What Is A Low Doc Home Loan?

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A mortgage created for the self-employed.

If you’re self-employed, you may have found it difficult to get a traditional mortgage. Don’t despair.  The low doc home loan has been designed specifically for the self-employed.

The dilemma of the self-employed

If you’re self-employed, the goal of your accountant is to minimise your taxable income. Unfortunately, while this means you pay less tax, it creates problems when you try to borrow.  While you might know that you can service a loan, your books don’t back you up, or your paperwork may not be up-to-date.  As a consequence, the self-employed often find it frustrating to obtain a Home Loan.

Consider the low doc home loan

While the self-employed often can’t satisfy traditional lending criteria, they can be perfectly capable of servicing a loan.  As a consequence, the low doc or lo doc loan was born.  Low doc loans don’t require the same level of “documentation” as normal loans. If you have difficulty documenting your financial position with regular pay slips, tax returns or business financials etc, a low doc mortgage could be a good solution.

Low doc loans are available through finance broker, banks and non bank lenders. Even with a lo doc loan, only borrow through someone you can trust.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHEN WOULD I REFINANCE MY MORTGAGE?

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Whenever it makes financial sense to do so.

Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.

Mortgage refinancing reasons: lower rate

The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.

Mortgage refinancing reasons: more flexibility

Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.

Mortgage refinancing reasons: renovation

If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.

Mortgage refinancing reasons: home equity

Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.

Mortgage refinancing reasons: defaulting

Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your finance broker about refinancing your home loan to make it more manageable.

Talk to Geoff about your mortgage refinancing needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHAT DO I NEED TO KNOW ABOUT DEBT CONSOLIDATION?

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Not to confuse it with debt elimination.

If you’re swamped with credit card debt and personal loans, it can sometimes help to talk to a professional about debt consolidation. However, you need to be wary.  You might end up paying more in the long term and/or reduce the equity in your home.

What is debt consolidation?

Debt consolidation is where you transfer your credit card debt and any personal loans to your mortgage.  The advantage of doing this is that the interest rate on your home loan is likely to be lower than you’re paying on your smaller debts.  You might also benefit from a regular manageable repayment. However, there are some things you need to be aware of.

Debt consolidation is not debt elimination

Since debt consolidation clears the debt from your credit cards, the temptation is to think that you’ve paid off the debt. But you haven’t. You’ve merely transferred the debt to your mortgage.  So, once you’ve consolidated your debts, consider snipping your credit cards in two. Otherwise, you could get trapped in a debt spiral.

Remember the 80% LVR threshold

When you took out your mortgage, you might have been under the 80% loan to value ratio, which meant that you didn’t have to pay lenders mortgage insurance.  Be careful when you consolidate your debts that you don’t reduce the equity in your home and have to pay lenders mortgage insurance.

Personal loans aren’t tax deductible

Interest charges on an investment loan are tax-deductible but interest on a home loan isn’t.  When you consolidate your debts, you need to be mindful of how much interest you can claim as a tax deduction.  Seek advice from a tax agent before making a decision in this area.

To learn more about debt consolidation, contact Geoff.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHEN WAS YOUR LAST HOME LOAN HEALTH CHECK?

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Circumstances can change, leaving your home loan less suitable than it was originally.  A home loan health check can reveal if you’re paying too much.

What’s involved? 

Your Finance Broker can do a full home loan health check for you either in person or over the phone.  They will check if your loan is still competitive and still suited to your individual needs.

Having an expert do this for you can also take the stress out of the process for you.  It is advisable to get this check done at least once a year, or if your circumstances change.

Questions to ask

Be aware of what you want checked. Think about the following when you speak to your broker: 

  • Am I paying an unreasonably high interest rate?

  • Am I paying high fees?

  • Am I happy with the service I receive?

  • Does my loan give me the features I need?

  • Am I paying for features I don’t use?

  • Have my financial circumstances changed

Benefits

A home-loan health check will generally cost you nothing and could save you thousands.  Your home loan features could be improved or you could find yourself with a lower interest rate.  A better payment structure could also be introduced, making your repayments more manageable.

Checking the state of your current loan could uncover the possibility of taking out additional finance, which can consolidate any other debt you may have or help you purchase an investment property.

Contact Geoff to organise your home loan health check.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW TO GET THE BIGGEST ‘ROI’ ON AN INVESTMENT PROPERTY

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When purchasing an investment property, there are a number of factors that could increase or reduce your potential return on investment. In this case it's not just location, location, location.

When considering a property for investment purposes, the most important question to ask is 'will be attractive to tenants?'.  But how do you know what will appeal to someone you've never met? Settling on a handful of locations is a good start. “Young families and couples are the ones that drive capital growth and so a location that is within a reasonable distance to schools, entertainment, transport, and an employment hub is one to look out for,” says the finance broker. Other ideal factors are a low vacancy rate and relatively high rental yield.

Although location plays a major role, it's by no means the only defining factor. “There is a mistruth a lot of people subscribe to when selling investment properties, which is to disregard the quality because you don’t have to live in it,” advises the finance broker. “You have to buy a homeowner quality property, because someone has to live in it,” he says. “And when buying an investment property, you have to have an exit strategy, which will generally involve selling to homeowners as well as investors.”

