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How much can I borrow?

How much can I borrow?
Every customer is unique. Every lender has their own set of policy calculations, meaning your maximum lending capacity varies from lender to lender. I find most online "How much can I borrow" calculators misleading. Call me for an accurate assessment of your borrowing capacity.

To give you a feel for your lending capacity, if you take your gross annual income (less any annual loan commitments) and times that figure by 5, you will have a rough estimate of your borrowing capacity. For example, $105K gross annual income (before tax), less annual car loan payments of $5K = $100K X 5 = $500K approximate borrowing capacity.

This is a very simple and quick way to assess your borrowing capacity. There are lots of other factors that come into play. Investors for example, can usually borrow more due to rental income and tax deductibility of the debt.

A few extra things that might impact your borrowing capacity:

Length of current employment: If you have only been in your job for a short period or have just started your own business this could impact your borrowing ability.

Employment status: If you are employed as a casual, lenders will usually only accept your income if you have been with your employer for 12 months or longer. If you are employed as a contractor, you might need to show a more detailed employment history as well as a copy of your current contract.

Size of your deposit: If you have a large deposit or lots of equity in another property this may make lending easier. Though, if you only have a very small deposit (or even no deposit), don't let that stop you from contacting me.
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How much would my monthly repayments be?

Enter details below for a quick
estimate of monthly repayments
Loan Amount $
Interest Rate %
Term of Loan Years
 

Monthly Payment $
Number of Payments

Can I get a home loan?
Almost everyone can get a home loan. Some people are right to jump straight in. Others might need to wait a little before they are ready.

Some relevant things to consider when answering this question:

How is your credit history? If you have had problems with your credit history, we might need to do a little work before you are ready to apply for a home loan. Please complete the authority form below and fax or email it to me, then I can generate your credit report for you.

Credit History Authority Form

If you are self employed, how long has your business been running? Generally you will need to supply two years tax returns to use your business income.

If you started a new job recently, are you under probation? You will need to be clear of any probationary period of employment (typically your first 3 months) before a lender will consider your income.

Have you recently started a new career in a new industry? Lenders like to see that you have had 12 months experience in your current type of job or have worked in a similar industry previously.

How much cash do you have available to put into a purchase? If you have a good size deposit, 5% or more of the purchase price (or equity in another property), this is a good start. The larger your deposit, the more comfortable lenders will be in lending money to you.
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What size deposit do I need?
It is generally advisable to have saved at least 5% of the purchase price. A 10% deposit is good but the ideal situation is to have a 20% or greater deposit (or equivalent equity in another property) thereby avoiding the mortgage insurance premium.
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What is Mortgage Insurance?
Lenders will take an insurance policy to insure themselves against higher lending ratio loans. Generally if you borrow greater than 80% of the purchase price, a mortgage insurance policy is taken out by the lender. You as the borrower will be liable to pay the premium. This insurance policy covers the lender, not the borrower. The higher the lending ratio the more expensive the mortgage insurance policy.

In other words, the greater the deposit you have, the lower the premium you will pay. If you have a deposit of 20% or greater, you will pay no mortgage insurance. In some instances I can even arrange finance to 85% of the purchase price without you paying mortgage insurance.
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Do I qualify for the first home owners grant?
Each applicant and their spouse must never have owned a residential property (jointly or separately) prior to 1 July 2000 in Australia. Each applicant and their spouse must never have owned (jointly or separately) and occupied a residential property for a period of 6 months or more after 1 July 2000 in Australia. The purchase cannot be made in a business or trust name.

At least one applicant must be a permanent resident or Australian citizen. At least one applicant must occupy the property as their principal place of residence for a continuous period of at least 6 months within the first 12 months of purchase. Each applicant and their spouse must never have received a first home buyers grant in Australia.
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What is a pre approval and should I get one?
There is no cost to you in getting a pre approval. If you are inspecting properties at open houses and are seriously looking to buy a property, it is usually worth considering a lender pre approval. To get a pre approval you will need to complete an application form and supply supporting documentation. A lender will then do a preliminary assessment of your circumstances to see if they are (broadly speaking) happy to lend you money up to a certain limit.

A pre approval is not a guarantee that a lender will give you the finance you need. The pre approval will have conditions, including the need for a valuation to be done on the property you want to purchase. Once you have a pre approval it is important not to change jobs or take out additional credit, as this may cause a lender to withdraw their pre approval. Pre approvals are usually valid for 3–6 months.
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Should I take a fixed or variable loan?
If you look at interest rates over the last several decades you will discover an interest rate cycle. A series of interest rate increases when the economy is growing strongly, followed by a series of rate cuts as the economy slows, then the cycle starts again as the economy moves back into growth. However, even the experts struggle to pick how these cycles will unfold.

Most people take a variable rate loan. Meaning your rate can fluctuate with market conditions. This is great in a falling interest rate environment but when rates increase, this can be tough on your budget. Historically, the best time to fix your loan is after a series of rate cuts (near the bottom of the interest rate cycle). Many people who chose a fixed rate do so as a knee jerk reaction following a series of interest rate hikes. This is often the worst time to fix as you may find that you have locked in near the peak of a rate cycle.

Since it is so difficult to predict the interest rate cycles, a reasonably common strategy is to take a combination loan. Part fixed, part variable, hedging your bets.
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What documents do I need to get a loan approved?
Proof of income: two most recent payslips and last years group certificate. If you have started with a new employer in the last 6 months an employer letter might also be required. If you are self employed you will need two years business and personal tax returns and financial statements.

Proof of savings: Lenders like to see 6 months history of any savings.

