WHY NOW MIGHT BE THE RIGHT TIME TO GET A MORTGAGE

In this article, we’ll discuss if now is a good time to get a mortgage, the importance of your particular financial situation and top tips to make the process easier.

In this article, we’ll discuss if now is a good time to get a mortgage, the importance of your particular financial situation and top tips to make the process easier.

What is a mortgage?

A mortgage is a form of debt that is secured against a specific piece of real estate or property. They are also known as ‘liens on property’ or ‘claims on property.’ Most new property purchases have a mortgage attached, especially for first home buyers.

Generally, a mortgage is a long-term loan – often for a duration of anywhere from 15 years up to 30 years. The term length is determined by several factors including the size of the loan, your income (or serviceability) and your age.

Less commonly known is that there are short-term mortgage loans, which are usually five years or less. A short-term mortgage is increasingly considered from private lenders in the absence of being able to secure a loan from a traditional financial institution, like a bank.

When is the best time to apply for a mortgage?

There are many factors at play when it comes to getting a mortgage. It’s important to balance finding the right property, having an adequate deposit (at least 20% is a good rule-of-thumb) and getting your finances in order. A deposit of 20% or more also helps you avoid paying Lender’s Mortgage Insurance (LMI) in many cases.

In the current climate, many borrowers are also refinancing – discharging their current mortgage and replacing it with another from a different mortgage lender at a better rate. If you are considering this option, look carefully at the transaction costs, which include any fees and charges your current lender may impose for early payout of your loan.

Top tips when you apply for a mortgage

Mortgage lenders will appraise your deposit (or equity in your current home), your income, other debts (credit cards, car loans, etc.) and your credit history when considering your eligibility for a mortgage. Unsurprisingly, the better your financial position, the more likely you are to be approved at the lowest possible interest rate. That said, there are an increasing number of lenders that provide mortgages to borrowers who don’t have all their paperwork in order, or who may have experienced credit history challenges. Consider these tips to make the process easier:

  1. Have a good deposit: Save at least 20% deposit, or have that equivalent in equity in your current home.
  2. Get your finances in order: Have your paperwork organised, including at least six months of bank statements, current payslips, last two years’ tax returns, details of any other loans, etc. It’s also helpful to have a clear view of your total household expenses.
  3. Find out your credit score: There are major credit score providers who offer free consumer credit scores and reports that will help you understand your credit-worthiness in the eyes of mortgage lenders, who will access these reports when you apply for a loan.
  4. Pay down debt: Less debt means you can borrow more and better service your mortgage loan.
  5. Work out your budget and capacity to pay (service) the loan: You need to understand how much you can afford to pay each month in principal and interest. If an increase in interest rates will make it difficult to meet your repayment commitments, then consider a fixed interest rate loan.
  6. Shop around for the best deal: There are many sources for mortgage loans that suit your requirements – that may or may not be with one of the big banks. Consider non-bank and private lenders, and keep in mind that mortgage brokers can do the shopping around for you, should you prefer.

 

Key takeaway

So, is now a good time to get a mortgage? As always, it depends on your personal circumstance. That said, many borrowers are taking advantage of historically low interest rates and high levels of competition from lenders trying to secure more customers.

 

HOW A CAVEAT LOAN CAN HELP YOU OVERCOME A SHORT-TERM CASH FLOW CRUNCH

In this article, we’ll look at caveat loans and how they can be a good solution to deal with short-term cash flow requirements.

In this article, we’ll look at caveat loans and how they can be a good solution to deal with short-term cash flow requirements.

What is a caveat loan?

The first thing to understand about caveat loans is that they are not mortgage loans. While sometimes referred to as a ‘second mortgage’ because they are secured against a property, they are different in structure and terms to traditional mortgage loans.

You must own a property to take out a caveat loan against it. A caveat operates like a form of ‘injunction,’ which means the loan is lodged on title behind your existing mortgage (no consent is required from your bank to do so). This also means the borrower is prevented by a ‘caveat’ from selling the property (or taking out further loans against the property) without the permission of the caveat loan provider.

What are caveat loans for?

In Australia, caveat loans are a fast source of short-term funds that are commonly used to manage the cash flow between the sale and purchase of a property. If you have sold a property and need to pay for another, but settlement timing doesn’t match up, a caveat loan can be a great short-term solution.

In addition, caveat loans can be used to complete major renovations or residential development projects. Funds required for construction can be sourced with a caveat on the property, which will be released once the property is finished and sold.

Caveat loans are commonly used as a short-term option for business owners who need a fast cash flow injection, regardless of credit history. For example, you own a business and you:

  • Have a large tax bill due immediately, but won’t have the cash to pay it for a few months.
  • Could benefit from a working capital injection to maintain business operations to offset invoice lags.
  • Need to purchase a large amount of stock (to service an order, or to take advantage of a bulk purchase discount) and need to fund it with short-term debt.

Similarly, a caveat loan can be a good short-term solution for borrowers who need money in a hurry to do home renovations in preparation for sale, regardless of credit history.

What are the benefits of a caveat loan?

Caveat loans in Australia are widely available from a variety of lenders and offer a range of features that make them appealing for short-term loans when funds are needed quickly. The upside of caveat loans includes:

  • They’re quick: Caveat loans can be applied for, approved and settled often within a few days.
  • Minimal documentation required: The paperwork required for caveat loans is far less onerous than mortgage loans, making it easier and faster to apply for this type of loan.
  • Flexible: Caveat loan terms are flexible and can typically be negotiated for anywhere from one month to three years.
  • Easy: Once you have repaid the loan, the caveat on your property is lifted immediately with minimal fuss and red tape.

Key takeaway

If you own a property, even if it is the subject of a first mortgage, a caveat loan can be a fast and relatively cost-effective source of short-term funds for personal or business use.

MIND THE GAP – HOW A BRIDGING LOAN CAN HELP

In this article, you will discover how a bridging loan can help ‘bridge the gap’ between selling one home and buying another.

In this article, you will discover how a bridging loan can help ‘bridge the gap’ between selling one home and buying another.

Buying a new home is exciting, but the timing can present a problem when it comes to selling your current home. In a perfect world, you would sell your existing home first, then use the proceeds to fund the purchase of your new home.

But as we all know, life often isn’t ‘neat.’

For instance, you might find yourself in a position where you’re unable to sell your current home before purchasing your new home, or you come across your dream home before even considering selling your current place Equally, you may not want to rush the sale of your current property and potentially sacrifice a better sale price that may be obtained if you waited a little longer. Another consideration is that you would prefer to stay in your current place while you purchase your new home to save the hassle of renting or moving twice within a short period of time.

In all these instances, a bridging loan can be a great alternative.

What is a bridging loan?

As the name suggests, a bridging loan helps ‘bridge the gap’ between the purchase of your new home and the sale of your current home. A bridging loan can be an ideal solution when you need to act quickly to secure a new property and the settlement dates for purchasing and selling don’t match, which is often the case.

What are the benefits of a bridging loan?

A bridging loan lets you do things on your terms during what is an already stressful time. The main benefit of a bridging loan is that it enables you to have the breathing space to avoid the feeling that you need to urgently find, or potentially pay an inflated price for, an upcoming property. Equally, a bridging loan removes the pressure of feeling forced to sell your existing property for potentially a lower amount due to time restrictions. It also helps with the timing of your move from your current home to your new home without the need to pay storage costs, hotel accommodation or rent.

How does a bridging loan work?

Bridging loan lenders assess the equity in your current home, the price of your new home and then tailor a combined loan while you sell your current home. Bridging loan providers offer a range of options to suit your particular circumstances and timing requirements.

A bridging loan from a short-term lender can be advantageous. Short-term lenders are often ‘private lenders,’ which means they have far greater control over the loan amount and terms able to be offered. As such, private lenders are renowned for being very flexible with the borrowers they help, as well as types of loans they write. Also, because short-term loans typically only require minimal paperwork, they’re usually quick to process – which means that funding is often available within as little as a few days, and in many cases, you can easily apply online.

Key takeaway

Bridging loans in Australia are well-established and can be a great choice if you need to act fast to secure your new dream home and haven’t yet sold your current residence.

A BEGINNERS GUIDE TO SHORT TERM FINANCE

In this article, you will discover the benefits of short term financial loans for personal and business use.

In this article, you will discover the benefits of short term financial loans for personal and business use.

Especially during periods of uncertainty, it may take longer to sell your current home after you have found your new place. Or your business may be suffering slow payments, resulting in cash flow shortfalls. Where do you turn to for immediate access to funds you only need for a short time?

When people think about personal or business finance, they often think of mortgages or other types of secured loans with long repayment terms of up to 30 years with a bank. These types of loans typically have a very strict ‘lending criteria’ (i.e. what you need to demonstrate to be able to be eligible for a loan), usually require years of financial information, and have an onerous application process that takes a long time to be approved, and settle.

But what if you only need finance for a short period of time? And you don’t want to jump through hoops – particularly if you don’t have all your financials in order, or have limited trading history?

If you have equity in your home or other property, a short term loan may be a good option if you need to obtain funding quickly, without all the hassle.

What are short term loans – personal use?

Here’s a common scenario: you’ve sold your current property that’s scheduled to settle in say October, but you find the house of your dreams in September. Rather than panic, or pass on your new house because you can’t get funding earlier, consider a bridging loan.

As the name suggests, a bridging loan is designed to do just that: ‘bridge the gap’ between your new property purchase and the sale of your current home. And the great thing is it’s a very fast and easy way to access finance by drawing down into the equity of your home to purchase your new home.

What’s less commonly known is that a short term loan might also be used to renovate or prepare your property for sale, pay off personal debts, or even complete a small land sub-division. And, what’s more, this is our speciality and what we do that’s different to most other lenders.

What are short term loans – business use?

It’s common for businesses of all shapes and sizes to experience cash flow crunches. These credit squeezes can be alleviated from a short term loan that provides a quick injection of funds that provide some breathing space.

Backed by the equity in your property, short term business finance helps smooth the ‘ups and downs’ of business cash flow, or helps you take advantage of an investment opportunity that needs immediate funding. Other common requirements include purchasing new stock or equipment, making wage payments, alleviating the pain of slow customer payments, or paying outstanding tax bills.

What are the types of short term financing?

Whether for personal or business use, there are a few different types of short term financing options. Choosing which one is right for you depends on your specific objectives and circumstances.

Caveat loan

Often called “unregistered second mortgages,” a caveat is placed on your property without requiring the consent of your bank, so it can be approved quickly. The caveat is released when the loan is repaid.

Second mortgage

Unlike a caveat loan, this needs approval from your existing lender. With added security, terms are generally more favourable than a caveat loan.

First mortgage

Cheaper and faster than a second mortgage, the first mortgage is top priority registered interest in your property and helps you to release equity in your home for personal or business use.

Home equity loan

Using your principal place of residence as security, these loans can help release equity in your home to fund renovations, investments, business working capital or repay debts.

If you need to act quickly to purchase a new property, fund your business or make an investment, don’t miss out on the opportunity – consider a short term loan to provide the finance you require, along with peace of mind.