Property Purchase

When should I get conditional approval for my purchase?

It’s best to speak to a mortgage broker at least 6-months before you think you are ready to purchase a property. That way you can get an idea on how much you can borrow, what deposit you will need, your likely repayments and fees, and an expected purchase price.

At Happy Loans Co. we will review your income, current assets and liabilities, and your household expenditure to help you get conditional approval to purchase a property. Depending on the lender, conditional approval will generally last 90 days, however there is the possibility to apply for an extension if required.

What do I need to be aware of when preparing to purchasing a property?

Deposit

You will generally need a 20% deposit to purchase a home to avoid paying Lenders Mortgage Insurance (LMI) which can add up to over $10,000.

There are exceptions to this rule for First Home Buyers who can utilise government grants to avoid paying LMI and borrow up to 95% of the property value, or borrow 105% (purchase price plus fees) when using a guarantor.

Additionally, people who work in specific industries, including medical, finance, entertainment, legal, sporting professionals, and the mining industry may be able to borrow up to 95% without paying LMI.

Borrowing Power

The amount that a bank will lend you is your borrowing power, Happy Loans Co. can work with you to calculate your borrowing power with different lenders. The information required to accurately calculate your borrowing power includes your household income, expenses, existing loans, number of dependents, credit card limits and HECS-HELP debts.

When calculating your borrowing power, banks will add 2.5-3% to the interest rate to assess your ability to service your loan.

Investment Properties

Buying an investment property is much the same as buying your own home to live in. Things to consider include:

  • Should I use the equity in my existing home to “cash out” and use those funds as a deposit for the investment property?

  • Should I take out an interest only loan to manage my repayments?

  • Can I afford the repayments if the property is not rented out?

  • If I don’t have a 20% deposit, should I capitalise the lenders mortgage insurance?

  • What is my borrowing power for the new purchase? How will I cover the purchase fees?

What documents do I need to provide?

  • Identification - Driver’s License, Passport and Medicare card

  • PAYG Employees - 2 latest pay slips and latest group certificate

  • Self Employed - last 2 years of tax returns and notice of assessments

  • Home Insurance and council rates

  • Contract of sale and proposed rental income (if applicable)

At Happy Loans Co., we will work with you during every step of the property purchase, and will present home loan options based on your overall short, medium and long-term goals.

If you are getting ready for your purchase and would like to get conditional approval, you can contact me at luke@happyloans.au, on mobile 0411 104 117, or return to our home page and click on start here.