To get the most value, you need to think about the demographic of renters who are likely to be living in the area. “You have to match the property with the area,” says the finance broker. “If you put a good quality, decent sized, one bedroom apartment in the inner city, it would be a great investment, however if you put it 30km out, it wouldn't garner as much interest.”

When investing in any kind of property, be wary of any danger signs. One of the biggest mistakes Australians make is not knowing what their cash flow is. “Bad cash flow is worse than paying too much for the property,” advises the finance broker. “It is vital to know how much your chosen property is going to cost after tax, every week after you settle. There’s no point in buying a top quality property if it’s going to send you broke.”

When looking to purchase an investment property, ensure the expert you are dealing with is actually an expert. “Everyone has an opinion on property,” says the finance broker. Your broker will be able to connect you with trusted professionals in their own network. “You always have to be wary of somebody who tells you that their way is the only way to invest,” advises the finance broker. “Only buying for cash flow is flawed, only buying for capital growth is flawed too. You have to buy property that’s going to work for you.”

As well as speaking to a real estate expert, speak to Geoff (an MFAA Accredited Finance Broker) to get his insight on the market.  

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHAT SHOULD I BE AWARE OF WHEN TAKING OUT A MORTGAGE?

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Loans That Seem Too Good To Be True

If you think you’ve found a home loan that sounds almost too good to be true, unfortunately, it probably is. Here we look at some of the traps you should look to avoid in taking out a mortgage.

Free Lunches

In the mortgage market, you come to expect certain things. e.g If you have a small deposit, you’ll pay more over the term of the loan; that having a bad credit history is going to cost you; that certain loans have certain interest rates, etc. So if you’re offered a home loan that seems much better than normal, look closely at the fine print. Free lunches are as rare in home loans as they are elsewhere in life.

Interest Rate Fixation

Most people looking for a mortgage are preoccupied with finding the lowest interest rate. But have you considered all the fees and charges, and the account flexibility you need? You need to consider the entire cost of the loan – not just the interest rate.

Ignoring Mortgage Fees And Charges

Don’t ignore any fees or charges linked to a home loan; you never know how your circumstances may change. Upfront fees for taking out a loan and monthly fees are pretty easy to understand. But, are there other fees that you may incur? Will you be able to pay extra if you have a sudden windfall? Will you be charged if you decide to move or refinance your home loan? Can you increase your mortgage repayments?

Lack of Flexibility

Different loans have different levels of flexibility i.e EFTPOS, internet banking, redraw facility. Ensure your home loan has all the features you want and don’t get locked into a Mortgage that will cost you if you change your mind.

Vendor Financing

Some property developers offer “vendor financing”. This may seem attractive because you don’t have to deal with a lender, or because they’re willing to give you a loan when others won’t. But be careful you’re not paying above market rates – for the property or your mortgage.

Get Specialist Help

The mortgage market is extremely complex, and getting what’s right for you is not as simple as finding the lowest interest rate. You need specialist help – the sort of help you get from an MFAA member.  Call Geoff to discuss any of your lending needs.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHAT TYPE OF LOAN IS RIGHT FOR YOU?

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The array of mortgages available helps a good finance broker to tailor a package to suit your needs. Here are just some of the options.

Fixed-Rate Mortgages 

With a fixed-rate loan, you know exactly how much you’ll pay per fortnight or month for the fixed period of the loan (usually one to five years). 

Variable Rate Mortgages

Repayments can change during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.

Principal and Interest Mortgages

In this mortgage, you are paying the amount lent to you plus the interest. 

Interest-Only Mortgages

With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal. 

Split Home Loan (Fixed and Variable)

You can choose to have part of your loan at a fixed rate and the other part can be at a variable interest rate. If rates do fall, the interest will go down on the variable part of your loan, but you aren’t taking as big a risk should rates rise. 

Redraw Facility

If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).

Land Loan

A land loan lets you buy a block of land without the pressure to build on it as soon as possible. Land loans are usually variable interest for up to 30 years.

Construction Loan

For buying land, building or renovating your home, a 12-month construction loan can be the best way to go. Usually, up to 90 per cent of the property value can be borrowed.

Non-PAYG Loans

For self-employed people, a home loan can still be arranged using differing supporting documentation that shows your ability to service a loan and might include BAS and bank statements. You self-certify your income, which will need verification. You may be able to borrow up to 80 per cent of the property’s value. 

Equity Release

This loan type allows you to convert a portion of your residential property ‘asset’ into cash or an income stream while still allowing you to continue to live in your home.

Contact Geoff to discuss your lending needs. 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW TO AVOID EXTRA HOME LOAN FEES

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Exit and early termination fees can put the brakes on plans to sell, to refinance, and to renovate or purchase an investment property. Here’s how to avoid them from the start.

Fees charged for the early repayment of variable-rate loans were phased out by government reforms in 2011. However, fixed-rate loans may still carry these fees, and both fixed-rate and variable-rate home loans taken before the reforms may still impose penalties for early repayments. Those pre-reform loans may now still be running.

