Browse Forums Home Finance 1 Sep 08, 2012 2:08 pm Hey guys. We are looking at possibly putting a bid on a house in the near future, which is something we've never done before. I've been looking at mortgages, and it is a little confusing to be honest. My first issue is what I need to prepare before we actually put an offer on a house. I thought you simply had to be pre-approved for a loan, but apparently I now hear that getting pre-approved does not do much and they can still reject you etc. There is no reason why we would not get approved (both working full time for a continuous 3+ years, no debts etc), so could we maybe wait until we actually get an offer approved before we apply for a loan? Not sure if we would get in trouble (extra fees) if we do have problems getting the loan (or getting it quick enough) is all, we really have no idea how this works. Secondly, as for the actual loan, I was hoping to get some recommendations for good lenders that we can have a closer look at. What we would ideally like in a loan is as follow: *Low interest rates is obviously main priority. *We'd probably like to lock in the interest rate for 3 years or so, just so we don't have to worry about interest rates for now. *We will have somewhere between 5-10% deposit, so we will have to pay mortgage insurance. If I understand this correctly, some banks have (slightly) lower fees for these things for first home owners etc, so the lower the better obviously. *I think this is the norm, but we want the mortgage insurance to end up on top of the loan (and not be taken from the deposit). *We will take a loan over 25-30 years, however, we will aim to pay it over 15 years or so. Basically we just want to be able to add extra money on the loan without any penalties or fees. We do not need the ability to pay it faster than 15years, that is really a best case scenario. *We want to be able to withdraw money from the loan when needed (ie the money that we are "ahead" on the loan we should be able to access if we need to). So yeah, any loans you guys can recommend? Looks like the interest for the cheapest mortgages will be around 5.8-6% from what I can tell, does that sound about right or have I missed something? Would also be good if you had some other pointers for things we should beware of when looking at which lender to go with, I'm sure there are many small conditions that are easy to miss. We are currently saving up for the deposit at a uBank account, and a quick look at mortgage interest rates for different banks puts uBank at the top, so we'd be fine with going with them as long as they have good conditions and are not too difficult to deal with. I guess what I'm trying to say is that we have no need to strictly go with the big 4 is all, as long as whoever we chose has a decent reputation. I know uBank is part of NAB, but it's still different Thanks for all the help. Re: First house - mortgage questions 2Sep 08, 2012 3:20 pm Hi tompab You can enter into a contract of sale subject to finance approval (usually 14 days but you can negotiate longer if required). From what you described: ability to service loan is good, you are creating saving history and 5-10 % deposit is in the ballpark. Loan should be a walk in the park for you providing there is no bad credit history. I would still get pre approval, then at least you have confirmed your basics. If you have any small debts you can clear that would be good and get all your paperwork in order: wage slips, employment record etc. Foremost Building Expert in Australia,assisting with building problems/disputes, building stage inspections,pre-contract review advice for peace of mind 200 blogs http://www.buildingexpert.net.au/blog Re: First house - mortgage questions 3Sep 08, 2012 3:40 pm You mentioned bidding. Do you mean at auction? If so you'll need to get the bank to do an evaluation first to ensure you don't overbid then not get the loan. As mentioned you can get bank approval in the cooling off period (NSW). Whenm setting up your loan get an offset account (not a redraw). You puty extra payments into that which reduces your interest. The difference is that with an offset the money is yours to withdraw anytime you like. With a redraw you ASK the bank if you can redraw the money. Also should you ever decide to make it into an investment oproperty you can withdraw your money and the loan is tax deductable. Re: First house - mortgage questions 4Sep 08, 2012 3:53 pm tompab, will try and answer your questions. First, you don't need any type of pre-approval to buy a property if you wish. However people do it to try and gauge whether they will have a good chance of obtaining the loan. Only when going down this path, you need to make sure you go to a lender that does a "full" pre-approval and not just one which does credit scoring only (which is basically worthless). As building-expert above mentioned, when signing a contract of sale, have them enter a clause "subject to financial approval" for a period of at least 14 days. This allows you to exit the contract without penalty if for some reason the loan isn't unconditionally approved. This can only however be done for a private sale and not an auction. As for the loan, if you go for fixed rates, not a real good way to go if you want to add extra repayments at will. At best lenders will only allow a certain amount before penalties apply. Also won't be able to redraw (withdraw) money during a fixed rate period, though an offset is a better option (though it also can't be used during a fixed rate period). In terms of LMI, yes it can be capatilised on the loan. As a broker I don't know much about uBank as its a web only based product, but I think their maximum LVR is 80%, so you would need at least 20% deposit. You also need to keep in mind costs for stamp duty, etc to complete the purchase. Cheers, Tom Re: First house - mortgage questions 5Sep 08, 2012 11:24 pm Thanks guys. No plans for any auction, when I said "bid", maybe "offer" would have been a better word I had no idea that you could not withdraw money on a fixed rate loan. That kind of sucks, but at least it narrows down the options a bit as we definitely want the option to be able to pay extra and withdraw when needed. Someone else mentioned having part of the loan fixed and part of the loan variable, which might be an option though. We are in queensland, so no stamp duty as it is our first house. Re: First house - mortgage questions 6Sep 09, 2012 3:58 pm tompab, as mentioned by travelbug, if getting a variable rate, look at getting an offset account linked to your home loan instead of relying on redraw. An offset account is basically a normal transaction account which you place excess funds, i.e salaries, etc, and it saves you the same amount of interest if not more as if you were paying extra into the loan account. As it is a transaction account, it also allows you to withdraw whenever you want, and it can be beneficial in the future for taxation purposes depending on what you do with your property. Loan structure is just as important if not more as looking for the best product. A decent broker should be able to do this for you depending on your goals. Cheers Tom hi guys. Please be nice. First time home builder in Qld. I would like some feedback please on whether I should build my granny flat first before my main house at the… 0 4485 Personally, considering your layout (study/work desks in bedrooms), I don't think you have any other option but to leave NW windows and make them as big as possible e.g.… 7 10415 We had this happen to us last year and got charged a variation. Try and give away as much as you can that is usable to charity otherwise if you are in Sydney I have a… 1 4464 |