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What is A Low Doc Home Loan and How Can It Help Me?

What is a low doc home loan? First of all, it’s proper name is low documentation or low documentation. It’s the type of mortgage that can be secured with different paperwork versus a full documentation loan.

While there may be plenty of people who benefit from this type of home loan, it’s particularly useful if you are self-employed. This might be the alternative loan option for you if you don’t have the traditional documents that lenders request, which is why it may benefit self-employed individuals. Typically, the self-employed find it more difficult to provide proof of income with standard documents. That doesn’t mean self-employed people should be kept from climbing the housing ladder.

The Low Down

Previously, low doc loans were exactly that, a mortgage you could take out with fewer documents. Once the global financial crisis struck, however, the lending rules tightened changing everything. It was no longer acceptable to lend to people with low documentation.

After the crisis, the National Consumer Credit Regulations were introduced in 2009, providing a challenge to how low doc loans operate. The biggest piece of the puzzle is that lenders can’t lend unless they meet the lender’s responsible lending obligations.

What does that mean today when it’s in action?

It means that every loan must pass the test showing the borrower can manage loan repayments. Due to these rule changes, the low doc loan became similar to a traditional full doc loan. The biggest difference isn’t the number of documents, but the type of documentation that can be used to satisfy the rules. Thus it’s new name the low doc loan! You will still have to produce a wealth of documentation, but a lender can be more flexible in what type of documentation they accept from potential borrowers.

For example, if you are dealing with a non-bank lender like Seek Mortgages and you are unable to produce up-to-date tax returns, there are other documents you can use to support your application. Non-bank lenders will look at your business activity statements, bank account statements, whether you’re business has been GST or ABN registered for 6 months at the least, and an accountant’s letter.

Of course, there are a variety of different products to peruse when considering a home loan and each of these will require different supporting documentation. This is why it’s important that you reach out and speak to the professionals who will guide you to the right home loan for you, whether you’re self-employed or otherwise. Contact us if you would like advice or just to learn more about what type of products may be suitable for you. We are happy to walk you through the documents you have, talk about what documents you might need, or which loan is more appropriate for your needs and available documentation.

If you want more information about low doc home loans, then get in touch with us today and allow us to find you a lender that will help you even if the major banks have said no.

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Top Tips To Save A Larger Home Deposit

If you are thinking about purchasing your first home, then the knowledge that a 20% deposit is required can be overwhelming. That’s a lot and it takes time to save up that kind of money. It’s not all bad news, though, there are non-bank lenders like Seek Mortgages who can work with a deposit as little as 5% of the property’s purchase price. Of course, the higher your deposit, the more likely you will be successful in securing a home. However, let’s talk about how you can get your deposit saved up as quickly as possible.

The Budget

First things first, you have to decide how much money you can afford to put aside each month. There are online calculators to provide you with information on repayments based on the purchase price of the property and your deposit amount. That will give you a good idea of what type of deposit you will need to get a mortgage you can afford. There’s your target deposit.

The Aim

There are benefits to saving a larger deposit, from smaller monthly mortgage payments to your money-saving skills meaning you will need a smaller loan. A smaller loan means less interest to repay! It really is a win-win.

If you do save a 20% deposit, then you’ll avoid paying Lenders mortgage insurance costs. This fee is payable if you’re borrowing and having less than 20% deposit saved. Of course, a larger deposit also means you’re likely to secure a better interest rate. All in all, you save more in the long-term by saving more for your deposit now.

That covers why you should aim to save for a 20% deposit, but let’s get to the how.

Track & Budget

Do you know where every penny you spend each month goes? It’s time to start tracking it. There are plenty of apps that will help you keep track of your spending, if you use online banking and have an app, it may offer a breakdown. Start paying attention to what you spend and make a budget to tighten things up.

Savings Amount

Settle on an appropriate percentage of your monthly income to save monthly and commit to doing so. You should have enough to pay your bills and cover daily expenses and sock the rest away. How much of your monthly income should you sock away? If possible, 20%, but you will have to decide for yourself.