“In most instances, for most lenders, fixed-term loans had a term of five years,” a lender expert explains. “That will be the case for most borrowers pre-2011.”

If you took out a loan before 2011 and have decided to sell, it can be difficult avoiding early termination fees for fixed-rate loans, as they protect your lender against the loss of the interest they reasonably expected to earn on your finance.

You are able to receive a waiver or fee reduction, although you rely on the discretion of your lender to receive one. Having a good repayment history and being a long-term customer helps.

“Different lenders will have different policies in relation to early repayment. Fees can be waived upon request but some lenders prefer to charge them,” the lender expert says.

To avoid early repayment fees in future, it is a good idea to take extra precaution when deciding to take a fixed-term home loan.

Fees on fixed-rate loans may include exit fees and early termination fees. Exit fees can range from $150 to $350. Early termination fees can be more costly and are charged against fixed-rate loans that are exited before the fixed-rate term is complete. They can be charged in a number of situations, including switching home loans or making extra repayments on your loan.

“The key thing to consider is whether to go for a variable option or a fixed-rate option. If you do take a fixed-rate mortgage, you will effectively be locking in the fixed-rate term, and the fixed-rate interest periods for whatever the term is,” the lender expert explains.

“That means that it’s not an appropriate product for someone who wants to pay out their loan early.”

Consider your future goals. Do you have plans to move city or change your job? Are there any foreseeable disruptions to your financial circumstance likely to take place during the space of your fixed-term rate?

Avoiding exit fees on homes loans ultimately comes down to understanding the products you are able to choose from and being clear about what you are signing up for.

“I would also recommend customers get some help when they are seeking out their loan. We certainly recommend that brokers provide really good services for customers in that regard,” the lender expert says.

To avoid being caught out by fees and charges, speak to Geoff about different types of loans and how to match one to your plans for the future.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

DO I NEED TO USE A MORTGAGE BROKER?

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The number one benefit of using a mortgage broker is being presented with a set of customised loan options without the hassle of doing the research yourself.

Yes, brokers receive remuneration from lenders for successful loan applications, but credible, qualified mortgage brokers are client-focused – because they know their reputation depends on helping you find the ideal solution for your unique situation and goals.

To do this, brokers draw on their knowledge of your personal circumstances and needs, the current lending market, lending products and their professional connections. They take the stress out of shopping around for a loan, and make the application process simpler for you.

Specialist support matters

Buying your first home or investing in real estate is a big financial decision. It’s understandable that you might seek the advice of family and friends.  But heeding the advice of someone you met at a barbecue about which bank or lender to choose is unwise.  Doing your own research is worthwhile but it can be complex and time-consuming.

Every person’s finances, budget limitations, features wish list and loan eligibility will be different, and not all relevant information can be found via a search engine.

Only someone that deals in home loans day-in and day-out can possibly be across the topic thoroughly. Mortgage brokers specialise in this work and will make your life easier.

There’s usually no up-front cost, which also makes sitting down with a mortgage broker a cost-effective way to discover a loan suited specifically to you.

Five reasons a broker is recommended

It makes more sense to rely on the independent advice of an accredited mortgage broker because: 

  • All loans are not equal:  There are so many variables – types of lenders, interest rates, choosing between fixed, variable or split interest, redraw, offset accounts and other terms and conditions.  A broker takes time to understand your needs and brings you options to help you choose the best fit. 

  • Understand all the fine print:  Have someone by your side to answer all your questions about different terms, features and requirements.  Mortgage brokers focus on client service and have lots of experience dealing with finance contracts – so can guide you through each complicated step with confidence. 

  • Ace the application:  Paperwork can be a pain and can be a stumbling block for time-poor people.  Reduce your own stress by working with a professional who takes responsibility for ensuring your application is complete and has the best chance of success. 

  • Connections can mean tailored solutions:  Brokers’ do maintain links with certain lenders.  These are carefully chosen professional relationships that enable your broker to help you choose an appropriate outcome. 

  • Plan B experts:  Brokers can support you by having back-up plans in place in case your first-choice application is not effective.  They will do their best to help you with alternatives.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

4 DIFFERENCES BETWEEN A CREDIT ADVISER AND A BANK LENDER

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It’s easy to walk into the local bank and talk to a lender, or apply online for a home loan, but it may not always be the best option.

1          Choice

When you’re buying a house, do you go to one real estate agent, decide you will buy a house from them, and choose from what they have on the market?  Do you make the best of what may actually be a poor fit for your circumstances (it’s okay, one of the kids can sleep in that fourth bathroom we don’t need)? No?  Of course not – why would you limit your choices in this way?

It’s really no different with the loan your use to pay for that home.  Every lender, including the big four banks, second-tier lenders and specialist lenders, offers different products with different features, some of which will suit your goals and lifestyle, and some of which will not.

2          Industry expertise

Your credit adviser will use their expert industry knowledge to help you sort through them and, unlike a bank lender, can find the one that most closely fits your needs.

You can expect, when it is time to make a decision and settle on one, that your credit adviser may offer two or three alternatives that would all be suitable, with a recommendation for one in particular that stands out.

