All posts by Obu Ramaraj

About Obu Ramaraj

Obu Ramaraj has been a mortgage broker since 2009. She has written over $80 million dollars of loans and still maintains a personal touch to all her clients, no matter how small or big your deal is because she enjoys helping people achieve their dream of buying their own property. By sharing her knowledge and experience she hopes to instil confidence in anyone looking for a home loan. Her attention to detail and drive to achieve the best result for each and every client are enviable assets in the home loan industry. Obu is passionate about helping all home buyers feel comfortable with the property buying process; however her strongest passion is to help more people become self-assured property buyers. Her goal is to increase their financial awareness and have more people buying houses from a very early age, comfortable in the knowledge that they have made the right choice for their circumstances.

Are you an accountant, lawyer or engineer?

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Did you know that banks offer special discounts and benefits to doctors for home loans? Yes, they have had special treatment from the banks for a while now.

But with our special relationship with lenders, the following professions are now eligible for special benefits too:

  • Accountants
  • Lawyers and solicitors
  • Certain kinds of engineers
  • Auditors
  • Actuaries

Of course, you need to satisfy certain criteria to qualify for these benefits.

What are the benefits?

Generally, you pay lenders mortgage insurance or LMI when you borrow above 80%. But if you belong to any one of the professions above, you may be eligible to borrow up to 90% without having to pay LMI. This is because banks consider these professionals to be of lower risk.

Lenders also offer better interest rate discounts to these professionals – savings that is better off in your pocket.

Just to give you an idea, if you were purchasing a $500,000 property, you could save around $10,800 in LMI. Just think about all the things you could do with the savings..

If you would like to know more, please call us on (03) 9005 3983 so we can help you save $$$.

 

New construction and valuation shortfall

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new-construction-homes

So, you’ve bought land and now you are in the process of getting building contracts sorted to get going with the construction and build your dream home. Your lender or broker comes back with the bad news that your valuation has come short of the contract price.

This could be your worst nightmare and one that is too common when you decide to purchase a house and land package especially in the newer suburbs where a lot of construction happens!

Land developers tend to inflate the price of the land and they incentivise the general public to purchase these land by offering a rebate of say $5,000 or $10,000. Lenders are generally aware of such rebates and when they value the land, they take into account the rebates on offer and sometimes, the land is valued even lower.

When you go into any display home of a builder, you get offered the basic package. But BEWARE! That is the first step to you making many upgrades – upgrades to kitchen appliances, color, facade and this and that. By the time you know, you have spent nearly $20,000 or more in upgrades. But what happens when the contract is sent to the bank? Lenders often come up with a value less than the upgrades.

Have you wondered why this is the case? When a lender values your house to approve the loan, the valuer takes into account other properties in the surrounding suburb that have been sold in the recent months. Comparing apples with apples, they come up with a value for your property – whether established or new. So they may not take into account every light globe or extra money you have paid for a special feature. While this may be precious to you, the valuer will only consider the price that anyone will pay should they re-possess the house from you (assuming you can’t make the mortgage repayments anymore!) and want to on-sell it.

So, you really need to be aware that valuation shortfalls can happen with house and land constructions.

What do you do if it happens to you?

Assuming your loan is facilitated by a good mortgage broker, the broker can then compare valuations with other banks to see if there is a possibility of higher valuation with any other bank. Depending on whether you can borrow with that bank, you now may have an option to choose a different lender.

Fixed rates vs Variable rates – pros and cons

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Houses

 

Fixed rates are at an all time historic low and it could be a good time to consider three to five year fixed rates.

But have you always wondered what the pros and cons are of choosing fixed rates over variable rates or vice versa? Here are some considerations for you..

Fixed rates – pros

  • You know exactly how much your weekly, fortnightly, monthly repayments will be for the term of the fixed rate and hence budgeting is easier.
  • When fixed interest rates are low, it makes it favourable.

Fixed rates – cons

  • Break costs can be very high – if you want to pay off your loan or move banks, you may end up paying thousands of dollars.
  • There is a limit on how much extra you can contribute during fixed term. Some banks allow $10,000 extra contribution per year (during the fixed term) and some may allow $30,000 during fixed term. This depends on the bank and you need to check it with your lender or your broker.
  • Offset account is usually not a fully offset account – some banks allow partial offset. So, if you have a lot of surplus cash, fixed rates may not be the right loan. One way to overcome this is to have a split loan with variable and fixed interest rate loans.
  • Banks usually will not let you redraw the extra amount you have contributed into your fixed rate loan.
  • Fixed Interest rate without a package are generally expensive. So, even if you have an offset account and pay the annual package fee, you may not be allowed to offset too much surplus cash!

If you think you may want to redraw or contribute extra surplus cash or extract equity, but still want to enjoy the benefits of the low fixed interest rate, it is still possible! We can show you how it can be structured for your benefit.