Show Your Work

You should use a separate savings account so you can show lenders you have a consistent history of contributing to your savings. Ultimately, lenders want to know you manage money well and you can show that by having a separate account.

If you would like to learn more about how much deposit you need and what options you have if you’re planning on less than 20% deposit, get in touch with us to discuss how we can help.

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The Top 7 Things You Need to Know As a New Homebuyer

Better Positioned With A Bigger Deposit

It’s possible to find a lender who will provide you with a low-deposit loan if you have saved less than 5% deposit. However, there are major benefits that come from saving for that magic 20% deposit.

The 20% deposit will win you a wide pool of products and potential lenders.

A higher deposit means a lower loan amount.

A 20% deposit highlights your ability to manage money, which is one of the most important things lenders look at.

There are still options for you if you’re working with less than a 20% deposit, but they tend to be subject to Lenders Mortgage Insurance, which just adds more fees and checklists.

Pay Attention To Your Credit

Your credit rating will be used by potential lenders to judge your suitability for a loan. Non-bank lenders, however, review your total situation so your credit rating isn’t always the most important thing when it comes to securing the loan. It still matters, though, in any situation.

A credit score is linked to home loan application success. This is why it’s important to understand your credit rating and what goes into making it up. First things first, get a copy of your credit report and review your rating. You can review whether there are defaults against your name, mistakes in the information or someone else has secured credit using your information. If you catch any mistakes, you should rectify them immediately.

The Bottom Line

At this point, you likely know where you plan to buy and how much you are going to spend. Now is the time to determine how much you can afford to borrow reasonably. There are a variety of fees to consider, including legal fees, lender protection fees, and stamp duty.

Take your current situation into consideration, as well as income, expenses, dependents, and upcoming lifestyle changes.

Don't Sign Up If It Doesn't Fit

There is a lot to consider in terms of home loans, it goes beyond interest rates. There is a lot to consider and it’s important you understand what is right for you and if a home loan doesn’t fit, then you shouldn’t be signing up for it.

Research Hard

Research is going to be your best friend. The difference between dodgy deals and hidden diamonds is going to be down to your market knowledge. Something you can increase by doing your research. The more you learn about the market and where you’re buying the better off you’ll be. Take a look at the amenities, transport options, schools, rental returns, and the average house price over the last decade or so. You want to know the area and be sure it provides you with the lifestyle you want and offers the opportunity for growth.

Investment Opportunities

Sometimes the greatest property growth locations aren’t the up and coming suburbs. They’re the ones right next door. It’s a cheaper entry point that provides you with development potential. Likewise, if you plan to buy a brand new property or one that has been recently renovated, you’re going to pay a premium. While a lived-in home as is might not be as pretty, it’s better value. Plus, you can add your own personal touches and put your stamp on things properly.

Don't Bid Without Finance

If you are buying at auction, know there is no cooling-off period. If you make a bid and it’s accepted, the deal is done. If you haven’t received finance approval you are putting yourself in a dangerous position. Be safe and don’t make any moves until you have a letter of finance in your possess. Once you have approval you can negotiate without worry.

For first time buyers, these tips will be important if you want to make a savvy purchase. If you would like to learn more, get in touch with us to discuss your needs, circumstances, and options.

 

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Is Bad Credit a Total Barrier To A Home Loan?

There is a litany of reasons why your finances may have spiralled out of control. It may be a major issue like redundancy, chronic illness, acute illness, or divorce. It could also have been a one-off where you were overwhelmed by life and missed a payment that left a mark against your name. Whatever the cause, the result is always the same – you get lumped into the bad credit category. Even if you dig your way out of the hole and fix default payments or pay overdue bills, that black mark still stands against your name. So, while you view your credit clear because you have dealt with dealt, lenders might not look at it so kindly.