3          The MFAA difference

MFAA Approved Credit Advisers must meet higher education and professional development standards than industry regulation demands, and they regularly attend training and development courses run by the MFAA and others.

They are also answerable to the MFAA Tribunal, which imposes penalties on members who are found to have breached the MFAA’s Code of Practice.

MFAA Approved Credit Advisers not only have the support and resources to be the best, their livelihoods depend on it.

4          Let’s talk commission

Of course, credit advisers earn commissions.  This doesn’t mean your credit adviser is not on your side.  Whether you see a credit adviser or a bank lender, that person in front of you earns money by selling you a home loan.  The difference, then?  The bank lender is there to sell you one of their loans.  The credit adviser is there to help you locate a product from a choice of lenders that works for you so that you come back to them when you’re thinking about refinancing, and so that you are comfortable recommending them to your friends and family.

Contact Geoff if you have any questions or require assistance.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW DO I KNOW I'M GETTING A GOOD DEAL FROM MY LENDER?

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With so many products offered by various lenders, it can be quite perplexing trying to figure out whether or not you’ve scored yourself a good deal on your home loan.  

While doing your research and comparing what’s out there in the market is one of the most obvious ways to find out whether you’re sitting on a good deal, it can be a time consuming practice and an overwhelming experience for those without specialist knowledge of the mortgage sector.  

“It’s good to shop around, and yes you can use comparison websites, but because lenders call like products different names, it can get very difficult comparing apples with apples,” advises the finance broker. “Brokers know the special names and pricing, so it’s worthwhile working with one as not only will it save you time but you’ll also get a well-rounded understanding of the advantages of each product.” 

That understanding of each product’s pros and cons is essential, because the best deal isn’t necessarily just the one with the lowest interest rate. It ultimately comes down to finding a loan that suits your plans - whether those plans are to pay the loan off as quickly as possible, to use it to fund renovations or investment down the track, or to pay the lowest total interest and fees over the life of a loan – and to finding a lender that will provide that loan at the level of finance required.  

“Imagine you’re wanting to buy your dream home. Now, different lenders will lend varying amounts based upon the same criteria,” says the finance broker. “So that could mean that the lender with the sharpest rate may lend $200,000 less than the one with a slightly higher rate. If you really want that property, you’re going to have to go with the one with the higher rate, which may only make a few thousand dollars difference a year in interest repayments.” 

MFAA accredited finance brokers have specialist knowledge of products from multiple lenders, to ensure you are getting a good deal. 

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

CAN YOUR PROFESSION SAVE YOU ON YOUR HOME LOAN?

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When it comes to saving on your mortgage, some of you may not have to look further than your job.  If yours is a profession that classifies you as a ‘low risk’ borrower in the eyes of lenders, then you may be entitled to special discounts.

The lucky ones

Accountants, lawyers and teachers are commonly eligible for home loan discounts, or particular loan types without fees, based on their professions.  “The benefits differ depending on specific professions,” the finance broker explains. “It depends on what industry the lenders decide to target as it’s a constantly changing situation, so what’s here today may not be around tomorrow.”

An example of this is the slowing down of the mining industry in 2015, which saw mining engineers lose their ‘in demand’ status and their profession-based discounts.

Doctors take the cake

Lenders have their own target lists of professions, but doctors are the big winners.  “They'll get waived LMI, lower interest rates and, in many cases, banks will even go outside of their normal policy to get their loans approved,” says the finance broker. “However, not all medical professionals, such as psychiatrists, chiropractors, vets and pharmacists, are accepted by all lenders so it’s always advisable to confirm.”

How the perks work

Simply being in a certain profession won’t automatically save you on your home loan.  To qualify you must apply with a lender that offers your profession a special discount and meet that lender’s criteria. “You’ll often need to provide evidence of membership of a certain industry body such as the Australian Medical Association,” advises the finance broker.  “Waived LMI is usually approved without any problems if you meet the criteria, however your mortgage broker may need to negotiate to get a better interest rate as well.”

Because lenders don’t publish these better interest rates, to benefit from the discounts it’s best to have your broker by your side.  Not only will they know which lenders to apply to, they will also assist you with pricing requests and negotiating the best possible interest rate.

MFAA accredited finance brokers are industry leaders who have the knowledge and expertise to find the most appropriate loans for even the most complex financial scenarios, including profession-based discounts.

If you fall into one of the above categories or if you think you might be entitled to a special discount, please contact Geoff.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

TREAT YOUR INVESTMENT PROPERTY LIKE A BUSINESS AND YOUR TENANTS LIKE CUSTOMERS

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It’s important to look after the tenants in your investment property – it encourages them to stay long term and take care of your property.  So how can you keep your tenants happy?  By treating your property like a business and your tenants like valued customers.

The tenant as customer

The rental market in most Australian cities is tight, with plenty of renters looking for accommodation.  But that doesn’t mean you have your tenants over a barrel.  They pay good money to rent a property and in return they expect a clean, safe and well-maintained place to live.

