Beat the Bank!

Yellow Brick Road’s “Super Guide” to getting a home loan

Yellow Brick Road is putting the power in your hands with our

on what to say and do when Negotiating a home loan.

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1

Have a clear goal

Don’t waste your efforts

ork on 4 Wserviceability

on unrealistic ambitions. It isn’t your gross earnings Develop clear and achievable goals in terms of what that are calculated by the you want to buy and how much you need to borrow. lender. It’s your net income, or the amount you can use for housing after taking out the living expenses. A lender wants no more than one-third of your income Know your gross income, your repaying the mortgage. living expenses and the costs Use home loan calculators of your financial obligations. to see how much you can Understand your household budget borrow and then alter your before approaching a lender. household budget to give yourself better serviceability.

nderstand 2 Uyour budget

3

Have a deposit

Generally speaking, you’ll

need to save 20 per cent of the property purchase price, plus allow another 5 per cent for legal costs, inspections and stamp duty, etc. However, you can borrow up to 95% of the purchase price with the inclusion of Lenders Mortgage Insurance, which protects the lender in the event that you can’t repay the loan.

5 Prove you can save

A lender wants to see that you can make

regular repayments on a home loan, and the ability to save is one important indicator.

So put your savings into one account and contribute to that account frequently.

6 Show consistent income

Lenders are uncomfortable lending to someone

with an irregular employment history or long gaps between employment. Demonstrate you can stay with one employer for a year or more, and be able to show consistent profits if you are self-employed. Apply for your mortgage before changing employers or starting a business.

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ave a solid Accentuate 7 Hrental 11 history the positive

If you are renting, try to not move

for at least six months prior to going for a loan. A lender wants to see permanence in your living situation.

If you’ve recently paid out a loan or

credit card, advise your potential lender.

This information supports your promise of repayment conduct or justifies what may have looked like low savings.

ower your 8 Llimits

he 12 TMum

on credit cards

very $1 of credit E card limit stops you borrowing up to $5 of home loan. So, reduce your credit cards to one and reduce that card’s limit to what you use.

Pay-off and cancel the credit card if you can.

9 Audit yourself

Lenders use credit scores to assess your credit risk, so you should know what they know. Most lenders credit-score you on the Veda system, which shows your current and past credit activity. You can buy your Veda credit file at www. mycreditfile.com.au.

educe 13 Rluxury

money quickly, you can move in with parents or relatives.

But only do this if you’re going to save!

The easiest way to boost your

net income is to reduce monthly overheads. Do this by looking at discretionary spending such as car leases, expensive smart phone plans and cable TV charges. They can reduce your net income and reduce how much you can borrow.

It doesn’t matter that you have a strategy – lenders will assume that you are happy to pay the high interest.

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If you want to save

overheads

10Avoid ‘interest free period’

& Dad option

14Clean up your finances 18 Focus on

Before applying for a mortgage, you should stop applying for credit cards and store cards and ensure your existing credit cards and store cards are in order - this means no over-limits or missed payments. Having too many cards suggests you live outside your means and the limits on those cards inhibit how much you can borrow. Also, get your bank accounts in order and make sure you have no overdraws. One ‘clean’ account is better than several with patchy histories.

speed

The faster you repay a

mortgage the less interest you pay. So before committing to a home loan, make sure that the loan allows you to put in lump sums and repay fortnightly rather than monthly. Do not take a 100% offsetaccount mortgage if you cannot live within a strict budget. Only disciplined people make these mortgages work for them.

15 Become an expert

Fully research the real estate market

in the area you want to buy in.

Know what you’ll have to spend before you sit down with a mortgage professional. Also learn about the market for home loans: there are different interest rates, features and limitations. You want to be well informed so you aim for a loan at the best rate and with the features that are relevant to your lifestyle.

et your 19 Gpaperwork in order

16 Dforon’ttooapply many

mortgages

o your homework and target D a lender that’s right for you.

Applying for too many home loans affects your credit scoring.

17

Use a broker

If you’re worried about loan selection,

Lenders need documents that prove who you are, where you live, how much you earn and how much rent/mortgage you are already paying. Start a file of your latest tax returns, your last three payslips and documentation of how much rent/ mortgage you pay. Have your career well documented (take current references), and have a copy of your rental history.

Look organised!

on’t lie to 20 Dlenders!

your credit score or questions about serviceability, a broker can get you prepared before you apply.

There’s no point telling fibs.

It’s against the law, it will forever affect your ability to get a loan, and you could be talking yourself into a loan you simply can’t afford.

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For couples & singles Know your status

Marital status is crucial in the assessment of an application, so you should decide what your status is, perhaps discussing it with an accountant or solicitor. If married, lenders expect to be able to assess expenses as a family unit, which might increase your expenses when your partners are added in; but if you make a sole application, you may not be able to reflect in your finances that many expenses are shared with your partner. Consider your marital status before you apply.

6

Be honest about your relationship

I f separated, a lender will query if there are any financial settlements due with your expartner. De facto relationships are treated similar to married relationships now in that de facto relationships are now handled in family law courts.

Talk to a solicitor Make sure you get legal advice on what kind of property title you need to use when buying with a partner, and what - if any agreement you need with your partner or spouse.

Have income A lender wants to see sufficient and regular income to repay the mortgage. So you need to demonstrate that your business has a history of stable profits.

For self employed

Know your status Don’t get confused between casual and self-employed. If you pay tax with each payment you receive, you are casual. If you’re paid on an hourly/daily rate with no tax deduction, you are self-employed and you should seek the assistance of an accountant or tax agent. Most lenders now will accept casual income from certain industries, where the income is constant.

Get your taxes done

Get your taxes done before applying and make sure there’s no tax owing on your ATO account. Ensure you’ve addressed all tax obligations before committing funds to a purchase/loan scenario.

Show consistent savings Lenders want to see evidence of good financial management, rather than windfalls. Use a separate savings account, regular deposits and few withdraws to show consistent savings.

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1800 927 927 | yb r.com.au @ybrwea lth facebook .com/ybrw ealth

Yellow Brick Road Finance Pty Limited ABN 33 128 708 109 Australian Credit Licence 393 195, has a number of authorised credit representatives who can provide advice regarding your credit requirements.