From your local mortgage broker Dylan Salotti, Divitis Finance

What are the steps to getting a loan?

1. Initial conversation
This is when we discuss your financial situation, needs and objectives

2. Returning your statement of position and supporting documents
Once you’ve decided to go ahead with the process we’ll gather more details about your current situation, we’ll also ask you to provide the supporting documents required by lenders which will allow us to give you a more accurate assessment

3. Preliminary Assessment
Once you have returned your documents we will complete an initial assessment of your situation, this includes establishing your ‘borrowing capacity’ (how much you can afford to borrow), your ‘funding position’ (calculating your loan amount) and completing a ‘Product Comparison’ (comparing the best loans for you)

4. Submit to a lender
Once you’ve reviewed your options and selected the most suitable loan for you we’ll prepare to submit your application to the lender

5. Conditional Approval/Pre-approval
Conditional/Pre-Approval is not full approval. The lender generally issues an approval subject to particular conditions relating to your chosen security, loan amount and funds available. Most conditional/pre-approvals are valid for 90 days which means you have 3 months to find a suitable property (this deadline can usually be extended by providing new supporting documents to the lender)

6. Valuation
Once you’ve found a property the lender will send a valuer to inspect the property

7. Unconditional Approval/Formal Approval
The lender issues unconditional/formal approval once they have completed a full assessment and confirmed that they will lend you the money for your property purchase

8. Loan Offer Issued
Once your loan has been formally approved the lender with send out loan offer documents for you to review and sign. Once you’ve signed, return the documents to the lender with any additional requested information

9. Settlement
On receipt of the sign loan documents the lender will certify these documents and contact your solicitor to book in a settlement date

How much deposit do I need? And what is LMI?

Unless you are using a security guarantee (which allows some people to purchase property without a deposit), then you will be required to make a deposit towards the property. The minimum deposit required will vary from lender to lender and also depend on whether you are purchasing to live in the property or for investment. Owner Occupied will typically require a minimum of 5%-7% deposit whereas Investment typically requires a 10%-12% minimum.

It’s nearly always a case of the bigger the deposit the better. If you are borrowing 80% or less of the value of the property you won’t usually incur any further charges. However, if you have less than a 20% deposit you will incur the additional cost of Lenders Mortgage Insurance (or LMI for short). LMI is insurance that protects the lender in case you default on your home loan. The LMI premium is a one-off fee deducted from your loan amount on settlement, unless you choose to pay it upfront.

How do House & Land loans work?

Most House & Land packages will be separated into 2 mortgage applications. The first component is the loan for the vacant land. The second part is the construction/build component. The land will be approved and settled first followed by the construction loan that will only be approved after the land settles. A construction loan will be taken out for the build/construction component and the bank will pay the funds directly to the builders in stages (known as “drawdown”) as the building works are being completed.

Should I use a bank or a broker?

Bank
• Banks can only offer you their own products
• Banks credit policies are ridged and may not fit with your financial situation
• Banks won’t guide you through the application process which could lead to errors and therefore delays
• Banks don’t usually charge you to set up a home loan, however, if you don’t shop around you could be paying much more in interest than you need to

Broker
• Divitis Finance is an independent mortgage brokerage who work with a panel of over 25 lenders, therefore, they can find a lender that is the right fit for you
• Mortgage brokers use their knowledge of the wider market to find lenders who’s credit policies work with your situation
• Brokers are there to do the legwork for you, chasing up the bank on your behalf which generally speeds up the process from application to settlement
• Brokers are paid on settlement by the lender, so you get all their assistance, research and knowledge for free!