If you can keep your property in good order and your current tenants satisfied, you’ll save yourself the time and money it takes to find new tenants. Many businesses run on the idea that it costs far more to acquire a new customer than it does to retain an existing one and if you’re one to agree with this, the same principle should be applied to your tenants.

Reputation counts

Word of mouth is important in business.  These days, business reviews – both good and bad – are shared widely on the internet and social media. There are even websites dedicated to reviews of dodgy landlords, and you don’t want to appear on them – that’s the kind of online exposure no business wants.

Know the law – and respect it

Residential tenants have legal rights.  These differ from state to state, but it’s vital for you as a business operator (landlord) to know and respect the law if you want to maintain good relations with your customers (tenants). Make sure to seek professional legal advice if you need more information.

Residential tenancy laws in Australia cover many aspects of tenancy including:

  • when and how the landlord can access the property
  • who’s responsible for repairs and maintenance
  • when and how each party can give notice to vacate a property
  • how to introduce rent increases
  • how bonds and security deposits should be handled.

Customer service 101

Because your tenants are your customers, the regular principles of customer service apply:

  • First impressions count. Make sure your relationship starts on the right foot.
  • Respond to your tenants’ needs. Listen actively and seek workable solutions to any problems.
  • Make yourself available and ensure your property manager has provided the appropriate contact information should any issues arise
  • Respond to requests for repairs in a timely way. Urgent repairs may require quicker response times.
  • Treat your tenants the way you would want to be treated.
  • Keep in mind that people remember how you make them feel and may base their actions towards you (and your property) on those feelings.

When you approach your tenants as customers and treat them with respect, there’s a good chance they’ll respond in kind.  This can lead to longer tenancies and a reduced vacancy rate – which means more money in your pocket.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

CAN A FINANCE BROKER GET YOU THE BETTER DEAL?

can-a-finance-broker-get-you-the-better-deal-mortgage-broker-sydney-prospera-finance

If you’re contemplating whether a finance broker can get you a better deal on a loan, it’s worth considering why brokers write more than 53% per cent of residential loans in Australia today.

Here are just a few of the reasons:

• Brokers usually have access to a wide variety of lenders and loan products, suiting a variety of customer needs and situations.

• They are experts in the loan application process that many average applicants are unfamiliar with.

• The staggering choice of loan products on the market can be overwhelming for consumers to consider, and brokers can help you navigate these.

• They will manage most of the application process, making it an easy experience for you.

One of the important steps you can take in pursuing a better deal for your situation is by engaging the services of an MFAA Accredited Finance Broker. MFAA Accredited Finance Brokers are, on average, the most qualified, and held to the highest standards in the industry, and have the knowledge and expertise to assist you to secure loans in a range of complicated scenarios.

To identify your preferred finance broker, it's a good idea to search listed MFAA Accredited Finance Brokers, research specific brokers online and seek the feedback of friends and families on their experiences with particular finance broker businesses.

It's also good practice to ensure you make enquiries to verify how suited your needs are to the lenders your broker has access to; confirm your broker’s experience and qualifications and check whether you will incur fees for engaging your broker’s services (the vast majority of brokers do not charge consumers fees for their services).

Once you settle on your preferred finance broker, there can be opportunities to benefit financially. Many consumers prefer a finance broker over a direct lender, such as a bank, because a lender will only offer their own loan products. This can become problematic and costly if products more closely matching your needs are offered by other lenders.

A finance broker’s industry connectedness means that they have access to in-house information about lending processes, too. They know which lenders might negotiate or possibly provide rates below their publicised rates, and they can help simplify and compare the often-confusing features, fees, charges and conditions attached to loans, to suit an individual’s needs.

Overall, because of a broker’s ability to access competitive loans to suit your circumstances and because of their skill in navigating and guiding you through the loan application process, finance brokers often can offer you the best option – not only saving you money but time, energy, effort and stress.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

REFINANCING TRAPS TO AVOID

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Whether you’re after lower repayments or want to tap into the equity sitting in your home, refinancing can offer a world of benefits. Here are some things to be aware of so that you don’t find yourself hooked into a bad deal.

Don’t be fooled by the interest rate

Finding a lower interest rate doesn’t necessarily mean you’ve scored yourself a better deal. In fact, a product with more features may cost you a bit more in fees or interest, but could save you more in the long run. Including features such as an offset account will prove valuable as it will allow you to make larger repayments or put any extra cash against the loan. Products without this feature may charge a fee for early repayments.

Honeymoon rates are just that

Don’t be lured by offers with discounted introductory rates unless you’ve calculated the savings over the life of the loan. While a loan with a discounted interest rate seems a tempting offer, it’s only temporary. Once the introductory period is over, the interest will revert to a higher standard variable for the rest of the loan term. It may be more beneficial financially to negotiate a lower interest rate without an introductory discount.

Be aware of the fees

One of the main purposes of refinancing is to lighten the financial burden, however, that doesn’t mean that it’s not going to cost you. There are many fees involved, which may include discharge and application fees, a valuation fee, land registration fee, and mortgage insurance. You may also be subject to stamp duty depending on what state your property is located in. While these cannot be avoided, you have to ensure that the costs involved are not higher than the savings, to make the process worthwhile.