100 points of ID: A copy of your passport (or birth certificate) and drivers licence.

Other docs may also be needed depending on your circumstances: eg, proof of any rental income, council rates notices for any properties you own, recent statements for any existing loans you have. Most recent statement for any credit cards you hold.
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Are you thinking of selling and upgrading your property?
If you have decided to sell and buy somewhere else it is always ideal to sell your existing property before buying the new property and thereby avoid the need for bridging finance. If you have sold before finding the place you wish to buy, you can always include conditions in the sale that work in your favour. Such as, an extended settlement period or a flexible option to lease your home from the person you have sold to.

If possible, concentrate on selling your property and getting the right price for this sale. Once you have exchanged contracts on the sale of your property you can then focus on finding your new home. If you buy before selling, you may come under tremendous pressure to accept a sale price for your home that is not ideal. If you are thinking of upgrading your property, call me to chat about the various strategies you could employ.
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How is stamp duty calculated?
See tables below.

First time home buyers be aware that exemptions and/or concessions may apply.

New South Wales:  
< $14,000 1.25% of purchase price
$14,001 - $30,000 $175 for the first $14,000 plus 1.5% for the balance above $14,000
$30,001 - $80,000 $415 for the first $30,000 plus 1.75% for the balance above $30,000
$80,001 - $300,000 $1,290 for the first $80,000 plus 3.5% for the balance above $80,000
$300,001 - $1,000,000 $8,990 for the first $300,000 plus 4.5% for the balance above $300,000
> $1,000,000 $40,490 for the first $1,000,000 plus 5.5% for the balance above $1,000,000

ACT:  
< $100,000
2% of purchase price
$100,001 - $200,000 $2,000 for the first $100,000 plus 3.5% for the balance above $100,000
$200,001 - $300,000 $5,500 for the first $200,000 plus 4% for the balance above $200,000
$300,001 - $500,000 $9,500 for the first $300,000 plus 5.5% for the balance above $300,000
$500,001 - $1,000,000 $20,500 for the first $500,000 plus 5.75% for the balance above $500,000
> $1,000,000
$49,250 for the first $1,000,000 plus 6.75% for the balance above $1,000,000
   
Northern Territory:
< $500,00 (0.065 x V2) + 21V, where V = (purchase price) /1000
> $500,000 5.4% of purchase price
   
Queensland - Owner Occupier:
 < $350,000 1% of purchase price
$350,001 - $540,000 $3,500 for the first $350,000 plus 3.5% for the balance above $350,000
$540,001 - $980,000 $10,150 for the first $540,000 plus 4.5% for the balance above $540,000
> $980,000 $29,950 for the first $980,000 plus 5.25% for the balance above $980,000
Queensland - Residential Investors:
< $5,000 Nil
$5,000 - $75,000 1.5% of purchase price
$75,001 - $540,000 $1,050 for the first $75,000 plus 3.5% for the balance above $75,000
$540,001 - $980,000 $17,325 for the first $540,000 plus 4.5% for the balance above $540,000
> $980,000
$37,125 for the first $980,000 plus 5.25% for the balance above $980,000
   
South Australia:  
< $12,000
1% of purchase price
$12,001 - $30,000 $120 for the first $12,000 plus 2% for the balance above $12,000
$30,001 - $50,000 $480 for the first $30,000 plus 3% for the balance above $30,000
$50,001 - $100,000 $1,080 for the first $50,000 plus 3.5% for the balance above $50,000
$100,001 - $200,000 $2,830 for the first $100,000 plus 4% for the balance above $100,000
$200,001 - $250,000 $6,830 for the first $200,000 plus 4.25% for the balance above $200,000
$250,001 - $300,000 $8,955 for the first $250,000 plus 4.75% for the balance above $250,000
$300,001 - $500,000 $11,330 for first $300,000 plus 5% for the balance above $300,000
> $500,000
$21,330 for the first $500,000 plus 5.5% for the balance above $500,000
   
Tasmania:  
< $1,300
$20
$1,301 - $10,000 1.5% of purchase price
$10,001 - $30,000 $150 for the first $10,000 plus 2% for the balance above $10,000
$30,001 - $75,000 $550 for the first $30,000 plus 2.5% for the balance above $30,000
$75,001 - $150,000 $1,675 for the first $75,000 plus 3% for the balance above $75,000
$150,001 - $225,000 $3,925 for the first $150,000 plus 3.5% for the balance above $150,000
> $225,000
$6,550 for the first $225,000 plus 4% for the balance above $225,000
   
Victoria:  
< $25,000 1.4% of purchase price
$25,001 - $130,000 $350 for the first $25,000 plus 2.4% for the balance above $25,000
$130,001 - $440,000 $2,870 for the first $130,000 plus 6% for the balance above $130,000
$440,001 - $960,000 $18,370 for the first $440,000 plus 6% for the balance above $440,000
> $960,000 5.5% of purchase price
Victoria - Concessions for Owner Occupier:
As per table above with the following concessions:
$130,001 - $440,000 $2,870 for the first $130,000 plus 5% for the balance above $130,000
$440,001 - $550,000 $3100 reduction in stamp duty
>$550,000 No concession for Owner Occupier
   
Western Australia:  
< $80,000
2% of purchase price
$80,001 - $100,000 $1,600 for the first $80,000 plus 3% for the balance above $80,000
$100,001 - $250,000 $2,200 for the first $100,000 plus 4% for the balance above $100,000
$250,001 - $500,000 $8,200 for the first $250,000 plus 5% for the balance above $250,000
> $500,000
$20,700 for the first $500,000 plus 5.4% for the balance above $500,000

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