Frequently Asked Questions

As experienced mortgage brokers in Brisbane, we find that most people have a basic understanding of what a home loan is, what a broker does and what refinancing means. But do you really want to base one of the biggest financial decisions of your life on a “basic understanding”? At North Brisbane Home Loans, we believe that anyone planning to refinance home loans or take out a new mortgage should be able to do so with all their questions answered and all the facts clearly understood. That’s why we’ve put together a dedicated resource that answers the most frequently asked questions that we receive from customers.

Do I have to apply through mortgage brokers in Brisbane? Can’t I just go to a bank?

You can apply for home loans in Brisbane by going directly to your bank (or any other lender) or by applying through a mortgage broker. But choosing to apply through your bank can severely limit your choices and likely won’t result in you getting the best possible home loan to suit your needs. In contrast, experienced finance brokers in Brisbane will be able to compare suitable loans from a wide panel of lenders to identify which one is best for you. They’ll do this after first considering your current financial situation and any long-term goals you may have in mind. They’ll also handle all the negotiations, complete the paperwork and follow through with the lender to ensure your application is viewed in the best possible light.

How much do finance brokers in Brisbane charge for their services?

While some mortgage brokers in Brisbane will charge customers a fee for their services (something they are required to disclose to you upfront), the majority won’t charge you anything at all. Instead, they’ll receive a commission from whichever lender you obtain the loan through. Because of this, some borrowers worry they’ll be charged more by the lender when they use a mortgage broker. But the reality is, a reputable broker will usually be able to get you a better deal than what you’d achieve by approaching the lender directly (due to the volume of business they create for the lender).

Can I trust that mortgage brokers in Brisbane will recommend the right loan?

When you work with finance brokers in Brisbane, you won’t have to worry about whether or not you can trust their advice. Since January 1st, 2021, finance brokers in Australia have been subject to legislation commonly referred to as ‘Best Interests Duty’. This means that mortgage brokers are legally required to thoroughly assess your financial situation and then recommend the home loan that is going to be in your best interests. A broker would actually be breaking the law if they recommended an unsuitable home loan to you. This legislation has been designed to give borrowers peace of mind, knowing they can trust their broker to provide the right advice.

How much of a deposit do you need for home loans in Brisbane?

The answer to this question will vary depending on your current financial situation and your potential borrowing capacity. Most lenders will, as a minimum, require a deposit that is equal to 5% of the property purchase price (for those that have a stable form of employment, adequate income and a good credit report). For example, if you were looking to buy a property worth $500,000, you’d need a minimum deposit of $25,000 (equal to 5%). However, if your deposit is less than 20%, you may be required to pay for Lender’s Mortgage Insurance (LMI).

What is Lender’s Mortgage Insurance?

LMI is an insurance policy designed to protect the lender if the borrower defaults on their mortgage. Most lenders will include LMI as a standard requirement when the borrowers’ deposit is less than 20% of the property purchase price. The cost of LMI varies, but it can add a significant cost to your total purchase price (LMI is payable as a one-off premium that gets added to your total home loan balance). However, borrowers who have a guarantor or those who qualify for the First Home Loan Deposit Scheme may be able to obtain a home loan with just a 5% deposit, no LMI required.

How much money will I be able to borrow?

Your borrowing capacity will be assessed by the lender, taking into consideration your current income, employment status, credit history and levels of personal debt. To get an idea of your potential borrowing capacity, try using our free online calculators. Or, for a more detailed assessment, talk to a mortgage broker in Brisbane.

How will my credit score impact my ability to get a mortgage?

If you have a less than ideal credit score, this doesn’t automatically mean you won’t qualify for a home loan. However, it may mean that you have fewer mortgage options to choose from or that you’ll need to start with a higher deposit (to minimise risk to the lender). If you’re worried about how your credit score might impact your ability to get a mortgage, then the best thing to do is talk to your mortgage broker. They can also offer practical advice on how you can work at improving your credit score.

Why do people refinance home loans?

There are several really good reasons why people choose to refinance home loans on a regular basis. One of the best things about refinancing is that you can often obtain a more competitive interest rate (which can save you literally tens of thousands of dollars over the life of your loan). Refinancing also allows you to change your home loan structure and features to suit your evolving needs. If the mortgage you took out as a first home buyer is no longer suitable (perhaps two promotions or three kids later), you can swap to one that better meets your current needs.

How much can I save by refinancing?

The amount of money you can save by refinancing will depend on your current interest rate, loan conditions and eligibility for the best mortgage refinance deals. However, if you haven’t refinanced within the past 2 years, you could potentially save a lot of money. For example, if you have a mortgage balance of $500,000, with a current interest rate of 4.0% and 30 years remaining on your loan term, you’ll be paying about $551 per week in repayments. Refinancing to an interest rate of 2.0% (a rate which some lenders are now offering) would reduce your weekly repayments to just $426 per week. This could save you $6,500 in the first year alone!