While there are traps to avoid, a little expertise can take the stress out of refinancing to save you thousands, fund that renovation, or simply find a loan that suits your life a little better.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

NO NEAR-TERM RATE HIKE FORESEEN BY RBA

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The Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy, the Reserve Bank of Australia governor Philip Lowe says.

After noting this week's global financial market turmoil hadn't shaken his optimism that Australia's economy will rebound this year, Dr Lowe said the next move in official Australian interest rates "will be up, not down."

But Dr Lowe indicated that the Reserve Bank was unlikely to follow in lock-step with international moves to tighten monetary policy across global central banks.

"Just as we did not move in lock-step on the way down, we don't need to do so in the other direction," he told the A50 Australian Economic Forum gathering of global investors hosted by Citigroup in Sydney last night.

Dr Lowe said he expects there to be "only gradual" progress in reducing the jobless rate and having inflation return to the mid-point of his 2-3 per cent target range.

"If we do make that progress, at some point it will be appropriate for interest rates in Australia to also start moving up.

"If this is how things play out, the likely timing will depend upon the extent and pace of the progress that we make.

"While we do expect steady progress, that progress is likely to be only gradual.

"Given this, the Reserve Bank board does not see a strong case for a near-term adjustment in monetary policy."

The speech included a suggestion that wages growth would eventually pick-up.

"Stronger growth in real wages would also boost household incomes and create a stronger sense of shared prosperity."

On the housing market, he said that prices are up by only around 3 per cent over the past year, with investors reducing borrowing in interest-only loans. 

"A while back we had become quite concerned about some of the trends in household borrowing, including very fast growth in lending to investors and the high share of loans being made that did not require regular repayment of principal.

"Our concern was not that developments in household balance sheets posed a risk to the stability of the banking system.

"Rather, it was more that they posed a broader macro stability risk – that is, the day might come, when faced with bad economic news, households feel they have borrowed too much and respond by cutting their spending sharply, damaging the overall economy.

"We have worked closely with APRA, including through the Council of Financial Regulators, to address these issues.

"This work, together with other steps taken by APRA, has helped improve the quality of lending in Australia."

In the housing market, Dr Lowe said there has also been a change.

"National measures of housing prices are up by only around 3% over the past year, a marked change from the situation a couple of years ago.

"This change is most pronounced in Sydney, where prices are no longer rising and conditions have also cooled in Melbourne.

"These changes in the housing market have reduced the incentive to borrow at low interest rates to invest in an asset whose price is increasing quickly.'

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

MORTGAGE INTEREST RATE PAYMENTS RISE AT FASTEST RATE IN 7 YEARS DESPITE NO HIKE FROM THE RBA IN 16 MONTHS

Mortgage-interest-rate-payments-rise-at-fastest-rate-in-7-years-despite-no-hike-from-the-RBA-in-16-months-mortgage-broker-sydney-prospera-finance

The cost of paying a mortgage for most Australians has risen at its fastest rate in more than seven years despite the Reserve Bank keeping rates on hold for the last 16 months, according to figures released amid fresh claims the "big four" banks are exploiting loyal customers.

Cost of living data, released by the Australian Bureau of Statistics on Wednesday, shows interest charges on mortgages for employed Australians rose by 4.5 per cent since December last year - more than double the official rate of inflation and in defiance of the RBA cash rate remaining frozen at 1.5 per cent.

On Wednesday, a withering report from the Productivity Commission accused the "four pillars" of the financial services sector - the Commonwealth Bank, Westpac, National Australia Bank and ANZ - of gouging loyal customers by offering them higher interest rates than they do new customers.

The commission found loyal customers were "ripe for exploitation", with one in two people still banking with their first bank while accepting interest rates on home loans up to 0.4 per cent higher than new customers.

It also found the Turnbull government and a key industry regulator had inadvertently provided a half-a-billion dollar windfall to the banking sector in their effort to cool surging east coast property markets.

Banks responded to orders from the Australian Prudential Regulation Authority to curb interest-only mortgages by raising interest rates - not just for new loans - but for all existing investor loans.

"It is completely unsurprising that faced with the opportunity to re-price their loan book as a consequence of a regulatory changes, banks did just that," the commission found.

The new ABS figures show the biggest quarterly increase in the cost of interest on a mortgage since the end of 2011.

The figures include all employees - even those without a mortgage - meaning the average interest charge rise for most mortgage holders is likely to be higher.

In contrast, mortgage interest rate repayment costs dropped by up to 5 per cent in three quarters between December 2016 and June 2017.

On Wednesday, Labor shadow treasurer Chris Bowen used the Productivity Commission's report to pressure the Coalition to reform negative gearing. The report found the policy was costing taxpayers $500 million a year alone in tax deductible interest repayments.

Treasurer Scott Morrison, who commissioned the inquiry, dismissed the report's findings.

He told question time he "did not agree" the extra interest cost of investor loans would be passed onto taxpayers.

It comes a day after Mr Morrison said he "drew upon his own experience and understanding" to dismiss advice from Treasury on negative gearing.