If that’s the situation you find yourself in now, then you might be feeling overwhelmed. Let us help you tackle the bad credit blues and help you figure out where you are now and where you stand for loans in the future.

What Is Bad Credit?

You may have told someone you have bad credit without understanding what that means. Essentially, bad credit is when you have a history of missing payments. The result of bad credit is that you will not find it easy to get approved for new credit or loans. Lenders tend to avoid people with poor credit histories because they are high-risk. Ultimately, lenders will be concerned about your ability to make repayments on the loan they furnish you with. If you have shown you regularly miss loan repayments or otherwise, then you aren’t necessarily someone who ticks the boxes they want to tick before they offer loans.

How Does Someone Get A Bad Credit Record?

There are several factors that contribute to bad credit.

  • Unpaid loan payments or bills
  • Exceeding your limit (credit cards or bank account)
  • A divorce/separation/breakup that has left you in debt
  • A debt agreement (part 9 or 10)
  • Taking unpaid time off work, whether due to illness or otherwise
  • Credit defaults registered against your name
  • Too many potential lenders running credit checks against your name

Do I have a Bad Credit Record?

The reality of the situation is that you probably don’t know if your credit record is bad unless you a) know you have a history of missed payments or b) have recently applied for credit or a loan. That’s generally when people receive the news that lenders have labelled them as non-conforming. You don’t meet the lending rules and it doesn’t matter whether you had major credit issues or accidental ones, you’re high-risk and that is that.

What's Next?

There is good news for you. There are non-bank lenders who may be able to help. Non-bank lenders offer a human touch to the work they do and recognise that sometimes there are circumstances beyond our control that result in credit issues. When you deal with a non-bank lender, you will speak to someone one-on-one as they learn more about your situation to find a solution that works for you.

If you have been rejected for a home loan due to bad credit, then it’s not over! You don’t have to wait to reapply either. There are options.

There are plenty of non-bank lenders like Seek Mortgages who can help. Likely, you will find a specialist loan that is suitable for your circumstances.

If you want more information about securing a home loan, then contact us to learn more about your options.

5 Top Tips For Sorting Out A Home Loan Application

5 Top Tips For Sorting Out A Home Loan Application With Credit Issues

There are a variety of factors that affect your credit history – divorce, illness, timing slips, redundancy, late payments, missed payments, and even bills that weren’t redirected after a move. If you have experienced any of these credit issues, then all is not lost for your loan application hopes. There are plenty of options you have to help get your credit back on track to successfully apply for a loan.

1. Deal With Your Credit Report

So, who should be considering buying a property in the current market? Quite simply, people should only be considering property purchases who have the safety net of a secure job, along with either enough money saved or other liquid assets.

Some will see this lower market as an opportunity to purchase property at a price that is materially much lower than it was earlier this year. Then there are those brave cashed-up people who believe that times like these are when fortunes can be made, and they hope to secure a property at once-in-a-generation bargain prices. And who knows, they could very well be right on the money.

It is actually quite likely that some excellent opportunities to buy will become available over the coming months, especially during the second half of this year. That means there are some savvy investors who are ready to buy, in preparation for a predicted rebound next year.

2. Shop Around

If you received a no from the first potential lender you approached, then try and try again. There are plenty of lenders available and just because one said no does not mean they will all say no. Lenders have different boxes to tick, so another lender may view your situation more favourably than the first.

Of course, it’s always smart to shop around no matter what you’re doing or looking for. Do remember, however, that if you submit multiple credit applications in a short period of time it can negatively influence your credit score. Proceed with caution, and if you want to avoid traps you should consider working with professionals like Seek Mortgages.

3. Explore Alternative Lending

If your credit issues are the only thing holding you back, you may find joy with a non-bank lender that offers more flexible products. The banks stick to fixed rules when it comes to loan assessments. The world has evolved since then and lenders like Seek Mortgages provide a different path to loans using a wider set of parameters.

