Are you considering purchasing a house? It can be a great feeling knowing that you are about to purchase bricks and mortar that you can call your own.
But there’s a big problem. You might not have the money to pay for it upfront. If that’s the case then you are going to have to raise the money through loans. But what home loan options are available to you? And how can you navigate what can often be a complex landscape?
Here’s everything you need to know about unique home loans and choosing the right mortgage.
Rates and Savings
On an 80% LVR mortgage, most lenders only require 5% real savings. More than 95% of LVRs are guaranteed for home loans, allowing you to borrow up to 10.5% of the property’s value.
Remember lending criteria are very strict and interest rates can be too high for this type of loan, so they are not suitable for everyone.
On the other hand, nurses are essential service workers, so lenders accept 100% of my overtime income. Not all banks understand that shift workers deserve a shift penalty, so the lender of choice is essential. Lenders will also take the amount of overtime into account.
An employment letter confirming that you have been working overtime for the last year or two is a good idea. Though this depending on the lender. Also, prepare tour most recent group certificate (e.g. Two of your recent payslips).
Overtime and Benefits
When assessing overtime earnings, many lenders make the mistake of assessing ancillary benefits. Nurses get a portion of their income in the form of ancillary benefits in many cases that are not taxable income. Lenders treat some benefits as tax-free income.
Benefits can be credited to your bank account and funds can be deducted from your wages to pay off debts such as mortgages or car loans. Common mistake leaders make is to include fringe benefits as taxable income rather than taxable income, which reduces the amount you can borrow.
Banks should also consider second jobs as income. They recognize that most basic service workers will have to move to a second job to supplement their income.
Lenders will accept 100% of your income if you can prove that you have worked for your second employer for 6-12 months and have a regular income. Lenders will consider your working history for at least 3 months if you are in a strong financial position and have a clear credit history. Their income should be between $50 and $80.
Exceptions For Nurses
Avoid the cost of an LMI as a nurse. If you work in a low-risk occupation, you are more likely to qualify for an 85% LMI or waiver of an LMI by borrowing 85% of the value of the property.
However, some lenders will not offer you a waiver if you are a nurse.
The maximum loan amount is $1.5 million. Lenders prefer borrowers with an annual income of $150,000 or less. You do not need to borrow more than 85% LVR. Your credit file must be free of bad credit records. You must also have a strong income.
Remember there are also specific nurse home loans that you can use.
You can also buy the property directly. Some lenders also accept refinancing to buy the property directly from the bank.
If you have a 15% deposit or save a little more than 20% on this option, you can avoid an LMI.
The only exception is if you borrow 80% or less of a DOC loan. However, not everyone meets the above criteria. There are many unique home loans.
First Time Buyers
If you are a first-time homebuyer, you can receive a discount of up to 15% off your LMI premium from selected mortgage and insurance companies.
You won’t get this discount if your lender deals with these companies. There are some discounts for first-time home buyers.
In most cases, you cannot borrow more than $600,000. If your deposit is borrowed from another source, you will not qualify. You can use a First Home Owner Grant (Fhog) to get your deposit.
Reduce the LMI by half the premium. If you are not entitled to a waived LMI, you can reduce your premium by a reasonable amount.
Remember also one of the biggest foes you need to overcome is that there aren’t as many homes to buy as you think.
Cheaper LMI vs LVR
The bigger the loan, the more you pay in higher mortgage and insurance costs. With a $300,000 loan, LMI is the cheapest. If you borrow $500,000 or more, it becomes the most expensive. Loans larger than $500,000 will have a moderate LMI.
If you borrow $30,001, you could save up to $800 by borrowing 1% less. Remember if you borrow 2% instead of a high amount like 90%, there will be a significant increase in the LMI you will be paying.
With an LVR mortgage, you pay more into LMI, regardless of the size of the loan, because of the higher LVR of the mortgage. If you only reduce your loan amount a little, you can save thousands of dollars.
Mortgage insurers do not all have the same mortgage insurance rates. Lenders and mortgage insurers differ from lender to lender in terms of LMI premiums.
Also, don’t forget to look for home loan discounts where they are available.
Deposits
Get your deposits to change your LMI premium. Standard LMI products from mortgage insurers are aimed at people who can prove they have saved deposits. However, some lenders offer a genuine savings solution. Many deposits can be used to change LMI premiums.
If you have at least 5% real savings, you are entitled to the standard LMI tariff. If you don’t show you have real savings, you will have to pay a higher mortgage insurance premium. You will also have to pay higher LMIs if you did not have any real savings when you borrowed the deposit, such as a personal loan or a loan from a parent.
Note that different lenders have different strategies in this regard. Some fixed premiums will apply to all borrowers, while others will be taken into account differently depending on different factors.
There Are Many Good Home Loan Options
The home loan market can be confusing if you are in low-risk employment, Understanding what the rules are can be complicated. This is why you must do some research beforehand and talk to a good lawyer.
The rules for first-time buyers are also different from those that have previously purchased houses.
If you are interested in learning more about home loan options, be sure t check out the rest of our site.