How difficult is it to get self employed home loans?

Self employed home loans have a reputation for being notoriously difficult. But a lot has changed in recent years, and self employed borrowers now have a lot more options when applying for a home loan. If you’ve been self employed for a minimum of 2 years, your paperwork is up to date (including tax returns and BAS statements) and there are no other significant red flags on your application, then it shouldn’t be too difficult for you to obtain home loan approval.

Can I include the cost of stamp duty in my home loan?

Stamp duty is a tax charged by the state government when you purchase a piece of real estate (although some concessions are available for owner-occupiers and first home buyers in Queensland). The cost of stamp duty is calculated on a sliding scale, so the more expensive the property, the more stamp duty you’ll need to pay. Generally, you can’t just include the cost of stamp duty in your home loan. But this doesn’t necessarily mean you have to save up enough cash to cover the cost of stamp duty. What you can do instead is pay for your stamp duty out of your cash deposit and then increase the total value of your loan to compensate. Mortgage brokers in Brisbane can help you determine whether this will be the best way for you to pay for your stamp duty.

When applying for home loans in Brisbane, should I choose a fixed or variable interest rate?

Your mortgage broker will be able to help you assess what kind of interest rate is going to be best for your situation. Fixed rate home loans are great for locking in a low rate and can be ideal for borrowers trying to stick to a set budget. However, fixed rate home loans aren’t always as flexible as a variable interest rate home loan. And you may find that a variable mortgage product will offer a better range of loan features (such as a redraw facility or offset account). That’s why it’s always a good idea to carefully assess the pros and cons of both options before you decide.

What can I do to improve my eligibility for self employed home loans?

To improve your eligibility as a self employed borrower, start by making sure all of your paperwork is completely up to date. Lenders will want to see your financial paperwork for the last 2 years, so having this in order before you apply can significantly speed up the process. It’s also a good idea to work on your credit rating – simple things like ensuring bills are paid on time or paying off your credit card in full each month can really help to improve your credit report. Finally, make sure you talk to a mortgage broker who has experience assisting borrowers who are self employed. They’ll know which lenders are more likely to look favourably at a self employed borrower and how to present your application in the best possible light.

What kind of construction finance solutions are there?

There are a number of construction finance solutions available to borrowers. If you have enough equity in your current property, you could consider refinancing your mortgage to access that equity. Another option is redrawing on your existing mortgage (if your loan has a redraw facility). Alternatively, you may find that dedicated construction loans or renovation loans may be more suitable for your situation. For more advice on what kind of construction finance solutions will work the best for you, talk to a finance broker in Brisbane.

How do construction loans work?

Constructions loans are designed specifically for borrowers who want to build a new home. Unlike a standard mortgage (where you receive the money for the property purchase as a lump sum on the day of settlement), construction loans are designed to be paid in instalments. Each time you reach a new stage in the construction schedule, the lender will make a progress payment to the builder. The details of the construction schedule and progress payments will all be determined in advance and included as part of your loan contract.

How do I know if it’s a good time for me to refinance?

Most mortgage brokers in Brisbane will recommend reassessing your home loan at least every two years. This doesn’t necessarily mean you have to refinance that often. But a regular reassessment is the best way to ensure your interest rate stays competitive. It’s also a good idea to think about refinancing whenever your fixed loan term is due to expire (at which point your interest rate will automatically roll on to the standard variable rate). Refinancing can also be beneficial if you want to consolidate personal debt or access the equity in your property.

How do lenders calculate interest for construction loans?

With construction loans, lenders will only charge interest on the percentage of the loan that has actually been paid. For example, the progress payment schedule may stipulate a 5% initial deposit, followed by a further 15% of the contract total once the base stage is completed. At this point in the project, the lender will only have paid out 20% of your loan total, so, you’ll only be charged interest on 20% of the loan. Only after the project is 100% complete and the final progress payment has been paid will the lender start charging you interest on the full amount. Considering the length of an average residential construction project (not to mention the potential for delays), this could save you a significant amount of interest while you’re waiting for your new home to be built.

What are renovation loans?

Since your options for renovation loans may vary significantly, it’s a good idea to talk with a mortgage broker when you first start planning your renovation. For an extensive renovation that will incur significant cost, it may be worth refinancing your existing home loan to access the equity (rather than taking out another dedicated renovation loan). Another possibility is to apply for a mortgage “top-up” with your existing lender. This will increase your existing mortgage balance, and the added funds can be used to pay for the necessary renovation works. If you’re looking at a small-scale renovation (perhaps a bathroom or kitchen upgrade) then it may be more beneficial to apply for a personal loan (which can come with greater flexibility and a shorter loan term).

Book a Free Home Loan Consultation

To book a free home loan consultation, or for expert mortgage broker advice, contact the team at North Brisbane Home Loans.

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