4. Affordable Payments

It doesn’t matter who you secure your loan with, the lender is responsible for ensuring you can afford to make the agreed repayments. It isn’t worth getting into hardship so ensure you are able to meet the repayment demands.

5. Options

If your deposit is less than 20%, you will likely have to pay an LMI (Lenders Mortgage Insurance) fee. It provides the lender with cover if you miss payments at any point. They’re a separate business with their own rules. Income source and credit history may leave you at risk of rejection, even if the lender has approved the loan. There is another way, of course. Third-party insurers and lenders like Seek Mortgages offer LPF (Lender Protection Fee to provide flexibility to assess the loan without requiring LMI provider approval.

If you would like to learn more, reach out to Seek Mortgages today and talk to us about finding a lender that will help turn your no into a yes.

Why A Home Loan NO Might Not Be The Final Answer

Why A Home Loan ‘No” Might Not Be The Final Answer

If you have ever been turned down for a loan, there’s a good chance you’ve asked why? Why did you get turned down?

Lending rules can change so if a bank has rejected your loan it might simply be a reflection of their credit policy. Of course, that credit policy may have shifted as it often does due to market conditions. So, in times of economic certainty you may have had an easy time securing a home loan versus now when the world isn’t as certain therefore it’s a greater challenge. This isn’t the only reason, there are plenty of reasons your home loan may have been rejected. It’s important, however, to remember that a no might not be the final answer.

1. Cross Your T's

Lenders want to see regular income. If you’re self-employed, that may present an issue. If you have irregular earnings, multiple jobs, or unusual income, then this sits outside of the traditional boxes that lenders look to tick.

2. Credit History

Another big issue for rejections is credit history. Your credit history is your biggest obstacle to overcome if your past is spotty. Conventional lenders use an automated process to score credit. Your application may be rejected simply because the computer says no.

3. Poor Paperwork

If you don’t have the right paperwork or present a poor standard of paperwork, this can influence whether your home loan is rejected. Your tax returns must be up-to-date, especially if you’re self-employed, If you are new to the country, then a lack of employment history may also go against you.

4. Bankruptcy

If you have previously filed for bankruptcy, then this is a red flag for traditional lenders. You might think you’re in the clear as you’ve been discharged, but it’s still something they consider.

There are plenty of reasons for your home loan to get knocked back, but what do you do about it?

The Alternative

There is good news! The world has evolved and now you have options beyond traditional lenders. Forget the banks who keep knocking you back, there are non-bank lending options that provide you with a personal approach to secure your home loan. These are big organisations like Seek Mortgages who exist solely to help people who have received a no.

Your application will be evaluated individually by an expert. The underwriter will look at a series of measures and consider the merit of you as a person, instead of allowing a computer to reject you. There is always an alternative available, especially if you have a poor credit history, unusual income, or any of the other issues we discussed above. The rejections you have experienced thus far may have knocked your confidence, but you don’t have to accept the first rejection and wait to apply again. Instead, you can opt for the non-traditional route before giving up altogether.

If you want a bit more information about what we can do to help, reach out and speak to Seek Mortgages today to find a lender who can help turn your home loan application from a no to a yes.

The Upsides of Home Loan Debt Consolidation

The Upsides of Home Loan Debt Consolidation

Unfortunately, a bunch of small debts can quickly balloon into one giant headache. There’s a simple way to get it under control, though. It’s possible to refinance your home to consolidate debt. But, is that the right move for you?

What Is It?

Simply, debt consolidation means combining the entirety of your debt into a single debt. That means all those credit cards, car loans, and otherwise are consolidated into a single monthly payment. When you deal with individual loans and debt, you are paying a different interest rate for each, as well as subject to a variety of balances and conditions. By rolling them into one you are managing your debt as easily and efficiently as possible. Before you decide whether this is the route for you, however, let us walk you through some of the upsides and downsides.

