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Mortgage Brokers

It is very important to get the “right finance” but is also just as important to get the “structure” right which Mortgage Brokers can help you with. It can be very costly, frustrating and time-consuming to act hastily and rush the finance part of the property transaction and not get it right. Realizing your mistake later can cost you tens of thousands of dollars in break fees, discharge fees, re-evaluation fees, application fees, fees, fees, and more fees.

PROS

  • – Will certainly save you time in shopping for loans.
  • – Usually free.
  • – Professional and Independent Assistance.
  • – Sometimes, given the broker-lender relationship, a bank will accept a loan application that they would otherwise have rejected.

CONS

  • – You may pay more for your loan than necessary if the broker is not independent.
  • – They may charge excessive fees or undisclosed commissions.
  • – You may be persuaded to borrow more than you need, as this will boost their commission.

SOLUTION

  • – Use a reputable broker, or a Broker that has been referred to you by a friend or family member.
  • – Make sure your broker gives you a clear and accurate breakdown of any fees and charges that you might have to pay.
  • – Check that your broker is appropriately licensed. If you have any doubts, verify this via ASIC, FBAA or MFAA websites.

mortgage brokers financing lending

Questions to ask your Mortgage Broker:

1. How much does the service cost and when do I have to pay?

2. Do you belong to an industry association such as the FBAA or MFAA and if so, does that association have a dispute resolution policy? (Ask to see it in writing. Dissatisfied borrowers can also contact the Mortgage Industry Ombudsman on 1800 138 422.)

3. How do you identify the best solution? Is it simply commission-based or do you use a software package? (Their criteria for selection should be logical and transparent.)

4. How many lenders (and which lenders) do you represent? (Make sure the broker deals with a spread of lender types i.e. banks, mortgage managers and others.)

5. How do you get paid? (Ask them to disclose all commissions and payments.)

6. Can you provide comparisons of any loans recommended, including upfront and ongoing fees?

7. Can you clarify the actual cost of the loan, including and excluding interest, fees and ongoing costs?

8. Do you comply with the Privacy Act?

9. Do you have professional indemnity insurance?

10. How long have you been in the industry and can I read your testimonials from previous clients?

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The Right Finance

Having a good broker can help you be confident that you have found the right loan and structure so that you can meet long-term financial goals and avoid serious costs. Also, potentially saving thousands of dollars in long term exit fees and interest rates.

Finding the right loan to meet your needs can be a very daunting task. With so many lenders to choose from and so many products within each lender, it is impossible for the average investor to choose between the various products (including all the fine print). It is important that you are sure the finance you are choosing is the most suitable for your circumstances.

Compare a Good Broker to a Good Bank Manager – Use the example of buying a car.

If you walk into a Ford car yard and describe all of the features you want in a car and the salesperson thinks to themselves, “Gee, the latest Holden Statesmen would be the best,” — will he tell you that? No! He will convince you that the latest Ford something-or-other meets your needs. It’s the same with the banks. If you walk into a bank, any bank, you will only be sold that bank’s products.

We would recommend that everyone who needs to take out a mortgage should use the valuable services of a mortgage broker. Whether you are buying your first home or investment property or whether you are building a huge investment portfolio you should consult a mortgage broker. The advantages of using a broker are twofold. Firstly, it is free — the bank pays the broker the commission — and secondly, the broker is aligned to many lenders and banks and will find the most suitable loan for you. It is in the broker’s interest to find you a great deal because they want your continued business.

In most cases, brokers have access to over 30 banks and lending institutions, including all of the majors (CBA, ANZ, NAB, Westpac) and many popular smaller and non-bank lenders (ING, Bankwest, Suncorp, etc). Mortgage brokers will help you find your way through the complex maze of product choices and help you decide the best one for you. Everyone’s situation is different and different products suit different circumstances.

Mortgage brokers also assist you with all of the paperwork, submit the loan, handle all the bank’s questions, coordinate the process with your solicitor and real estate agent and basically take all the stress and pressure from you. They’ll hold your hand the whole way through and deal with any complications that may arise

 

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Refresh your Portfolio

Sometimes it is necessary to go back to the drawing board.

You may have a portfolio that is not quite right. You may have had good intentions, theories, dreams or hunches when you bought particular properties but looking back you realize you made a mistake. But that’s OK. As they say, “There is no such thing as failure unless you fail to get back up again.” The successful man is one who fails four times but gets back up five times.

There are times when the best thing to do is sell and move on. Other times, you may need to sell because you did not seek the right advice in the first place and you have the wrong loan in place or have bought in the wrong name. A common example is the client who has bought a home and followed their parent’s advice focusing on paying down the mortgage. Now they want to upgrade and rent this property out. Bad news – the reduced loan amount means the property is positively geared and they will be taxed on the excess of rent over interest. Worse still, they will have to take out a large loan to buy their home and this will be a non-tax deductible debt.

refresh your portfolio property investment

 

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Buy, Build or Flip, Sell or Hold

House and keys

Buy + Build + Sell or Hold

PROS

This strategy is similar to the“buy and subdivide and sell” strategy and once again not for the fainthearted. On the upside, there is good profit to be made, particularly for those able to be involved in the building process themselves. Adding real value by building or improving a property is one of the most fundamentally sound ways to make profit.

 CONS

As above for subdivision –tax consequences will be adverse and you will have to become involved not only with councils, surveyors and the like but also with builders, tradespeople, suppliers, etc. Delays in any of these areas can lead to lengthy hold periods. It can also erode all the profit from a project. In some cases, if very lengthy delays are experienced, the entire project might not even turn a profit.

Buy and Flip

This can mean different things to different people but what it usually means is to buy ‘off the plan’ and sell before settlement. Some investors use this strategy to buy a few properties and then sell most of them before settlement. They then apply the profits to reduce the debt on the properties they retain. A fantastic strategy for the experienced investor and it works well in an upward-moving market. However, it can be fraught with danger if the market falls during the construction period and you don’t have the spare resources (cash or equity) to cover the shortfall.

house flip renovate

It can be a bit like the stock market ‘margin calls’ that are rapidly bringing the share market to a grinding halt. If you intend to buy and flip, it is important to get professional advice. This is to ensure that you can cope with a possible decline in value. If your financial position is such that you could survive such then the buy and flip strategy can bring some fantastic possibilities. If you proceed down the buy and flip path (after seeking professional advice) – look for developments with the following criteria:

  • – Look for brand new developments.
  • – Developments that have a suitable timeframe to completion.
  • – Projects with Progress Payment Plan that does not require the bulk of the payment until near the end of construction. Only a 10% deposit is required to hold the property until completion and settlement.
  • – Be first in. Often the best gains are to be made early when the developer needs to sell quickly to meet the bank’s “re-sales” requirements. This will assist an investor as the project nears completion. The price may have already risen substantially as the developer is no longer in need of a quick sale.
  • – Work with a professional that can assist you to determine the suitability of potential properties.

 

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