Some frequently asked questions for you...
You've got questions. We've got answers.
Can I borrow 100% of the property price?
Short answer, yes it is possible. The people who are eligible for this would fall into one of two categories:
– You have substantial equity in another property you own.
– You have parents or relatives who have equity in a property that they’re willing to give you access to.
Drop us a line and we can discuss your options in more detail.
Why use a mortgage broker if I can go to a bank?
If you needed your car repaired you’d go to your local mechanic. Or the one mechanic you trust. You’d take the time to drive there, you’d hope he can find the problem, and then you’d hope it isn’t going to cost a fortune. If he can’t fix it then you have to find the next mechanic and drive there. But if he can fix it, how do you know you’re getting the best price?
But what if you could speak to an expert who knew exactly how to fix all your cars issues and could tell you exactly which mechanic would fix your car the best and at the lowest price? Would you not want to deal with that expert? (side note – that gives me a brilliant idea.)
Banks are the mechanics, you have the broken car, and Financial Engineers are the experts. We bring all your options to your doorstep, saving you time, money, and a potential massive headache. You can be confident you’re getting the best deal on the market. How good is peace of mind huh? Don’t make the classic mistake of walking into your bank thinking they’re going to give you the best deal because you’re a “loyal customer”. Speak to an expert who can show you 40+ options instead of just one.
How do mortgage brokers get paid?
Depending on the lender, we are paid approximately 0.50% to 0.8% of the loan amount as an up front fee and an ongoing fee of 0% to 0.285% of the loan balance per annum. This is not paid by you, it is paid by the lender.
This is an important question. How and what we get paid is something all mortgage brokers are obligated to disclose upfront without hesitation. Financial Engineers Inc would be happy to provide a copy of our lender’s commission schedules for you to see what commission we get from each lender.
We are remunerated by the banks for introducing your business to them and for doing much of the leg work that would otherwise be done by one of their staff. They’re happy to pay us because it’s costing them less to get your business. Similar to a referral fee. This outsourced approach is brilliant since it gives you more choice and the banks don’t have to pay us anything if we don’t lodge applications with them.
How do I know you wont choose a particular bank to get a higher commission?
Easy. Upon your request, during the product recommendation stage we can give you a copy of the commission schedule for every bank we deal with including the 1st, 2nd, and 3rd tier lenders. The commission is non-negotiable, highly regulated, and applies to every mortgage broker in Australia. You’ll see the entirety of what we can expect to get remunerated for from your deal.
How do I know you won’t recommend a loan that is unsuitable?
Plain and simple, it is against the law for us to recommend or assist you with an application for an unsuitable loan. We’re not in business to lose our business. It is in neither of our best interests to suggest an unsuitable loan. We take every pre-caution to make sure the loan is suitable and we can’t stress how important it is that you disclose your full financial position and answer all questions honestly.
How do I get the best interest rate?
Great question. Difficult answer. The answer is more of a “rule of thumb” than a hard and fast rule. For starters, here are some basics:
– Loan amount at or below 80%LVR.
– Property is an owner occupied.
– The more you borrow from a lender the better. (In other words, have all your borrowing with one lender)
– Talk to an experienced mortgage broker who knows how to negotiate rates
How much do I need for a deposit on an investment property?
Well, the short is answer 20% of the purchase price. Due to recent policy changes by most lending institutions, the maximum LVR for investment loans is 80%, although we know lenders that in some circumstances will only require a 5% deposit. If a 20% deposit sounds ridiculous considering you’re in your early 20’s, saving $5/month, and watching the average Sydney property price soar over $1trillion, fear not; there are ways to borrow 100% of the purchase price. These ways include your parents going guarantor, using equity in an existing property, or receiving a ‘gift’ from a family member. Drop us a line to go over your options in further detail.
Should I have an offset account on my investment loan?
Offset accounts are almost essential for any property owner. If you have a mortgage on the property you live in I’d say you definitely want an offset account linked to that property. If you already have an offset account linked to your home then there aren’t too many good reasons to have a second offset account linked to an investment property. Why leave cash in the investment offset account when that cash could be in the owner-occupied offset account offsetting the ‘bad debt'(non-tax deductible)? Don’t offset ‘good debt'(tax deductible) when you could be offsetting ‘bad debt’.
How does the bank decide how much I can borrow?
This is tough to have a short answer for but just know the banks take quite a conservative approach. Each bank has a borrowing capacity calculator that will add about 2.5-3% to the actual interest rate. So if the actual rate you’d get is 5%, the banks could be assessing your loan capacity by using an 8% rate. Obviously, they take into account all your income/expenses plus they also have built-in benchmarks for living expenses based on your age, number of dependents, etc. Then if you’re receiving rental income from a property the banks usually only 80% of the income. And on top of that each lenders calculator differs form the next so you’ll get different outcomes with each bank. Check out the Mortgage Workshop to get an idea of how much you can borrow. As finance brokers we practically study these bank calculators. Drop us a line and we’d enjoy doing the legwork for you to work out your best options.
What is negative/positive gearing?
An investment can either make money or lose money. Negative gearing is when your investment costs more than it makes; positive gearing is when your investment makes more than it costs. The logic behind a negatively geared investment is “I’ll take a minimal loss year on year in hopes that the capital gains from selling the investment will exceed the total loss.” A loss can be used to reduce your taxable income which will reduce the amount of tax you pay. However, you are only reducing the tax you pay because the income from your investment isn’t covering your costs. Hence, you will still need to make up for the negative cash flow from other sources. Negatively geared properties aren’t “bad” but they should never be the aim. Why take a loss when you have the option to take a gain?
How much can I borrow?
This is sort of like asking how long is a piece of string? It all depends on your income, your savings, your assets, your liabilities, how many kids you have, where you live, your basic livings expenses, etc. You can use our Borrowing Capacity Calculator to get a pretty good idea of how much the banks would loan you based on your current position.
Who is the best mortgage/finance broker in the country?
Short answer is Financial Engineers.
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