The Upside

Every month, you pay one single payment. Forget about setting up half a dozen direct debits or more, you don’t need to worry about any of that. It’s simpler to pare down all your debt into one single payment with one interest rate for a fixed period of time.

With a fixed rate and term, you know what your payment amount looks like. It might not sound like much, but the reality of the matter is you are far more likely to be disciplined in paying your debt off when you’re dealing with a fixed situation.

You will have less to pay monthly. Overall, though, you may end up paying back slightly more than original, but by stretching the terms you will reduce your monthly expenditure.

6 Home Deposit Saving Tips If You're Self-Employed

6 Home Deposit Saving Tips If You’re Self-Employed

Every self-employed individual knows how much income can vary from month to month. It’s difficult enough to plan for emergencies, the idea of saving for a house deposit with variable income is even more challenging. Not to worry, though, you can prove to potential lenders that you’re an excellent home loan candidate. It begins with proving that you have a history of regular and steady savings. Let’s take a look at six ways to boost your home deposit saving efforts.

1. Save More When You're Doing Well

When you’re swimming in work and things are going well, the temptation to treat yourself will be great. You have to resist this urge and instead focus on boosting your savings. If you are earning more money, then you should be putting more money away. Consider saving a percentage of your income each month so that no matter what you earn, you’re consistently saving.

2. Target-Setting

Where would you like to live? It’s a good idea to have an area and a neighbourhood in mind. This will allow you to calculate what type of deposit you’ll need, thus providing you with a savings goal. Just don’t forget to calculate legal fees and stamp duty. Depending on the loan you apply for, there will be different fees from different lenders. While it’s possible to secure a loan with a 5% deposit in your pocket, you can avoid extra fees if you push yourself to 20%.

3. Track Your Progress

Humans respond well to visual reminders so invest in an app or make a colourful chart, whatever it takes to give you a visual reminder of how you’re progressing with your savings target.

4. Tax-Smart

Self-employed individuals can claim tex deductions that add up when you dig into them. For example, if you work from home you may be able to claim for a portion of your internet, electricity, and other related costs. Speak to an accountant or qualified tax professional to learn more.

5. Tuck it Away

It’s tempting to skip a month of saving or only put something aside when you have a big payday. Don’t let this temptation get you. While your situation is unique, consistency is key. Save something from every payday so that you’re constantly taking little steps to your bigger goal.

6. Income Protection

Have you ever considered what you would do if you were unable to work due to illness or injury? Even a week or two of illness can upset the balance of your income so, it’s important that you protect your income. Income protection insurance is a wise investment. The last thing you want to do is dip into your deposit savings to pay the bills and live on if something goes wrong.

If you’re self-employed, interested in securing a mortgage, and you’d like to learn more, reach out to Seek Mortgages today. We can help connect you to a lender if the major banks have refused your loan application. Or, we can provide you with advice on how best to proceed.

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Should I Buy A House During Covid-19

The property market in Australia isn’t immune to the effects that coronavirus has had on our economy. Property prices have plummeted recently with sales volumes also down dramatically.

Prior to the restrictions put in place due to the coronavirus, this year’s property market kicked off on a high note. But now, all major property markets are forecast to be negatively impacted for the rest of the year; with the market rebound and eventual stabilisation not likely to occur until sometime in 2021.

The Market

This news hasn’t been great for anyone selling their property on the market, but it has unexpectedly put many first-home buyers into quite a strong position. Properties which would have most likely been over budget only months ago have now become increasingly accessible due to the current conditions of the market.

While purchasing property can almost always be put off until later for most people, there are thousands of prospective buyers out there who are still eager to buy. Especially those who have a deposit saved and a secure job, as they are the most likely to become the most powerful forces in the property market over the next few months.

Safety First

So, who should be considering buying a property in the current market? Quite simply, people should only be considering property purchases who have the safety net of a secure job, along with either enough money saved or other liquid assets.

