Why you need a broker

Choosing the wrong lender or the wrong loan can cost you thousands of dollars - or worse you could miss out on the property you want even though you can afford it.

With hundreds of loan products available to borrowers it really  is important you get help from someone experienced at finding a way through the lending maze.

A good finance adviser should be able to identify your needs and match you with a lender who can give you what you want.

There is much more to choosing a loan than just the interest rate.

What the bank manager won't tell you

Each lender has different lending rules. They change often.  What was once ok, may not be any longer.

If your bank manager tells you that you can’t afford a loan, it may simply mean you don’t suit the bank’s lending guidelines. And, you can bet your bottom dollar, she won’t tell you to head across the road to another lender whose guidelines might suit you.

By the way, in the time it’s taken her to tell you this, the finance clause on the purchase contract has probably expired, or you have been gazumped! You’ve lost the property you wanted

Matching a borrower to the right lender is vital to avoid delays and disappointment.

The Key Differences

The key differences between lenders include:

1. The Assessment Rate: This is the interest rate at which a lender assesses your ability to repay a new loan. It is always 1 – 2 percent above the rate you will actually pay and every assessment rate is different.  But lender's have different assessment rates choosing the right one can mean the difference between getting a loan over the line and failing.

2. Debt on Other Property: Some lenders will apply their assessment rate to debt on other properties you own. Others will accept the actual interest rate you are paying. This can be very important for property investors.

Say you have a loan on a five year fixed rate of 6,99%. Having a lender apply an assessment rate of 10.8% to the debt could dramatically reduce your borrowing capacity.

3. Rental Income: Lenders add a portion of the rent from your investment properties to your income to assess your ability to repay a new loan. The portion varies between 75% and 100%. Obviously, your position looks a lot better if the lender uses more of your rent.

4. Negative Gearing: When establishing how much you earn some lenders will take account of negative gearing benefits. Others won’t.

5. Low Doc Loans: Some lenders charge exactly the same for Low Doc Loans as they do for Full-Doc Loans. Others charge a higher rate.

6. Lender’s Mortgage Insurance: Most lenders will charge lender’s mortgage insurance if you borrow more than 80% of the value of a property on a Full Doc loan. However, it is possible to borrow up to 85% without paying LMI  if you know where to look. There are lenders who will let you capitalise LMI over 80%. Others will only allow you to capitalise it to 80%.

7. Company/Trust Structures: Some lenders will provide loans to all company/trust structures. Others are selective.

It is not possible for the average borrower to know or understand the myriad rules imposed by lenders. And, as said, your local bank manager won’t tell you.

To ensure you make a loan application to the right lender and obtain the right interest rate and conditions you need to talk to the right finance advisor. You will find one by calling Finding Finance 1300 729 075

Or submitting an online enquiry

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