Mortgages

Whether you have a portfolio of ten investment properties or if this is your first investment property loan we have the depth of knowledge and experience to navigate the confusing world of investment property loans.

Often there are important tax considerations when arranging finance for an investment property like whether to buy the property in your personal name, a company or trust or to invest through your SMSF. We can work with your accountant or financial planner to help tailor a solution that is right for you. Need an interest only investment loan in a company name for a self employed applicant – we can do that and much more! Call us today for an obligation free discussion.

We love getting the best deals in the market for our clients on a daily basis and fortunately there are always hundreds of lending products being offered all ofthe time. The key to getting the best rate is always understating what is the best rate for your scenario. A quick online search of’waht is the cheapest home loan rate’ generates alost unlimited suggestions and without a proper understanding of how to match your scenario and needs with a range of suitable lenders will just result in you going crazy. Cheap internet rate are well known in our industry to be pretty voliile and often difficult to be approved for unless you fit a pretty specific target market that they are after. Further more the lender you select is under absolutely no obligation to tell you that there might be a better rste out there. As a client of AXTON Finance we are obligated however to always act in your best interest at every stage – the major banks and lenders are exempt from this legislation and can press you into any loan they seefit.

Absolutely, we have access to almost all the current cash back home loan refinancing in the market place but it pays to understand the details. Did you know that if you walked into any bank off the street and asked them for the best home loan with a cash back offer they are under no obligation to act in your best interest but to ‘sell’ you only loans from their institution! This is quite the opposite with a licensed mortgage broking firm like AXTON Finance. We are mandated under Best Interest Dutites (BID) to offer you a loan that is most suitable to your needs available in the market place – our role is to consult to you your options rather than sell you a home loan with a sugar hit of a cash back offer.

Increasingly lender jargo is creeping into the mainstream media and DTI is fast becoming an often quoted measurement. DTI or Debt to Income Ratio is simply a measure of total household gross income relative to all household debt (including not just the loan you are applying for but credit card limits, car loans, personal loans etc). Generally speaking most banks and lenders will want to see a DTI of less than six (6) times but some are willing to stretch further to seven or even eight times gross household income. With that said its generally not often wise to max yourself out the upper thresholds of this level unless there are specific strategies in place. For example property investors often have higher DTI’s because of the investment property loans in place but this can theoretically be reduced quite quickly with the sale of one or two investment properties. Alternatively younger people who are in their earlier stages of their careers may be willing to stomach a higher DTI ratio on the basis of their projected income earnining potential. It pays to understand how different lenders apply this important metric than to try and DIY it with your local bank or lender alone.

Another industry common acronym is a LVR or Loan to valuation ratio. This ratio is an important metric that measures possible risk to a lender based on how equity you have in your property relative to the loan you require. This metric is applied to your home or investment loan the same way it would be if your were a large corporate investment entity were buying a skyscraper in Collins Street Melbourne!

For example a home loan of $500,000 on a $1,000,000 property has an LVR of 50%. While a home loan of $900,000 on the same $1,000,000 property has an LVR of 90%. Ideally banks and lenders want to see you borrow 80% or less of the value of your property. Borrowing in excess of 80% means you may have to pay mortgage insurance which usually increases the interest rate charged on your loan as well as applying a once off levy knows as lenders mortgage insurance or LMI (see FAQ relating to this).

The LVR is determined by a bank appointed valuation which we can usually secure for you upfront prior to loding any finance application which can help reduce the risk of any unknown variables that a bank appiointed valuation could bring up. It basically helps us ensure that your loan application is approved as planned right for the very start!

Usually it doesnt cost you anything extra to access the services of an experienced mortgage broker like the award winning team at AXTON Finance. Lenders ordinarily pay a broker a commission made up of a small upfront payment and a management trailing fee that the lender considers would be a direct cost to them through a branch that would require marketing costs, staff expenses and other normal business overheads that a mortgage broking firm will incur at no significant risk to the lender. Because the rates and fees are pretty much always the same going through a broker as they are if you attempted to navigate the market yourself you dont have much to loose by appointing an experienced mortgage broker.

Further more mortgage brokers are required by legislation to act in your best interest at all times unlike dealing directly with a bank or online lender. Our process will clearly lay out our tailored recommendation to you as well as a clear disclosure of how we are remunerated and whether any additional fees or charges would be payable. This is something that you are likely going to get from going direct to a lender yourself!

Usually it doesnt cost you anything extra to access the services of an experienced mortgage broker like the award winning team at AXTON Finance. Lenders ordinarily pay a broker a commission made up of a small upfront payment and a management trailing fee that the lender considers would be a direct cost to them through a branch that would require marketing costs, staff expenses and other normal business overheads that a mortgage broking firm will incur at no significant risk to the lender. Because the rates and fees are pretty much always the same going through a broker as they are if you attempted to navigate the market yourself you dont have much to loose by appointing an experienced mortgage broker.

