RESIDENTIAL PROPERTY FINANCE
Residential mortgages have become a commodity with many lenders offering similar products and features.
Lenders often focus on the interest rate as the only important criteria for a good loan and simply 'tick the boxes'.
Midas examine loans from a much broader perspective, taking into account your unique financial circumstances. More than a consultant, we are someone who takes the time to build trust and structure a loan that's right for you.
Choose Your Loan Type...
BENEFITS OF A MORTGAGE BROKER
Why is it critical for property investors to find a mortgage broker they can work with as part of their team?
Most mortgage brokers who are not in the space of property investing find it hard to understand the mindset of a property investor.
A good mortgage broker can also help you with property strategies, property selection, risk management, etc.
STANDARD VARIABLE RATE LOANS
A fully featured variable rate product. The variable interest rate means that the interest rate changes according to the outlook in the financial markets.
The key benefits of this product are:
Principal reductions may be made at any time at no extra cost.
Building loans allowed.
Redraw facility available.
LINE OF CREDIT FACILITY
A very flexible loan product that enables a property owner to access to the equity in their residential property more efficiently.
Main features are:
Interest is charged only on the balance outstanding.
Interest only repayments are required. Unlimited principle reductions are allowed.
Ability to redraw back to the original line of credit limit.
Direct crediting of business, salary and investment income.
Interest can be capitalised up to the maximum loan limit.
Easy access including cheque, direct debit, access card, phone or net banking.
Can be combined with other mortgage loan products.
Evergreen facility option (no loan term).
Offset Mortgages link an everyday transaction account to your mortgage. The balance in the transaction account is used to offset the equivalent balance of the loan account for the purpose of calculating interest in the loan.
The offset account operates like an everyday savings account. It usually offers ATM access and a cheque book.
Whilst most lenders offer mortgage offset account facilities the amount and percentage of offset can vary between lenders.
Professional Packages are not just a loan. They are a benefits program offered by lenders.
Some of these package benefits include:
Discounts on most variable and fixed interest rate products.
Reduced or waived application fees.
Waived transactional account keeping fees.
Waived loan account service fees.
Waived annual fees on credit cards.
LOW DOCUMENTATION LOANS
Ideal for customers who are self employed and are unable to provide the necessary documentation required to confirm their income.
Borrowers are required to complete an Income and/or Affordability Declaration.
FAMILY PLEDGE LOANS
Allows applicants to maximise the amount they can borrow against their purchase property by offering them an alternative source of funds for their deposit and upfront fees.
Instead of an applicant funding the deposit and upfront fees with their own cash, family members (parents, grandparents and siblings) can provided part or all of the deposit by offering equity from their own property as a limited guarantee.
The key benefits for the applicant are:
Maximise the amount borrowed - allow greater than 100% of the purchase price, plus costs such as Stamp Duty and Legal Fees.
Helps to reduce or avoid Lenders Mortgage Insurance premium.
The benefits for the Guarantor are:
Allows the guarantor to nominate a specific amount the guarantee is limited to, rather than a traditional 'open' guarantee for the entire loan amount.
The guarantor can release the guarantee at any time, as long as the Loan to Valuation Ratio (LVR) is reduced to 80%. The LVR can be higher, but LMI will still apply.
Available for applicants wishing to purchase land to build less than four dwellings.
As a rule of thumb, most lenders will allow you to borrow up to 80% (without Lenders Mortgage Insurance) of hard costs for residential constructions of four or less dwellings. Hard costs include acquisition and development (such as land, statutory contributions, construction and professional fees).
These lending ratios apply to transactions where there is a third party builder involved. Only a small number of lenders will accept owner/builder applications at reduced lending ratios.
In both scenarios the lending institution requires the owner's contribution to be made upfront. This contribution can take the form of additional equity (i.e. security), cash collateral and commencement of construction.
During the construction period funds are paid progressively and are subject to the lender's valuer and/or quantity surveyor confirming that works have taken place.
During construction, interest can be serviced or capitalised. Upon completion most lenders will allow you to switch to a standard product of choice.
A bridging, sometimes called a relocation loan, fund the purchase of your property while allowing you a period (generally up to six months) to sell your existing property.
During this period the lender will take both properties as security, pay out any existing debt and advance the full funds for the purchase plus cost. In some situations interest can be capitalised during the bridging/relocation period.
Generally once the other property is sold and/or the debt is reduced, the client reverts to a standard loan product, where repayments are made on a period basis.
EQUITY RELEASE MORTGAGES
Are Sometimes called Reverse Mortgages, they are a variable or fixed rate loans, designed to for people 60 years or over who own their home but have little cash to cover everyday living expenses or large financial outlays such as home renovations, an overseas holiday or a new car.
The loan is secured against their owner-occupied property and no regular repayments are required as long as borrower lives in the home. Repayment is deferred until all borrowers are deceased, the property is sold, or borrowers are no longer living in the house (whichever occurs first).
Some examples of where an equity release product may be beneficial include:
Insufficient superannuation to provide a sufficient level of income.
Desire to increase super contributions late in career - maximise tax relief through salary sacrifice and use the equity release to offset the income loss.
Long term investors wishing to preserve their portfolio.
Divorce proceedings - meet settlement obligations without a property sale.
"Stay in Place" widows - equity release replaces deceased spouse income.
NON CONFORMING LOANS
They are designed to be more flexible to suit a variety of applicants and situations. The loans are an alternative for borrowers who do not meet traditional lending criteria or do not wish to use mortgage insurers.
Some of the most common non-conforming scenarios include:
Self-employed without financial records for at least two years.
Irregular employment pattern - part-time, contract or seasonal.
Inadequate or an irregular savings history.
Adverse entries (black marks) on your credit file.
Only recently became an Australian resident.
55 years or older.
The majority of lenders now offer this loan type, which allows borrowers to fix the interest rate on an agreed percentage of their loan, keeping the other part variable.
You are not locked in to a 50/50 split – most lenders will allow you to have a split loan in almost any ratio. This loan type is becoming increasingly popular with borrowers who want to take advantage of the opportunity to spread the risk in uncertain economic times.
A major advantage of this loan type is the fact that you can continue to make extra repayments on your variable loan as it maintains all of its flexibility and options.
A financial guarantee issued by an insurance company/underwriter to the vendor. It acts as a substitute for the cash deposit paid between signing a contract and settlement of the property. At settlement the purchaser is required to pay the full purchase price including the deposit.
The use of a Deposit Bond does not remove the obligation of the purchaser to pay the full deposit upon settlement.
The Deposit Bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price. Acceptance of the Deposit Bond in lieu of a cash deposit is at the sole discretion of the vendor.
The above information is provided for general education purposes only and does not constitute specialist advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy.