You may have heard the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has made some recommendations about changing how mortgage brokers get paid. There’s been a lot of noise in the media, so we thought it might be a good idea to update you about what’s going on and how it may affect you as a home loan customer – but first, we’d just like to say that it’s business as usual for the time being.

We’re here to help you with great service for all your finance needs – and we’ll be keeping your best interests at heart, as always.

So, what’s going on?

The Royal Commission has recommended that lenders no longer pay mortgage brokers a commission and that borrowers should pay their mortgage broker a fee instead.

As a home buyer who understands all the benefits of using a mortgage broker, you may find this recommendation quite troubling. The last thing you need when you’re buying a home is to come up with more money for mortgage broking fees, right? And with the loan application requirements becoming increasingly complex, how would you get by without one?

Unfortunately, these are not the only considerations regarding the Royal Commission’s recommendation. Changing to a borrower-pays system could have a seriously negative impact on competition in the home loan market and this could prove to be disastrous for everyone.

How would reducing competition affect you?

Over the last 20 years, the work of mortgage brokers has driven competition in the home loan market. Our work in providing home loan customers with choice and value has forced banks to cut their own profit margins and keep your fees and interest rates down. Almost 6 out of every 10 (59.1%) home loans go through a mortgage broker and this keeps banks on their toes and working to constantly improve their loan products.

If the proposed changes were to become law, many consumers would not be able to afford our services and our businesses would struggle to survive. Without brokers:

• Too much power will go to the big banks, which could drive your loan costs up.
• Smaller lenders may have to exit the home loan market, reducing competition.
• This will result in less choice of loan products and less access to credit.
• You’ll get no assistance understanding increasingly complex loan criteria.

People who need a broker’s help the most – young people, low income earners, those who have difficulty understanding the home buying process – may never get the assistance they need to achieve the great Australian dream of owning their own home.

Changing to a borrower-pays system would not just be a tragedy for those people, it may put our entire economy at risk in the long-term. A healthy, competitive property industry is a major driver for Australian economic growth and provides a great deal of employment.

What can we do about it?

The mortgage broking industry has united to get behind mortgage brokers and to support the continuation of healthy competition in Australia’s home lending market. You may have seen the TV commercial from the Mortgage and Finance Broking Association of Australia (MFAA) promoting the service, value and choice that we mortgage brokers provide to you.

You can assist us, and all Australians, by pledging your support  for mortgage brokers at #ChoiceMatters, change.org and Your Broker Behind You.

Once we’ve collected enough pledges, the Government will be forced to listen to what we have to say about preserving broker commissions and upholding your right to a competitive lending market that provides you with genuine choice and personalised service.

Thank you for supporting our business. If you have any questions, please just give us a call.

It may be a buyer’s market, but when property prices are falling, buyer confidence often goes with it. However, the possibility of paying too much is not the only risk a home buyer or property investor can face when market conditions are undergoing significant change, as they are now. In this article, we outline some of the other potential pit-falls and tell you how you can avoid them when buying a home this Autumn.

1. Pre-approvals are more important than ever

A loan pre-approval means a lender has assessed your financial situation and determined how much you can borrow. It’s a good indication they’ll give you a formal loan approval later.

Banks have been tightening their lending criteria and this is one of the things influencing falling property prices. Fewer loans are being approved, and the size of loans being approved has also reduced. Home buyers who could easily get finance a year ago, are now facing much more rigorous tests to get loan approval.

Under no circumstances should you place a deposit on a property until your loan pre-approval is confirmed – otherwise you may risk losing your money.

2. Get lender approval on your property selection

Did you know that a lender can reject the property you want to buy, even if they have given you a pre-approval on a loan big enough to buy it? You can reduce the risk of lenders rejecting your home selection by asking us to confirm you have chosen a viable property before putting down your deposit.

There are several reasons why a lender may not give you final approval on a loan for the property you want to buy. The main reason is negative equity risk.

Negative equity is when the amount you have borrowed becomes more than the market value of the home. There is a risk this can occur due to falling home values. For example, in 2018 many off-the-plan homes were unexpectedly valued at less than the contract price upon completion and some buyers were unable to get the loan approval they needed to complete their purchase without topping up their deposit.

To avoid a negative equity situation, a deposit of at least 20% is recommended. If buying off-the-plan, it is also recommended you insert a clause in the sales contract confirming the final price will not be more than the market value of the property upon completion.

The other reasons a lender may not approve your loan is if the property is in poor condition, in a remote or unpopular location, or is too small (less than 52sqm).

3. Ask more questions

Research is key when buying in a falling market. Ask more questions about the underlying factors that drive capital growth to ensure the property will hold its value and you’re not paying too much – look at local employment rates, proximity to schools, public transport and other important amenities, rental demand etc. You can also contact us to access free reports that have this information.

4. Keep your broker in the loop!

Remember, it’s a buyer’s market and with careful research you can buy with confidence. If you want to secure a bargain this Autumn, then call us now to confirm your borrowing capacity and get pre-approval on a loan. In addition to helping to protect you from risk, a pre-approval will help you move quickly when you find the right property and negotiate strongly to get the right price. Call us for a chat about your plans today.

Buying an investment property can be a clever way to build wealth for your future. There are government incentives that make this form of investment great for mum and dad investors – such as the potential to claim back losses as a tax deduction. So, how do you go about finding the right property for your needs, particularly if you’re not an experienced property investor? In this article, you’ll find some insights about what to look for in an investment property. And remember, your mortgage broker is here to help!

Capital growth potential
Capital growth is the increase in value of a property over a period of time. Investors use a range of strategies to build wealth, and looking for the properties that are most likely to experience significant capital growth, is often high on their radar.

So, how do you find an investment property with solid capital growth potential? Look for locations and suburbs experiencing economic growth. Economic growth creates jobs, which brings more people to an area, which may flow through to the property market via increased demand for housing. Greater demand means more chance of capital growth.

Next, be sure to choose an investment property that is close to amenities such as schools, shopping centres and public transport – when an area is experiencing economic growth, these properties will be in the most demand.

Rental returns
Some investors choose to focus on properties with a high rental yield, rather than just looking at capital growth potential. The rental yield is the rate of income return compared to the costs associated with the investment property. It’s typically expressed as a percentage, and may be calculated as a gross or net figure.

Investors who are following a rental yield strategy will typically look for areas where rents are high compared to the property value. Talk to your mortgage broker, as they have access to exclusive property tools to help you locate a suitable area.

Low maintenance costs
As an investor, it’s wise to opt for a low-maintenance property. They not only cost less to keep, but they’re less hassle too. Units can be easier and cheaper to maintain than old houses for example, but keep in mind you’ll most likely have to pay body corporate fees.

Ways to add value
When choosing an investment property, ask yourself whether there is room for improvement, or ways to add value. You might not renovate it right away, but when you do, be sure to do plenty of research to find out what’s in high demand. Ask your local real estate agents what kinds of property features resonate well with tenants and future buyers in the area.

Choosing the right investment property requires careful research and planning. Luckily, one area you don’t have to worry about is finding the right investment loan for your specific needs. Your mortgage broker can take care of finding you a loan product that matches your financial circumstances, while working with your investment goals.

We recommend that you seek independent financial and taxation advice before acting on any information in this article. It contains 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.