How your spending habits affect your borrowing ability

Figuring out how much you can borrow for a home loan isn't just you telling the bank you can afford the repayments. It's a detailed process where every aspect of your financial life can be scrutinised. They'll want to know all the standard stuff about you like your household income, and other income such as rental or investment. But there's more to the equation than just the basics.

Your existing debts play a crucial role. Car loans, buy-now-pay-later, HECS, credit cards… these will all chip away at your maximum borrowing power. Credit cards in particular can bring your maximum down. Lenders will look at the card limits – not the balance – when assessing your borrowing power.

If you have non-mortgage debt and are thinking about a home loan you can consider paying down your debts and reducing credit card limits or closing credit cards. Speak to us first – if you’re using your saved deposit to close other credit you want to make sure you don’t leave yourself short.

What about my Uber Eats addiction?

Yes, banks care about how you spend. Particularly if you have a smaller deposit, the lender will want to see your spending habits to make sure you aren’t putting half your pay on race 4 at Flemington every Saturday. If you’re an Uber Eats fan and have excessive transactions on your statement this could hint to the lender that you aren’t super responsible with your spending. It’s beneficial to your bank statement regularly to see where your money is going. Uber Eats, Afterpay, Streaming Services, and eating out can quietly accumulate over time. Even if you aren’t applying for a loan, reviewing your spending is a good financial habit to be in.

In the end, getting a mortgage isn't just about numbers on a page. Part of it is proving to the bank that you're financially responsible and ready to take on the challenge. So, get wise, tighten your budget, and talk to us for advice on how to get into your home sooner.

Home loans for older borrowers

There is no such thing as “too old” to get a home loan, however older borrowers should know that they may be subject to more scrutiny and other restrictions.

If you’re in your 50s or thereabouts and thinking about taking out a mortgage you may have some questions.  A typical mortgage is 30 years, and unless you plan on work beyond 80 you will need a plan! Below are some things to take into account if you are an older borrower considering a loan.

1. The easiest approach, if you can afford it, is to shorten the loan term.  For instance, if you are 55 years old and planning on retiring at 70, taking out a 15 year loan term rather than a 30 year loan term will be seen favourably by most lenders. Having a shorter loan term will mean higher repayments, so you will need to show that you can manage higher repayments. 

2. If you have a strong asset position including superannuation this can help show the lender that you can manage the loan at retirement. If there are assets that can be sold at retirement to clear the loan, or income generating assets that can help you manage repayments post-retirement this will all be considered.

3. You might consider buying with a family member.  Dual occupancy homes are increasingly popular for this type of scenario, particularly where older borrowers live in the same property as their adult children. With combined incomes it can be easier to show the lender your ability to repay.

4. Ensure you have clearly thought through how you intend on manage exiting the loan at retirement, if your planned retirement age is prior to the loan term. If you can demonstrate a clear plan to the lender it will give them comfort that they won’t be left exposed as you approach your retirement age.

Remember also, the bigger the deposit the lower the risk from the lender point of view.

A good mortgage broker like Blackwattle Finance will help you to understand what is achievable, which lenders are best suited to your needs, and how to show the lender how you will manage retirement. Get in touch with us to learn more.

Refinance case study: one conversation could save you $141,759

You might be surprised at the potential savings from refinancing your home loan. Emily and Jack bought their first home in Rozelle six years ago and had not reviewed their home loan since then. However, with recent changes to the market, they were now ready to discuss refinancing.

We looked at their financial position and discussed their goals. They were looking for a lower interest rate, better online services, to pay down their loan sooner and consolidate debts. Comparing over 30 lenders we were able to select a loan tailored to their needs and objectives.

We selected a loan with a lower interest rate, minimal fees, an offset account and redraw facility.  The offset account works for Emily and Jack as they both earn an annual bonus, and putting the bonus income in the offset will allow them to pay off their loan sooner by reducing the interest payable.

When we refinanced the mortgage, Emily and Jack also took the opportunity to consolidate their debts. By borrowing an additional $25,000 they were able to clear and close their credit card and car loan. This had the benefit of reducing their overall monthly loan repayments, and an additional benefit of streamlining their finances as they only had to manage the one monthly repayment. The lender we selected has an excellent online banking portal - something that was very important to Emily and Jack.

We selected a low interest rate with a $4,000 cash back incentive to maximise savings. With their $1,200,000 mortgage this refinance will save them an incredible $8,725.36 in the first 12 months, and a total savings of $144,759,000 over the life of the 30 year loan*. This savings, achieved purely by refinancing, allows Jack and Emily to pay off their mortgage sooner, a primary financial objective when we first spoke.

We are up to date with the latest market information and are committed to finding you the best possible rate. If you want to chat about the refinance options available to you, contact Garreth today on 0414 444 683.

*Interest rates are not fixed and will vary in accordance with the market.

Expert advice from a broker committed to finding the best solutions for your needs

Why use a mortgage broker?

Currently 60% of all home loans are originated through mortgage brokers.  To some, this might seem surprising.  The role of a broker is sometimes misunderstood - particularly by those who haven’t used one before.  There are lots of good reasons why so many people use a broker to secure a home loan.

Probably the most important one that is that brokers work for you, not the banks. Brokers are an agent for you to make sure you get the best possible loan and at the best possible cost.  Brokers help you decide on the best approach, help you with choosing which option to take, and then manage the application process right through to settlement and beyond.

WHAT DOES A MORTGAGE BROKER DO?

A broker is an intermediary between you and lenders.  The broker’s role is to understand your needs and objectives, and then use their expertise of the mortgage market to find the best option for you.  A broker will have access to a range of lenders and hundreds of products and will be able to match you with the best loan product for your individual circumstances.  They will manage the application process on your behalf and liaise with the bank all the way through to settlement.  They will also negotiate on your behalf to get the best possible deal on your loan. 

For a lot of people, the process of applying for a loan can be overwhelming.  Others may be time poor and find it easier to allow a trusted advisor to manage the process.  Most like the comfort of knowing that a professional is in their corner when they are making such a big commitment.

HOW DO BROKERS GET PAID?

Most finance brokers do not charge you a fee for a standard mortgage loan.  Brokers receive a commission from the lender you choose for referring your business to them.  Banks and lenders across Australia pay very similar commission fees.  There is also usually an ongoing small fee that lender pays to the broker – this is for the broker to continue to assist and support you for the life of your loan. 

There is no premium or penalty for using a mortgage broker.  There are no additional fees, charges, or interest for taking a loan that was introduced to the lender via a broker. 

PROFESSIONAL CREDIT ASSISTANCE

The broking industry is regulated by ASIC and any consumer credit assistance under the National Consumer Credit Protection Act (NCCP).  Brokers are bound to act in the best interests of their customers under Best Interest Duties legislation.  They are required to either hold a credit licence or be a representative of a licensee.  Brokers must complete minimum education requirements, must be insured, and must be a member of one of the industry bodies to operate. 

BLACKWATTLE FINANCE – WHY CHOOSE US?

We pride ourselves on going above and beyond.  We will research all avenues to ensure you receive the best possible credit advice.  We make things as simple as we can and as easy for you as possible.  We’ll provide you with updates and advice and ensure you are aware of each step of the loan process so you are informed.

When you get your approval, or when you pick up the keys on your new place, we are just as excited as you.  We love to build lasting relationships and enjoy the process with our customers.  We hope you choose us to help with your next purchase!