"The Productivity Commission's report does not take into account the fact that price growth in housing in Sydney has fallen from 17 per cent to 1 per cent," Mr Morrison told Parliament.

He said if the higher-growth environment had continued, investors would have been forced to borrow more through interest-only loans.  

"If what they're saying is true then every time the Reserve Bank either decides to lift or lower the cash rate, that is somehow a tax to the taxpayer," he said. 

Mr Bowen said Labor would consider giving increased powers to the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission to police competition in the sector.

Commonwealth Bank chief executive Ian Narev said banks already faced intensive scrutiny over last year's move to hike interest-only mortgage rates, and defended the level of competition in the sector.

“I don’t think Australia is short of people having a red-hot look at how banks are doing in terms of implementing these kind of macrorpudential requirements," he said.

Mr Narev argued "barriers to entry" in banking were coming down, and cautioned against only looking at bank profits at this point in the economic cycle, when very few borrowers were falling behind on their loans.

CBA announced a $4.9 billion profit for the first half of the financial year on Wednesday.

The Australian Bankers Association said it would carefully analyse the 600-page report and consult its members before making a submission, while smaller enterprises welcomed the findings.

"The productivity commission report is a diagnosis of the cold hard truth," said RateCity chief executive officer Paul Marshall.

The commission found "overwhelming evidence" few consumers read or understand terms and conditions for products purchased, and "it would not be hard to conclude that a segment of the financial system is motivated to keep it that way."

“For the banking sector to be truly competitive, the system needs to be reformed so that everyday Australians can compare products quickly without needing a finance degree,” Mr Marshall said.

Customer Owned Banking Association chief executive Mike Lawrence said the draft report "was a very welcome wake-up call about the state of the retail banking market and the need to take action to promote competition". 

A royal commission into Australia's financial services sector begins on Monday.

(Published in SMH : 7 Feb 2018)

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

HOW TO GET THE MOST OUT OF REFINANCING

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Everyone wants to pay less on their mortgage, and refinancing is one strategy to help lower your interest rates – but is it worth it?  We take a look at how you can get the most out of refinancing.

Why refinance?

Generally, people refinance to negotiate a better deal on their home loan and pay it off sooner.  Depending on your situation, you should be able to save money by taking advantage of lower interest rates, or new products that weren’t available when you first negotiated your home loan.

To help put it in perspective, let’s say you previously took out a $300,000 loan at 7.5% over 30 years with monthly repayments of $2,098.  If you refinanced to a new loan at 4%, you could save $239,543 ($665 per month) over the life of the loan by making the minimum repayments of $1,432 per month. 

Once you’ve refinanced, if you continued making the same minimum repayments as your previous loan ($2,098 per month), you’ll potentially save $346,912 and pay off your mortgage 165 months early.

Make it work for you

Take advantage of your refinanced loan by: 

  • Consolidating debts:  Home loan interest rates are often lower than those for other forms of credit, so you can save money by consolidating debts such as credit cards or personal loans into your mortgage.  Beware, however: paying off a short-term loan over a longer period will likely incur extra interest and fees over the longer term.  Put the money saved from consolidating your debts into your mortgage, as if you were still repaying the other debts, to reduce the overall debt faster.

  • ‘Splitting’ your loan:  Nominate a portion to be charged at a fixed rate of interest for a set period of time, with the balance charged at a variable interest rate.  When the fixed rate period ends, the loan reverts to the variable interest rate.  You benefit from the security of the fixed rate and flexibility of a variable rate loan, and are impacted less if interest rates rise.

  • Having an offset account:  The balance of your offset account is subtracted from the remaining principal amount before interest is applied, meaning you spend less on interest over the course of your loan.

  • Making extra repayments:  Any payments made on top of your regular repayment will save money by reducing the amount of interest you’ll pay.

When should you consider refinancing? 

Life brings change and your mortgage needs to keep up: maybe you now have a partner, a young family, a new job that pays more, or have become empty nesters with extra cash on your hands.  If the terms of your current loan don’t allow you to pay more (or less) on your principal amount, it could be worth considering refinancing into a more flexible arrangement.

Refinancing or loan switching can save money, but you might incur costs such as exit and establishment fees, government charges and administrative or legal expenses.  These costs need to be weighed against the benefits to determine if you’ll save in the long run.

Today’s home loan market is very competitive, and there might be a loan out there offering the features and flexibility you want.  Before you make any decisions, however, be clear on your reasons for refinancing.  It’s also a good idea to speak to an experienced mortgage broker or financial expert to ensure you’re making the right move for your financial situation.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

WHEN THE AUCTION IS PASSED IN – TO YOU! WHAT HAPPENS NEXT?

When-the-auction-is-passed-in-to-you-what-happens-next-mortgage-broker-sydney-prospera-finance

The hammer falls, the auction has ended, the bidding’s all done… and the property is passed in to you, the highest bidder.  You’re standing out the front of what could be your dream home, surrounded by curious neighbours, nosy passers-by and who knows how many other serious buyers.  So what now? 

What happens next? 

