Sunday, November 17, 2019

MB

Unless you have been hiding under a rock for the past few years and you are still ordering takeaway via the Yellow Pages, you would have heard of Uber Eats, Deliveroo, MenuLog and their fellow meal delivery apps, which have revolutionised how we feed ourselves on splurge nights. 

As a mortgage broker, I can see a lot of similarities between the services I provide and what Uber Eats and their compatriots have to offer. 

Sounds unusual? Hear me out and I will explain... although you won't get a pizza or Pad Thai at the end of it, sorry!

Back in the days, you had to find that elusive phone number in the phone book or search through your collection of pamphlets and menus. Then you would call up the restaurant you felt like eating from, place an order, get dressed and leave the house to pick it up. 

When you arrive, you hope that your food would be ready and that your bag contains the food you actually ordered. By the time you get home to eat your takeaway meal, you then cross your fingers that it is going to taste good. 

What an effort! Sometimes, cooking at home would have been a much simple and faster option... 

Nowadays, all you need to do is open your preferred food delivery app and you have the best of the local restaurants at your fingertips. There is no need to ring around looking for the best deal or trying to figure out which store has a vegan option or caters for those with a nut allergy, because it is all laid out for your ordering pleasure. 

So how does this relate to you getting a home loan?

Think of the process of going direct to the bank to get a loan. Here, you get access to one set of products, you have limited options, with lots of legwork from you to gather the required documentation. 

To compare the loan with other banks, you would need to call or visit each one individually, then sit down and sift through the data you have collected to determine which one was right for you. 

The manager of each bank has a vested interest in securing you as a customer so they are going to emphasise the benefits of their loans while glossing over the pitfalls, leaving you confused. This sounds a lot like old-school takeout orders as I mentioned above. 

Enter the mortgage broker, in his or her cap to save you from all this hassle and potentially a terrible loan - just like Uber Eats saves the hungry hoards from the aforementioned takeaway tango. 

Mortgage brokers are paid by the lender, regardless of which product or institution you choose, so we are not biased in our recommendation. We will lay out all the options like a buffet. We care about the results we get for our clients, because our business thrives on word of mouth and repeat customers - unlike those massive banks who can get away with almost anything and still turn a profit. 

And, we will help you select a product that meets your unique requirements - we take into account everything from interest rates, offsets and redraws, linked credit cards and frequent flyers points - so you won't be the vegetarian living on naan and hot chips because someone forgot that the local Indian does not have any vegetarian curries!

We also offer that thing you cannot put a price on - convenience. Tell us your story once and provide those bank statements and tax returns one time, and you will not have to repeat the same thing every time you meet with a different lender. 

I can't help you with a serve of loaded nachos for two or a salter caramel pudding with homemade ice cream delivered to your door in under 30 mins BUT I can help you find the perfect home loan just as easily and almost as quickly. 

 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

 

home loan

It's been all over the news lately - a brand new scheme from the Federal Government, which will allow first-time homebuyers to purchase a property with as little as a 5 per cent deposit. 

Better still, they'll be able to get their foot on the property ladder without needing to fork out their hard-earned savings on lenders mortgage insurance (LMI). 

The $500 million scheme was a key election promise. However, now that the details of the program are being revealed, it doesn't seem to be the generous leg-up it was hyped to be. 

And as is often the case: if it seems too good to be true, it probably is. 

Here's my take on the First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme (FHLDS) seems like a good idea - at first glance. 

Unlike shared equity schemes we've seen in the past, like HomesVIc, it provides homebuyers with a guarantee against the remaining 15 per cent of their deposit. 

However, I don't know that the program is going to have the impact that first homebuyers hoped for. 

It will be limited to just 10,000 participants per year, on a first-come, first-served basis. With around 110,000 first homebuyers purchasing properties each year, it's barely a drop in the ocean, with less than 10% of buyers able to benefit from this scheme. 

It means that the yearly allocation is likely to be exhausted in mere months, or perhaps even weeks, so it may not even be an option for those looking to buy a property in the latter half of the year. 

How much can you spend under the scheme?

This is where the real issue with this scheme arises. 

First homebuyers should be aware of the price caps that are set with the FHLDS. 

These caps set a limit on the value of the homes you are able to purchase under the scheme. 

At present, these limits are set at just $700,000 for a home in Sydney and $600,00 for a home in Melbourne. This will do practically nothing to help anyone in Sydney - my clients here would be jumping for joy if they could find a decent first-home for sub $700,000. 

It seems a ridiculous, arbitrary amount to set as a cap. You can certainly forget living anywhere near the CBD.

Do you have your deposit ready to go?

Meanwhile, anyone hoping to score one of these elusive 10,000 spots will need their 5 per cent deposit stashed away and accessible, with all their paperwork and supporting documents ready to go, or they risk missing out. 

Another thing to keep in mind is that buying a property with just a 5 per cent deposit, particularly in those markets that are cooling after a massive boom, could be risky. 

Yes, the government is guaranteeing the remaining 15 per cent of your deposit, so you don't need to pay LMI - this is great. But the fact still remains that you've only contributed 5 per cent to the purchase price. You don't have 20 per cent equity, you have 5 per cent equity. House prices don't need to fall very far for you to end up in negative equity, and on the flip side, they'd have to grow pretty darn fast for you to gain any decent ground. And you're not paying back 80 per cent of the purchase price, you're paying 95 per cent, so your repayments could be huge. 

Have you considered the bigger picture?

Something else I've heard bandied around a lot in relation to this scheme is the concern that if you can't save up more than a 5 per cent deposit, can you even really afford to own a home?

I get it: paying rent while saving is hard work, and you're probably forking out close to what your mortgage repayments will be in between rent and savings right now anyway. But owning a home involved more expenses than just the mortgage. 

You'll have council rates to pay, to the tune of a couple of thousand dollars a year, and water rates, too. There is also building insurance and possibly strata or body corporate fees. Things around the home break, and there's no landlord to call to get them fixed. 

My advice? Keep saving. And if you're really keen to get into the property market, speak to your mortgage broker today about your options. With a solid savings plan and some strategies to get ahead financially, you could be well on your way to home ownership, regardless of whether you're successful with the First Home Loan Deposit Scheme or not. 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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