We reconginse that we deal in your private data and for that reason our head aggregation group whom we pay significant professional membership fees to enforce bank grade data security and encryption processes. All device logins by AXTON finance enforce mandatory two factor authentication (2FA) and anti malware, anti virus and anti ransomware protection for all of our clients. If you would like to know more about our CRM data security provided through our aggregation partner and licensee please reach out to us for more information.

Our system is near digital from start to finish which helps get your loan approved sooner. This includes super convenient online booking links for online or inperson meetings (like this one here to book an initial consultation), two factor controlled client centres to collect application data and compliance questions as well as various online VOI (verification of ID processes which are great if you are an expat overseas of interstate to us) and docusign processes for alost all loan application and loan offer documents with our panel of over 30 major banks and lenders.

Generally we will have your initial call where one of our experienced brokers will complete a discussion about your highlevel needs. Once we work out that there is a feasible scenario that we can assist you with we will start a digital portal file or update your existing profile with any currently known information before sending to you to complete and review in more detail.

Our secure clients centre is sent to you on email with two factor authentication for you to review and submit back to us prior to your meeting online

We are the absolute experts at answering this question daily but we need to assess a hot of factor to be accurate and reduce the number of unknown unknowns as they say. A quick online borrowing capacity or a so called instant pre approval is rarely a reliable (or responsible) assessment to determine your borrowing capacity. We will take time to cleary understand your position, income sources, equity available, credit history (we can order a free non invasive credit check prior to submission for you) as well as a discussion around yourliving expenses to match what sort of loan limit would be comfortably suitable to you rather than simply securing a massive loan that a lender approves because they say you can ‘afford it’.

Yes rising interest rates will reduce your capacity to service (afford) larger loans. There are multiple ways of being able to improve your borrowing capacity in ways that can responsibly improve how you present to a a lender or bank. Simple tips may include reducing credit card limits or

Chances are you have Googled this term and yes – we can help expat Aussie clients like you. Its a special niche that we can help you navigate successfully and avoid you a whole lot of wasted time trying to deal direct with your bank who may not have a clearly defined or well understood position of their own expat lending policies. Its important to get an expert into your corner. For more detailed introduction to expat lending and the basic parameters please check out this great blog article here and book an online meeting at the end of the post if you would like to discuss further!

We can only arrange mortgage lending for Australian expats against Australian-based property. If the property you own or are looking at purchasing is based overseas then we could only really look at borrowing (cash out) against any equity you have in any property that you may already own in Australia. The balance of any lending against a non-Australian property (eg a property in the USA, Singapore, Europe etc) may need to be arranged by a local broker or lender.

Yes but the term guarantor needs to be clearly understood and the suitability of the structure clearly defined before proceeding further.

Parental guarantees are generally only in the form of equity guarantees only and not servicing guarantees. What does this mean?

Equity Gurantees are the common form of help parents give their children and is formed by ‘pledging’ equity in a property usually the parents owner occupied home or an investment property owned by the parents.

Servicing guarantees are no longer available as it was a form of promise that said Mum and/or Dad will provide personal assurances that they will have enough income to boost the borrowing capacity of their children – this was esentilally stopped many yeartsago but remains an often asked question

Generally speaking, you must be related to the proposed equity guarantor.

In most circumstances, it’s okay to have guarantor support from your mother, father, brother, sister, and sometimes even aunts, uncles and grandparents if the situation is suitable.

A guarantor should be in a sound financial position meaning they should have good equity and have comfortable means to meet their own commitments even if there were a default situation (which of course is usually very rare but possible).

We recommend even if the lender doesn’t that a guarantor should seek independent financial and legal advice to protect their own interests.

Bridging finance is a term often thrown around in client meetings but not many people really understand how this policy works. So lets start at the top and work our way down.

Imagine that you have seen your dream home come up for sale and you haven’t sold your current property yet or even considered selling it yet – then you might need bridging finance.

In its simplest definition, bridging finance is a type of loan that enables you to buy a property and settle it before you sell your current one. So you can buy before you sell!

Bridging finance enables you to fund the purchase price of a ‘to be purchased’ property, usually in its full entirety plus closing costs (ie stamp duty and legal costs) and allows you to keep your current property and sell it within a reasonably short time frame (less than six months ideally). The lender charges you interest on the bridging loan and adds it to the balance each month until you pay it down with the sale proceeds of your existing property (less any existing debts/costs).

Let’s look at a simple example. Say you own your current home worth $1.0m and you owe $500k to the bank already (a 50% LVR / Loan to Valuation Ratio), you haven’t sold it and you might not even have it on the market yet, and you want to buy an amazing new home that you have seen for $1.5m – you might need bridging finance.
The purchase price can be funded with a new loan of say $1.6m to say cover stamp duty. At peak, you will owe $500k (existing) plus the $1.6m so call it $2.1m owing. If you have any cash deposit you could use it to reduce the total loan size required.

