Pre-approval is a green light from a lender. Put simply, it confirms you’re eligible to apply for a home loan up to a certain amount. Essentially, the lender checks your financial circumstances, to decide if you’ll meet their criteria and can afford to repay a mortgage. A home loan pre-approval usually lasts for three to six months and gives you a set budget during your property search. Here’s why home loan pre-approval is so important.

To confirm your borrowing power

Before you start shopping for a property, it’s important to confirm your borrowing capacity. Online calculators can give you a general indication of what you might be able to borrow given your income and savings. But they don’t accurately confirm what size repayments you’ll be able to make after you meet your other living expenses and financial commitments.

With a loan pre-approval, you’ll know exactly how much you can afford to pay for a property. It gives you a solid understanding of your finances and a clear spending limit.

To save time on the property search

Imagine spending months looking for your dream home, only to be rejected for finance once you found it. Confirming how much you can borrow eliminates the chance of this happening. It gives you a budget for your property search which will help you save time, avoid wasted effort looking at properties you can’t afford and prevent disappointment.

To beat the competition

In a hot property market, you need to be able to move fast. Properties that are in high demand can be snapped up before you know it, so it’s important to be ready to make an offer as early as possible.

Pre-approval gives you the ability to make an offer on a property on the spot, with the confidence of knowing you’ll be able to get the finance organised quickly. It also signifies to vendors that you are the real deal and helps you negotiate from a position of strength.

To protect your deposit

Before you hand over your deposit money, it pays to make sure you can get the home loan you need to complete the purchase. If there is some issue with your eligibility, or a lender won’t approve the amount you need, you could potentially lose your hard-earned deposit.

Pre-approval gives you an important financial safeguard. And if you’re buying at auction, pre-approval is particularly important because your deposit is non-refundable. Once the hammer goes down and you’ve made the highest bid, you’ll be locked into the purchase. For that reason, you must make sure your finance approval is rock solid first.

Don’t forget to get approval on the property too

Before you attend an auction, sign a contract of sale or put down your deposit, it’s also a good idea to ask us to confirm if a lender will approve a loan for the property you have selected. Be aware that certain properties may not be acceptable to some lenders – if it is unusual, remotely located or has other problems, this step is particularly important.

Once you find the right property, you’ll still need to make a formal loan application to the lender. As part of this process, the lender will require a valuation of the property you select.

Apply for pre-approval today

Spring is here and it’s the busiest time of year in our property markets. If you’re ready to start your hunt for a new home or investment property, talk with your mortgage broker about pre-approval now. They’ll explain the process and get you started on shopping for your dream home with confidence. Get in touch today.

Remember all the ‘smashed avocado’ media reports about how difficult it is for first home buyers to get into the market? Well now there’s good news! In recent months, we’ve seen a surge in first-home buyer activity in the property market.

According to data from the Australian Bureau of Statistics, the share of new loans for first-home buyers increased from 17.6% in May to 18.1% in June – the highest it’s been since October 2012. Here’s our take on why property buying conditions are changing for the better for first home buyers.

1: Softening property prices

Over the past five years, property prices rose more quickly than first home buyers were able to save, making it difficult to find the necessary deposit to buy a home. However, according to CoreLogic, property prices are softening in both capital city and regional markets, with many property markets starting to show steady declines in prices for both houses and units.

The data shows that national average home values fell by 1.6% over the 12 months to July 2018 – the largest annual fall since August 2012.  This trend not only makes it easier for first home buyers to save their deposit, it means that properties that were once out of reach may now be more affordable.

2: Tighter lending conditions for investors

APRAs recent crackdown on investment property lending and extra regulation on interest-only loans have made it harder for both local and foreign property investors to continue expanding their portfolios. Property investors and first home buyers tend to compete for the same properties, so this has reduced competition for people trying to get on the property ladder for the first time.

Over the past two years, property investors have been hit with:

• Substantial interest rate increases for all investment property loans
• Larger deposit requirements for interest-only loans, and
• Considerable reductions in tax-deductible expenses for property investments.

If you’re a first home buyer at an auction, fewer property investors with deep pockets means there will be a better chance of winning the bid.

3: Low rental returns for investors

Another factor that has reduced competition with investors is the rapid reduction in rental returns Australia-wide. Gross rental yields are currently close to historical lows.

CoreLogic data reveals that in the 12 months to July 2018, total annual rental returns fell to 1.9% – their lowest since June 2012. This is another reason why the property market is not looking quite as attractive to investors as it did a few years ago!

4: First-home Owner Grant (FHOG) and stamp duty changes

Demand from the first-home buyer segment has also been fuelled by new government incentives. For example, the FHOG increased from $10,000 to $20,000 from July last year for new homes built in regional Victoria valued at up to $750,000.

Stamp duty for first-home buyers purchasing a property worth up to $600,000 was also abolished in Victoria from July last year. Previously, only a 50% reduction was available. Concessions were also introduced for properties valued up to $750,000. As a result, 11,763 Victorian first-home buyers benefited from the concessions in the second half of 2017 – a massive spike from the 6689 over the same period in 2016.

In NSW, similar measures were introduced in July 2017. First home buyers no longer pay stamp duty for new and existing homes valued up to $650,000. Concessions are available for properties up to $800,000.

Most other states have also introduced new concessions for first home buyers. If you’d like to find out more about the incentives in your state or territory, ask your mortgage broker or visit your local state government website.

5: Other incentives for first-homeowners

Aside from the FHOG and stamp duty exemptions, some governments are introducing other housing affordability initiatives for first-homebuyers. For example, Victoria is piloting a shared equity scheme. Under the initiative, first-home buyers will only need a 5% deposit and the State Government will provide up to 25% of the property’s purchase price (more details here). NSW also introduced a shared equity scheme from July last year for those purchasing a property with an approved equity partner (more info here).

With Spring property market conditions continuing to favour buyers, it could be a good time to buy a property. Prices are dropping, interest rates remain low, and there are plenty of incentives available to help first-home buyers get started. If you’d like to know if you’ll be eligible to buy your first home this season, please get in touch with your mortgage broker today.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. You should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

Spring is here and if you’re in the market to buy a property during the busiest time of year, you’ll be hitting the open inspection circuit in a big way! Vendors and real estate agents will be using their best tactics to make you fall in love with their properties and entice you to pay top price. Here are some tips to help you see past the cosmetics and help you determine the right price to pay for the home of your dreams.

Do some research beforehand

Vendors and real estate agents use clever marketing and photography to reel you in. Before you go to the open inspection, do a little research about the suburb and where the property is located. You don’t want to go all that way only to find ‘close to public transport’ means the property is right next to a railway line, or ‘up and coming suburb’ equals local crime hotspot.

Look past the staging tactics

Every home you see will be staged to sell, either by the vendor or a professional property stylist. Good staging can be used to hide a multitude of sins, like uneven floors, rising damp, cramped rooms and other structural defects. Don’t be fooled. Remember, the contemporary furniture, art and accessories won’t be staying once the property is yours. You need to look beyond the cosmetics for faults and defects that could prove costly to repair later.

Beware of the overuse of smellies

Vendors may use fragrances and scented candles to disguise the smell of damp, mould, compromised sewers, bad plumbing and leaky toilets. These kinds of issues can be very expensive to repair, so be cautious if the place smells like an expensive gift shop. Always get a professional building inspection prior to putting in an offer, even if the place smells great without all the candles.

Look up

A leaky roof or water damage can be costly to fix. Signs there could be a problem include mould on the roof, roof rot, missing or buckling tiles, damaged flashing, wavy cornices, and damp patches on ceilings or walls. Vendors are likely to paint over any problems to disguise them during open inspections, so have a good look at the roof from outside the property and again, get a professional building inspection to be on the safe side.

Check the plumbing

You may feel silly, but don’t be afraid to turn on the taps and flush the toilets during the open inspection. You’ll want to listen for hammer issues and check the hot water is working. Also, be sure to ask to see the hot water system. You’ll want to find out how old it is and the last time it received a proper service.

Look out for unwanted guests

For the layperson, it can be tricky to identify the presence of termites or other pests like mice and rats. Sagging or buckling floors, hollow-sounding beams and “mud leads” could mean there is a termite problem. A funky smell in cupboards and under the house may indicate the presence of rodents. A pest inspection is important, particularly if the property is in a high-risk termite zone.

Be wary of cracks

Subsidence is when there is excessive movement of the ground beneath a property which causes structural damage. Cracks can indicate a problem which may be minor, or quite severe and it’s difficult to tell. Look for cracks indoors that reach to doorways or windows. Take a walk around the exterior of the property and look for cracks in the brickwork or foundations. Remember, a strategically placed pot plant or outdoor chair may be covering an issue. Again, a building inspection is important to determine the property is structurally sound.

Consider the orientation

Remember, properties often look their best in Spring when the garden’s in bloom and the sun is out. However, don’t forget to consider the orientation of the property and what it will be like at other times of the year. North or north-east facing properties often get the most sunlight. If the ceiling lights are ablaze when you enter the property and it’s a sunny day, imagine how dark it will be during Winter.

Do your due diligence

Before purchasing any property, it’s extremely important to research the current market value of the property and the area you’re buying into. Ask us for a free suburb and property report. It also pays to find out what developments are going up and whether there are any planned zoning changes looming that may adversely affect the value of the home you purchase. Are there amenities close by? What are the schools like? Drive around and make sure the suburb has good capital growth potential.

We hope you’ve found these tips useful and that you soon find the property of your dreams. If you’re in the market for a property purchase this Spring, talk to your mortgage broker early about getting pre-approval on your home or property investment loan. That way, you’ll be ready to move quickly when you find the place you want. Happy house hunting!

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. You should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.