Saturday, 21 December 2013

The three things your home loan broker knows that you don't: Otto Dargan

       The three things your home loan broker knows that you don't: Otto Dargan

By Otto Dargan
Friday, 13 December 2013

If you’re a first home buyer, you’re usually going in blind when it comes to getting a home loan application approved. Sure, your parents might be able to give you some ‘hot’ tips but things have changed a lot since they first applied for a home loan.
Some bank staff will not tell you all of the options available for your loan but a good mortgage broker will.
Here are three things a broker knows that you don’t.
The LMI factor
Lenders mortgage insurance (LMI) is a premium paid by the borrower that protects the lender against loss incurred by a mortgage default. LMI is usually around 1-4% of the loan amount and is applicable if you borrow over 80% of the property value (80% LVR).
Banks have different LMI premiums, however nobody tells the borrower!
If you purchased a property for $600,000 and borrowed 95%, one of the major lenders would charge you $29,226 for LMI premium while another would charge you $18,453.
We all like to shop around for a good interest rate but have you tried getting the best deal for your LMI? You can’t. Why? Because lenders don’t publish it!
A good broker will take LMI into account when helping you to choose the right home loan. In some cases, LMI can even be waived if you’re a professional such as a doctor, accountant, lawyer or engineer.
If your mum or dad agree to act as a guarantor for your loan you can possibly avoid LMI entirely. Unfortunately some brokers never tell you about this option and you end up paying thousands in LMI unnecessarily.
Brokers know the (credit) score
When a bank assesses your loan application they’ll combine all the data in your application with your credit history and get what is known as a ‘credit score’. Credit scoring has been gaining traction and now most banks use it – but each lender views risk very differently!
Before your application is even looked at by a human, you’re run through the bank’s scorecard. Apart from your credit history, they’ll gather other information like your asset position, job stability and even whether you saved a deposit or if it was a gift!
One lender may not like someone who has changed jobs recently but for another it doesn’t factor into their credit score at all.
If you don’t pass the credit score, you shall not pass! Brokers know how banks score and can help you select the right lender for your situation.
Do something with that extra cash!
If you’re on a professional package, making extra repayments can make a massive difference over the term of the loan.
We all know that right? Well what you didn’t know is just how big a difference extra repayments can make! For a $570,000 loan over 30 years with an interest rate of 4.99%, you pay $3,056.40 per month.
Just paying $1 extra a day ($30.42/month) will save you $13,950.36 over 30 years. That’s a pretty decent Christmas holiday.
Albert Einstein once declared compound interest to be ‘the most powerful force in the universe’ and it works both ways!
It’s up to you to get in touch with an expert who knows the tips to save you money.
Otto Dargan is the two time winner of Australia’s Brightest Mortgage Broker and the founder of specialist mortgage broker the Home Loan Experts.