees
• Penalty Fees

These costs can vary. If you are short of cash, some of them may in certain cases be added to what you need to borrow (capitalised) and you can pay them off over time.

 

How Much deposit do I need?

Credit policy can change from time to time. Most lenders will now let you borrow up to 90% of the value of the property. Options are available for greater lends but choice can be limited. You need to demonstrate good savings patterns, no late fees on your repayments or overdrawn fees on your transaction accounts. If you are to receive a non refundable gift from a relative it needs to be deposited into your bank account and together with an official signed and witnessed statutory declaration.

A minimum of 3-5% genuine savings will be sufficient and the First Home Owners Grant Scheme can contribute towards other funds.

In some cases your deposit will need to be 20% depending on the type and location of your property.

You may need to allow for Stamp Duty. Stamp Duty will vary depending on the State, purchase price and if you are eligible for any exemptions. Pink Finance will give you an indication of how much stamp duty will apply to your purchase.

First Home Owners Grant Scheme

You may be entitled to the First Home Owners Grant Scheme(FHOGS) if you have never purchased an owner occupied property in Australia and your are either a Permanent Resident or Australian Citizen.

CHANGES TO THE FHOG OCTOBER 2012

From 1st October there will be some significant changes to First Home Owners Grant (FHOG). Currently if you are a first home buyer purchasing a property up to $830,000 you will be eligible for a $7,000 grant. The property could be new or an existing property.

From 1st October you will only be able to get $15,000 grant however the property must be a brand new property and the maximum eligible purchase price has been reduced to $650,000.

This $15,000 grant will be applicable for exchanges between 1st October 2012 and 31st December 2013. From 1st January 2014 the grant will reduce down to $10,000.

The property must be brand new, off the plan (OTP) or “substantially renovated” – by definition on the OSR Website this is where by all or substantially all of the building is removed and replaced. Substantially renovated is definitely open to opinions so would definitely recommend that you obtain clarification to see if a property qualifies under that jurisdiction with the OSR first.

There are also some stamp duty exemptions for first home buyers and non first home buyers. Whilst First Home Buyers enjoy stand duty concessions up to $650,000 non first home buyers will be able to get a $5,000 concession if they purchase a new or off the plan property.

To qualify for the grant you must live in the property for 6 continuous months within 12 months of the settlement date. You must be 18, an Australia citizen or Permanent Resident and have a least 95% ownership on title of the property. (5% can be a non first home buyer except in a spousal situation).

 

Mortgage Definitions

Mortgage jargon can be confusing and hard to understand. Here are some definitions to help you understand the terminology often used when discussing mortgages:

• Break Cost Fee – The economic cost if you were to exit out of your fixed rate mortgage before the fixed term. There are many variables that will determine the fee
  • Current fixed rate
  • Time your loan was fixed for
  • How far into the fixed you are
  • Loss of interest to the bank
• Cooling Off Period – A period of time (generally 5-10 working days) that allows for finance and building and pest inspections to be carried out. It allows you to obtain formal loan approval without having to run the risk of exchanging with no finance approval.
• Exchange – The day when you and the vendor exchange contracts. That is the day when you hand over your deposit for the property that you wish to purchase.
• Interest Only – a repayment option where you pay the interest based on your current balance. This will vary from month to month depending on the balance and the number of days in that month.
• LVR – Loan to Value Ratio. This is your percentage of loan you have against the value of your property (for example $300,000 loan secured with a $400,000 property is a 75% LVR lend.)
• LMI – Lenders Mortgage Insurance. A premium charged when your LVR is greater than 80% or you have less than 20% deposit. This is a premium designed to protect the banks, not you, in the unlikely event that your property is repossessed if you cannot meet your loan repayments. The higher your LVR the higher the premium is. Each lender charges a different premium.
• Offset Account – a transaction account which is linked to your mortgage. The funds available in your offset account will offset against the interest payable on your mortgage. Your repayments will not change but it will help you reduce your loan term and the interest paid.
• Principal & Interest – a repayment option where you pay off some of the principal with each repayment. The more principal paid off each month will reduce your loan term.
• Rate Lock fee – a fee which will secure your fixed rate. The cost, timing and payment methods for this feature vary for each lender.
• Redraw – a feature which enables you to access any extra repayment that you have made. Typically a feature in standard variable and basic variable loan products.
• Repayment Holiday / Pregnancy Pause – a facility which allows you to reduce your repayments for a certain time if you need to. You generally have to meet minimum loan conduct requirements and have a set amount of equity available to cover you for this repayment pause period.
• Stamp Duty – A duty charged by the state government in respect to the value of the property you purchase.
• Settlement – The day that you own the property. This is the day the mortgage comes into effect.