With the property passed in, as the highest bidder you have the exclusive first right to negotiate with the seller.  Only when you walk away can the agent start negotiations with someone else – so remember that you’re in the box seat. 

At this point the agent will invite you to come inside and negotiate – don’t go!  Once you’re inside, you’re in the seller’s territory and this may put you at a psychological disadvantage.  Make the agent go back and forth between you and the seller to keep the power in your hands.

By staying outside, you can also keep an eye on what’s going on, so you’ll know if there really are any other potential buyers hovering. Remember that time is on your side – the agent may have another auction to get to, and the seller has invested money and emotion in the auction.  They want to see a result.

A negotiating strategy 

If you’ve done your research and checked recent sale prices of similar properties in the neighbourhood, you’ll have a rough idea of what the house is worth.  This, along with the price the property was passed in at, should give you some idea of what the seller is hoping to get, not just the price range so often quoted by the agent. 

You may also have done a little due diligence on the seller – if you know why they’re selling, you might get a sense of how urgent the sale is.  Has there been a divorce that means assets have to be divided?  Is the property a deceased estate, with the heirs anxious to cash in?  Has the seller already bought another property? 

Finding the right price 

You know how much you can afford and how much you’re prepared to pay, and you now have some idea of what the owner wants.  Somewhere in there is the price you’ll be able to buy the house for. 

It’s not a bad idea to ask the agent how much the seller really wants if they haven’t disclosed the reserve.  Stick to your guns here – tell the agent that you’ve already made an offer with your passed-in bid, and it’s now up to the seller to come to the table. 

When negotiating, avoid telling the agent your walk-away price; they’ll try to get as close as possible.  Keep it vague.  Keep your emotions in check, too – real estate agents can smell emotional investment in a property at 20 paces. 

And stay a little bit flexible – spending slightly more than you planned probably won’t seem like such a big deal in four or five years’ time if it helps you secure the home you really want.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE

Borrowing Money for Renovations: What You Need to Know.

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You’ve been dreaming of that new kitchen and dining room for as long as you can remember, and now the time has come to put your plans in motion.  But do you really have the budget to afford the works?  Here are a few things to think about before making the leap from Pinterest board to blueprints.

Workout Your Budget

Before you look at borrowing any money, you first need to work out how much your renovation will cost.  Get “Ask An Architect” to send you their comprehensive guide to costing a renovation.

Before you finalise your plans, you can arrange for a building inspector to help identify any structural work that might be needed.  Major work could significantly increase your budget, so it may be worthwhile to talk directly to a professional to get a more tailored understanding of how much you’re up for.  Architects and master builders are usually happy to provide a quote, so think about getting more than one quote to give you an idea of the range.

In addition, add a percentage for contingencies: most experts recommend that you add another 10% to 20% to the overall budget to cover the inevitable delays and complications that arise throughout the renovation process.

Once you know what the costs may be, you can start to think about how to raise the cash.  Of course, in an ideal world you’ll have saved up at least part of the amount beforehand, but renovations can run into the tens or even hundreds of thousands, so most people will need to borrow some money.

Unlock Your Equity

If you’ve been in your home for a while, chances are that you have considerable equity, both as a result of paying off your initial home loan and from rising property values.

Equity is the amount of your home that you own; that is, the value of your property, less the outstanding loan amount. For example, if your property is valued at $500,000 and you owe $300,000 on your loan, your equity is $200,000 ($500,000 – $300,000 = $200,000).

As long as you can meet the repayments and the renovations are likely to add value to your property, most lenders should be willing to lend you a percentage of your equity for home renovations.  Depending on your situation, this equity could be accessed through redrawing, increasing your existing loan or refinancing your loan entirely.  A mortgage broker will be able to advise on the best option for you.

Building Loans

Most home loan providers will offer a product called a building or construction loan, which acts as a line of credit that you can draw on as renovation costs become due.  The advantage of these are that you aren’t making repayments on the full value of the loan at once, but only on the progressive loan balance, which will change over time.  That means you can start to pay off the first invoice before the next ones come in, saving you money overall.

Your broker can assist in checking with your home loan provider whether the loan is ‘interest only’ for an initial period.  If it is, this will also help to keep your costs down during the crucial building period.  If the provider doesn’t have a specific building loan, they may let you have a general line of credit, which functions similarly.  Once the renovations are finished, the loan or line of credit can even be rolled into your home loan.

Personal Loans

Especially where a renovation is small – perhaps you just want to update your kitchen without any building works – you might consider a personal loan.  As personal loans are generally not secured against your property, the interest rates are usually higher.  However, as the term of the loan is much shorter, you should pay less interest over time.

Each option has advantages, so it’s worth spending some time considering them carefully. Remember, your mortgage broker can always help you with any questions you might have.

PROSPERA FINANCE — Geoff Norman

MOBILE LENDER PROVIDING MORTGAGE BROKERING SERVICES TO NORTH SYDNEY | CROWS NEST | ST LEONARDS | GLADESVILLE — FINANCING HOME LOANS — FIRST HOME BUYER LOANS — CAR LOANS — LOW DOCUMENTATION LOANS — EQUIPMENT LEASE