When you consider fixed rates, you have an option to rate lock the fixed interest rate by paying fees (generally, pay 0.15% of the loan amount) to lock the rate for up to 90 days. This is possible only once you have found a property and signed a contract of sale. Banks will not let you rate lock for pre-approvals. If you decide not  to pay the fee, your fixed interest rate will be as on the day of settlement.

Variable rate – pros

  • As the interest rates go up or down, so will your interest rate – minus the interest rate discount you were entitled to when you originally signed up.
  • You can usually make unlimited additional repayments without a penalty – either directly into your home loan or into your offset account.
  • You have access to the surplus funds deposited into the home loan as redraw.
  • You have an option to move banks or even discharge your loan when you choose variable rate without incurring a heavy penalty.

Variable rate – cons

  • When interest rates sky rocket, you may regret not fixing your loan for a lower interest rate!

While you do have the choice to change from one to the other, before you choose an option you need to understand the pros and cons of each and also the fees involved. To switch from a variable rate to a fixed rate might only cost you a small variation fee, whereas to move from a fixed rate to a variable rate can cost you thousands depending on the balance of the loan term.

Borrowing with non-genuine savings

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What is non-genuine savings?

Non-genuine savings, in terms of a deposit for a home loan is any money that has not been saved over a period of at least three months from the income you earn. For example, it could be a gift from parents or money that has not been in your account for three months.

Can I get a loan with non-genuine savings?

Mainstream lenders will usually ask for genuine savings because it gives them comfort to know that you can save money from what you earn and hence also make monthly repayments on your home loan. However, there are certain lenders who will accept your deposit even if it is a gift from your parents.

How much can I borrow with non-genuine savings?

Usually, you can borrow up to 90% of the property price regardless of the source of deposit. There are two or three lenders who will lend you 90%. If you want to borrow up to 95% with non-genuine savings, there are a couple of lenders who will consider it. However, the assessment criteria will be much stricter and lenders may or may not allow the lenders mortgage insurance (LMI) to be capitalised on the home loan; i.e. loan needs to be 95% including LMI.

Criteria to borrow 90%

  • Your credit history must be clear, how ever some small paid defaults (utility and telco) may be considered on a case by case basis.
  • You should have been working in your current job for six months or more. You must also have worked in a similar industry for two years prior the new job.
  • The purpose of the loan must be purchase, refinance or construction.
  • You must have been paying your bills on time every time (personal loans, credit card, rent, utility and so on)
  • You must be earning enough income to afford the loan.

Criteria to borrow 95%

  • Your credit history must be clear, how ever some small paid defaults (utility and telco) may be considered on a case by case basis.
  • You should have been working in your current job for six months or more. You must also have worked in a similar industry for two years prior the new job.
  • The purpose of the loan must be purchase, refinance or construction.
  • You must have been paying your bills on time every time (personal loans, credit card, rent, utility and so on)
  • You must be earning enough income to afford the loan.
  • The location and kind of property also determine the ability to borrow 95% with your non-genuine savings. For e.g., the property cannot be in a high density / high rise building, regional or remote area.
  • Your current debts need to be less in order to be considered favourably.

If you would like to know more or discuss about non-genuine savings, please contact us on (03) 9005 3983 or send us an online enquiry.

Forgot to pay your bills?

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Forgot to pay your bills_001

Yesterday I got a call from a prospective client asking for help. I usually don’t get too many calls for this kind of help. Apparently, the telco company had charged him too much for what my client didn’t use and he didn’t want to pay the bill last year. He forgot all about this until a few weeks ago when he decided to apply for a home loan and voila! the news was pretty shocking to him. There was a default on his credit file lodged by the telco.

So like any good person, he paid the bill and called the company to see if they can help him get his home loan by removing the default. Not only were they rude, but they refused to help him out, as he was no longer their customer!

I see this every now and then – defaults sometimes happen when there is a lease in one person’s name and friends then move in and the original person fails to transfer the lease into the friend’s name and friends of friends finally forget (conveniently) to pay the rent! Or it could be a case like my client in the scenario above.

What options does my client have? He could try a few things here:

1. Well, he could go to the Ombudsman if he knows he is in the right and ask them to help him sort it out with the telco.

2. He could use the services of a default removal specialist to see if he can get the default off his credit file now, rather than wait for the next five or seven years when it will automatically drop out of his file.

3. He could approach a lender who will approve his loan with a small paid default (of course, with the right explanation as to whose fault it was and why it happened). Sometimes, he may be able to get a reasonable interest rate and at other times, he may have to pay an extra percentage to get his loan approved.

He can also choose to get out the contract until he sorts out his credit file, if he wanted to! But if it was a really good deal, then he can try one or more of the options above.

Have you experienced something similar (you or friends)? If so, please share how you sorted it out.