Some will see this lower market as an opportunity to purchase property at a price that is materially much lower than it was earlier this year. Then there are those brave cashed-up people who believe that times like these are when fortunes can be made, and they hope to secure a property at once-in-a-generation bargain prices. And who knows, they could very well be right on the money.

It is actually quite likely that some excellent opportunities to buy will become available over the coming months, especially during the second half of this year. That means there are some savvy investors who are ready to buy, in preparation for a predicted rebound next year.

Lenders & Banks

First-time buyers especially must be confident that their job is secure before deciding to take out a mortgage.

For those who do end up losing their employment during this time, most of the major banks in Australia have dropped rates, and many are offering affected customers up to six months break from paying their mortgage. Other lenders are offering services that allow you to refinance or consolidate debts.

To get yourself into the best possible position to nab yourself some property at a bargain price, ensure that your finance is completely sorted. Not only will this give you the most realistic budget to work with which will provide you with some confidence when you’re considering all of your options, but many real estate agents won’t even take bookings for viewings without finance pre-approved.

Most reports that are forecasting property markets have included strong disclaimers that state their high uncertainty of what’s to come. This is not only due to the fact that everything is seemingly changing almost daily, but also because the longer that this crisis continues, the more material impact it will have on Australia’s property market.

Just remember that there are no guarantees when it comes to the property market. But at the end of the day, whether you’re buying or selling, we’re going to make it through this.

If you want to find out more about getting a mortgage in the current market, talk to our team today.

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COVID-19 and Business Loans: What You Need To Know

COVID-19, or coronavirus, is all anyone can talk about at the moment. It’s all we see on the news, and for most of us, it’s all we can think about – particularly when it comes to work. Whether you’re a business owner or a sole trader, regardless of the industry you’re in, COVID-19 has no doubt had a detrimental effect on your daily operations.

Thankfully, the Australian Government has offered a range of incentives and options for business owners, to help them get through the next few months. Details are changing all the time, and you can keep fully informed on the Australian Government’s Coronavirus app.

Currently, here are some of the loan assistance offers for businesses:

SME Guarantee Scheme

The SME Guarantee Scheme has been introduced to assist small and medium enterprises (SMEs). The scheme provides a guarantee of 50% to small and medium enterprise lenders for new, unsecured loans to be used for working capital. This allows SMEs access to additional funding that will help them survive the economic downturn. Businesses with less than $50 million turnover are eligible for the following:

  • Loans up to $250,000 per borrower
  • Loans up to three years, with no payments required in the first six months
  • Unsecured financial loans, so no assets are required to secure the loan

These loans are subject to the lender’s assessment and is available to businesses until September 30, 2020.

Cash Flow Boost

Small to medium businesses and charities (non-profit) who employ workers and have an annual turnover of less than $50 million may be eligible to receive cash payments, tax-free, of up to $100,000. These can be used to pay loans, rent, electricity and staff costs.

Reduced Payment Options

Many major and small lenders have offered their current business banking customers a range of support, including deferred business loan payments, reduced or deferred overdraft repayments, and some have also waived fees.

The Big Four

Each of the big four banks is offering their own financial support to their customers. The Commonwealth Bank has announced a 1.00% reduction for all existing small business loans, and they are waiving early redraw fees on business term deposit accounts. National Australia Bank has decreased variable business loans by 1.00% and 2.00% for QuickBiz loans and overdrafts. They are also offering deferred business loan and business credit card repayments. Westpac has reduced overdrafts by 2.00% and variable cash-based loans for small business by 1.00%. You can also defer business credit card repayments for three months. ANZ has offered a 0.25% reduction in business loan rates, and 0.80% reduction in fixed secured business loans (2-3 years). You can also defer payments for six months.

Each lender is different, so check with your bank or lender to see the options available to you. And if you’d like to apply for a business loan under the SME Guarantee Scheme, or you need more information about any of the above, get in touch with our team of experienced lenders to see how we can help your business survive COVID-19.