This $2.1m loan does not usually need you to make monthly repayments on the bridging component (ie the $1.6m loan) but you do need to keep repayments up to date on your current home loan. Interest however does accrue daily on the bridging loan component and is added monthly to the balance. This can get pretty expensive if you are in a bridging position for too long.

Of course, the main pro of this structure is you might be able to buy a property before you sell and minimise the risk of having to move twice if you sell first and can’t find your next home before the settlement of your current home. Furthermore, lenders will give you a loan size (in the short term) much larger than what your income might otherwise support to hold both properties for a period of time.

So what are the cons – well to be honest there can be a few and this list is by no means totally exhaustive so lets go through them;

Market Risks – without doubt, the biggest risk of using bridging finance is mainly around factoring in that you may not sell your current property in time or be forced into a situation that makes you accept a lower price than you might have otherwise been happy to accept. A falling market can be a risky place to be in a bridging finance position so being realistic in what you would sell for is an absolute must.

Costs – like any mortgage interest is calculated daily and charged monthly. With a bridging loan is the same but a little different. You must keep repayments up to your existing loan balance (or a calculator whereby the lender works out what the approximate loan balance will be at the end of the bridging period). The bridging loan interest is still calculated daily (usually at a higher rate) and the interest is added to the loan balance each month and paid out with the sale proceeds at the end of the transaction.

Timing – most lenders will want you to be in a bridging finance position for not more than six months and in some limited cases up to 12 months. But remember a bridging loan is usually a very large sum of money that you have borrowed and while you may not need to make monthly repayments the interest accruing could be adding up quite quickly.

The good news is that if you can negotiate a longer settlement on the property you have just purchased you might not need bridging finance for a very long time frame or at all. This is because bridging finance only kicks in from the settlement date of the purchase property. We can help inform you of what sort of solutions and purchase negotiations might work as an alternative to bridging finance that could help save you a lot of money and stress.

Market conditions – bridging finance favour certain market conditions better than others. As a general rule, a declining property market could be risky if you are using bridging finance and you have purchased before you sell. If the sale of your property takes longer than you anticipated and you are unable to meet market conditions the sale price you might be able to secure as the weeks and months roll on could be accelerating down to your detriment. Conversely, in a rising market, the opposite can be true – you bought a nice new expensive home before prices take off and you are selling your old home in an environment that favours you as a vendor. There is a degree of luck to this so it might not be for the faint-hearted unless you go into a structure with your eyes completely open.

Deposit – so we have identified that bridging finance might be an option but you need a cash deposit to secure your new home on the auction day! This is often an overlooked consideration by many buyers – but doesn’t the bank just give it to you I hear you ask? Not quite – you need to have finance approved to release equity against your current property first to release the deposit required (if you don’t have sufficient cash) or utilise redraw or offset funds to pay the required deposit. Increasingly we are seeing vendors accepting deposits less than the standard ten per cent deposit with five per cent becoming more common especially to bring more bidders to an auction or to accommodate a buyer like yourself who may be interested in trading up to a new property using bridging finance.
There are also options outside of using a cash deposit that we can discuss with you like using a deposit bond (basically an insurance bond issued by a reputable insurance company), a bank guarantee (increasingly rare these days), as well as a few other options that we can discuss with you.

Servicing requirements – this is just mortgage jargon for ‘can you afford the loan’. Lenders have a myriad of metrics that they assess your capacity to meet repayments when interest rates rise. With bridging finance there are a few extra variables to consider which can stress your ability to ‘afford’ the end debt loan amount once you have sold your current property. These variables relate to lenders applying a discount of usually about 15% of the current valuation of your home to ensure that in a forced event you could actually sell and settle your property which would in this worst case result in a sale proceed being reduced and thus the ultimate loan you require increasing. Furthermore, the lender will add up to twelve months of interest on the bridging loan amount (in addition to the sale price discount) to ensure that the larger loan at the end of an extended period could be closed out and still be affordable. The lender of course will only charge you for interest that you used which is why it pays to minimise a bridging loan time frame. We can help you navigate the ins and outs of how lenders assess this risk and apply it to your personal scenario.

Complexity – not all lenders in the Australian mortgage market are prepared to offer bridging finance and pretty much each lender who does has a different process and assessment policy on how they interpret your structure before they will approve you – lucky for you we are experts at navigating this on your behalf. Many lenders make it a requirement that you are an existing borrower of their institution before they are happy to extend a bridging finance product to you. Because the funding and legal documentation required to be in place for bridging finance is only usually for a short period of time (under six months usually and often just a few weeks) the interest rate charged on the bridging loan component is often not discounted and will likely be at a much higher amount than what your ‘end debt’ loan will be one you have sold your current home. While this might be fine to achieve the property purchase you want, the cost and stress of bridging finance could add up to be a very expensive solution without the right advice.