When you’re looking for a home loan, you could either approach banks and lenders directly or speak with a Finance Broker.

While a bank can only offer you its own products, a finance broker can compare a large number of loans from a huge range of lenders, to help you take the guesswork out of finding the loan that suits you and your needs.

This also saves you time on having to compare the market yourself by looking up different rates and deals manually.

It’s understandable that finance brokers are now the number one choice for consumers who are seeking a new home loan or a refinance of an existing loan. 

Businesses are also increasingly engaging finance brokers to help them with a range of finance needs, from car and equipment leasing to finance loans, to help their businesses expand.

Having the right Finance Broker by your side makes the world of difference. Below are some of the things you can expect from a good finance broker and what they will do for you.

Finance Brokers Do The Leg Work

• Finance brokers are industry experts.
• Finance brokers already know the industry, the lenders, their products and their requirements, saving you a lot of time and energy on research.
• Finance brokers will also put the time into finding out about your particular situation, and they have a wealth of experience to draw on to help find the loan that most suits your needs.

Finance Brokers Can Translate Industry Jargon

• Finance brokers are able to make sense of what loan documents and lenders are saying.
• Finance Brokers can explain things to you clearly and ensure you understand the information presented at every step of the journey.

Finance Brokers Give You A Broader Choice

• Finance brokers offer a large selection of loan products.
• While a bank can only offer you its own products, finance brokers can help you choose from a selection of loans provided by different lenders.

Finance Brokers Help You Compare Apples To Oranges (And The Whole Fruit Basket!)

• Not all loans are created equal, so trying to compare the different rates, fees and features can be like trying to compare apples to oranges.
• Finance brokers have the knowledge and tools to compare often hundreds of different products to fit the ones that are suitable for your circumstances and needs.

Finance Brokers Can Find You A Good Deal

• Banks and lenders are often spruiking a special deal or two, and these could make a big difference to your repayments or success rate.

• A finance broker will have a thorough understanding of the deals on the market, and which will be appropriate for you.

Finance Brokers Act As Your Advocate

• Finance brokers are bound by Best Interest Duty, which means they must act in your best interest when providing credit advice.
• Finance Brokers want the best for you, the client, and will be your cheer squad, middle-man, team player and coach throughout the process.

Finance Brokers Are In It For The Long Haul For You and Your Home Loan

• A finance broker won’t just love you and leave you;  they will oversee and manage the loan’s progression right through to the end on your behalf.
• And the process doesn’t end when you sign the documents and buy your property!
• You can expect your finance broker to keep track of you and your changing needs, helping you should you need to switch products or wish to purchase another property.

In most cases, pre-approval should be considered a guide only and not a guarantee of approval. This is because most lenders do not ‘fully assess’ pre-approval applications.

Lenders will indicate a likelihood of approval up to a certain limit based on the information provided in the application, but usually do not fully check the applicant’s supporting documents or credit history.

Given the inherent risk involved, it’s important to chat with us about whether a pre-approval is appropriate for your individual situation.

There are hundreds of different types of loans on the market, but as a general rule, most can be categorised as follows:

This refers to the primary purpose of the home loan or property loan.

For investment property loans, you can generally expect to pay a slightly higher rate than for owner-occupied loans (i.e., loans for a property you intend to live in).

Will a Fixed Interest Rate Guard Your home Loan Against Changing Interest Rates?

Regardless of whether you are applying for an owner-occupied home loan or an investment loan, you will need to decide whether you want a fixed or variable interest rate.

Fixed interest rates remain unchanged for a set period of time (usually 1-5 years, but sometimes up to 10 years) regardless of any changes in the market, so your interest rate and repayments will stay the same throughout the agreed term.

When rates are rising, fixing your interest rate may be an attractive option to guard against further increases, however, when rates are falling you will not get the benefit of any rate reductions during your fixed-rate home loan period.

Variable interest rates can change at any time in line with changes in the market; this means your interest rate and repayments can go up or down at any time.

Some loans are very basic and offer only a loan facility, while others come with a range of features such as a credit card, offset account and discounts on other banking products.

As a general rule, no-frills, basic loans tend to have no or low monthly fees, while full-service packaged loans tend to attract annual or monthly fees.

Ideally, it’s great to save a 20% deposit when buying a property (e.g., if you want to buy a property worth $500,000, the ideal scenario would be to save a deposit of $100,000).

Having a 20% deposit opens up a vast range of loan options and can help you avoid paying tens of thousands of dollars in extra expenses such as LMI (Lender’s Mortgage Insurance). See ‘What is LMI?’ section below.

However, a 20% deposit is understandably out of reach for many Australians, particularly first home buyers, so it’s important to know that there are other options available if you have a smaller deposit.

You can learn more about these options in our article:

As an absolute minimum, most loans require a minimum deposit of 5% PLUS enough savings to cover additional costs such as legal fees, moving expenses, lenders mortgage insurance (LMI) and any stamp duty you are required to pay.

Are There Any Home Loan Assistance Schemes Available For First Home Buyers?

In very limited circumstances, such as where you are eligible to participate in a Government home ownership scheme, it may be possible to enter the property market with a deposit of only 2% PLUS enough savings to cover additional costs.

If you don’t have a 20% deposit but want to avoid paying LMI costs, many lenders will allow you the option of a security guarantor home loan.

An eligible close relative – almost always a parent – can act as a guarantor and use part of their property as security for yours instead of paying a full deposit.

For this to be an option, the guarantor has to be in a solid financial position and have sufficient property equity (i.e. the guarantor must have fully or substantially paid off their home loan).

This is because your lender will effectively issue a mortgage (or second mortgage if one already exists) against the guarantor’s property in addition to providing a mortgage against the property you are purchasing.

Being a security guarantor is risky. For example, if you default on your home loan, the guarantor needs to step in and make the repayments. Otherwise, they run the risk of losing their own home.

If you already own an existing property and have built up sufficient equity (that is, you owe much less than the value of the property), you may be able to use this equity in lieu of a cash deposit to help you purchase an additional property.

Once you’ve decided to move forward with the loan application process, we will need to collect some documentation from you.

This will generally include:

1. Identification such as a driver’s licence, passport and/or birth certificate
2. Six (6) months of bank statements, credit card statements and mortgage statements, if applicable (we can make this easy by providing a link for you to upload them electronically directly from your online banking)
3. At least your last two (2) payslips for PAYG employees or financials and tax returns for self-employed applicants
4. Statements for any other liabilities or income you may have (e.g. child support income, HEC/HELP debt, rental income, Buy Now Pay Later facilities, etc.)
5. Evidence of your deposit and sufficient savings if you are buying a new property
6. Purchase contracts for a home loan, including building contracts, or plans if building
7. Other documents specific to your individual circumstances (we’ll let you know if this applies)

Your borrowing capacity is another term for how much you can afford to borrow.

Borrowing capacity considers your income, expenses, liabilities (debts) and assets (things you own). It also considers the current interest rate, PLUS an additional buffer in case rates rise further.

As rates rise, your borrowing capacity goes down as higher rates mean higher monthly repayments, and lenders will be willing to offer you less money to avoid running the risk of your monthly repayments rising to a level you can no longer afford.

Although these factors may change over time, your borrowing capacity is determined when you apply for a loan.

We will help you to understand your borrowing capacity, and work with you to determine if there are any steps you can take, either in the short or long term, to improve your capacity if needed.

When Should I Refinance my Home Loan?

Home loan reviews should be done at least once every 1-2 years, or more often if your circumstances change. This does not mean you need to change lenders this often, as there are pros and cons to be considered for each client, but regular home loan health checks put you in the best possible position to avoid unnecessary costs and ensure you are still on a sharp rate.

I Have a Poor Credit History, Can I Still Get a Home Loan?

Each (home loan) lender has their own specific niche, so a no from one lender does not necessarily mean a no from all.

Several lenders on our panel are also well placed to assist clients with less-than-ideal credit histories as long as they can now demonstrate their ability to repay their home loan.

HOME LOAN FAQ | GENERAL QUESTIONS

LVR stands for ‘loan to value ratio’. It is a measure of how much you owe on your home vs the total value of the home. For example, if your home is worth $500,000 and you currently owe $400,000, your LVR will be 80%.

This is because you owe 80% of your property’s value. LVR is important as lower LVRs are considered less risky by lenders, so they often attract a lower interest rate than higher LVRs.

LMI stands for Lenders Mortgage Insurance.

LMI is an additional cost paid by the borrower when borrowing without a full 20% deposit.

• LMI does not protect the borrower at all.
• LMI only protects the bank against loss in case you default on your loan and the property needs to be sold for an amount less than you currently owe.
• LMI can run to tens of thousands of dollars depending on the size of the loan.

In most cases, LMI is payable on loans with an LVR of 80% or higher (i.e., where your deposit is less than 20%), although some lenders will offer loans of up to 85% without LMI, or even 90% for people in some specific professions (particularly medical and legal professions).

Some government schemes will also cover the costs of LMI for eligible buyers.

How Is a Comparison Rate Different From an Advertised Interest Rate?

A comparison rate is designed to help you compare the overall cost of loans at a glance by factoring in additional charges such as annual or monthly fees, establishment fees, discharge (loan closure) fees, and the current interest rate.

However, Comparison rates have some limitations: they are calculated on a loan of $150,000 over a 25-year term with monthly payments (a formula set by the Consumer Credit Code), which means they won’t be exactly accurate for your circumstances if you are borrowing a different amount or have a different loan term (length), and they are based only on current rates which are likely to change over time.

‘Reinvesting’ is the term coined to describe purchasing a property for investment purposes in an affordable location, while continuing to live and rent in your preferred location.

This strategy is popular among buyers who are priced out of their preferred area, but still want to get a foot onto the property ladder.

Is NBS Home Loans a Bank or a Finance Broker?

NBS Home Loans is a finance broking service. We do not lend out our own money, but rather we help match clients to banks and lenders that do lend out money.

To offer loans from a large range of lenders, brokers must undertake training to understand each lender’s processes, policies, and products and obtain accreditation with each lender.

NBS Home Loans can assist with all types of loans, including home loans, investment property loans, personal loans, car loans, asset loans, and business and commercial loans.

NBS Home Loans does not provide accounting services or financial advice beyond lending/credit advice, however, we work closely with several trusted partners who do provide these services and we and can help point you in the right direction if you require assistance in these areas.

NBS Home Loans specialises in complex or ‘outside the box’ loans, particularly for self-employed clients, and we pride ourselves on helping clients that others will not or cannot help.

In the vast majority of cases, there is no cost to a client for our services. This is because we are generally paid a commission by the bank or lender once we settle a new home loan or investment loan.

In some cases where we will not be paid by the bank or lender for our work, or we do not expect to be paid by the bank or lender, such as some types of bridging finance, there may be a fee to the client.

Any fees to be charged by NBS Home Loans will always be disclosed at our free initial meeting so you can decide whether you wish to proceed.