100% Home Loans Officially Dead
St George will officially remove their no deposit home loan product as of 9th April 2009. This means they will no longer offer 100% home loans to its consumers.
As mentioned in an earlier post back in January, 100% Home Loans – The No Deposit Mortgage is a Dying Breed, it was a matter of time before 100% home loans are removed entirely from the Australian mortgage market. As of the 9th of April this will be the case.
We will also see lenders reducing the amount they will lend against a property. Commonwealth Bank announced this week that they will only lend up to 90% of the properties value for new customers. This follows ANZ, ING and Citibank reducing their lending up to 90% of the properties value.
These policy changes that will make it difficult for home buyers to enter the market.
The next major shift will require applicants to have at least 3 to 5 percent in genuine savings for a minimum of 3 months. This can be in the form of cash in a deposit account, shares or equity in another property to be considered for a loan.
As the major lenders are experiencing unprecedented loan volumes, I can only predict that lenders will continue to tighten their lending policy to reduce their overall risk .
Home Loan Specials – Discounts on Mortgage Rates and Fees
These specials are for a limited time only.
Westpac Refinance Offer
$600 rebate for those looking to refinance to Westpac plus no establishment fees. This could save you up to $1,000 off your refinance costs. Ends April 12th 2009. Only a available under their premier advantage package.
Westpac Fixed Rates
Customers will receive 0.20% discount on all fixed rate loans under the Premier Advantage Package.
Commonwealth Bank Home and Investment Loans
$0 Loan Service Fee for the life of the loan on our 3 Yr Special Rate Saver on new borrowings only.
Citibank Home Loans
$0 Application Fee Basic Variable Loan. Saving $345 in application fees
St George Fixed Rate Loans
0.15% off Fixed Rates when applying for the Mortgage Advantage Package For a Limited Time.
Available for new applications and existing customers for borrowings of $150K or more.
Introductory 1 Year Fixed Rate, Low Doc and No Deposit Home Loans are not eligible.
This discount is not available on Interest in Advance Loans.Pre-approvals are not eligible for the 0.15% p.a. discount
To find out more about these specials or a home or investment loan suitable to your lending needs please contact us or submit a mortgage enquiry.
Home Loan Lending Tightening Up!
Filed under: First Home Buyer, Home Loans, Mortgage Scenarios
Home loan lending is certainly tightening up. Yesterday RAMS announced that they are removing their 100% home loan product for risk management purposes.
With now only one reputable lender offering 100% home loans, it is going to become more difficult for those with out a deposit to get a mortgage.
Banks and other lenders also require home buyers to have a minimum 3% to 5% deposit sourced from genuine savings for a minimum of 3 months. Genuine savings can be in the form of bank deposits, shares, equity in another property and for some lenders rent paid over a 12 month period.
Not all lenders require genuine savings for a successful application but similarly to 100% home loans we will see a shift towards most lenders require savings of some sort before they will accept a potential borrower.
Banks Revising Their Hardship Policy For Home Loans
Due to the economic down turn, Australia’s major banks are revising their policy for home loan customers that are experiencing financial difficulty.
The banks are looking to extend their repayment holiday policy. This means that a customer experiencing financial hardship will not have to make mortgage repayments for the specified term. However, the intrest on the loan is capitalised (added to the loan) and repayments will commence as soon as the period has ended.
Commonealth Bank announced that they can provide an extra 6 month home loan repayment holiday which can now be extended up to 12 months. ANZ said they are looking at a similar offer.
Westpac said it also offers repayment holidays along with a range of measures that can help their customers for many years while NAB assess their customers on a case by case basis.
If you are experiencing financial hardship it is important to contact your lender early. They can implement measures that can save you from defaulting on your loan and help reduce mortgage stress.
Mortgage Insurance – What Is It?
What is it?
Lenders mortgage insurance only protects the lender and not the borrower. In the event the borrower defaults on their mortgage repayments and the lender has to sell the property, mortgage insurance will cover the deficit between the sale price and the loan amount.
I get many questions from clients asking about lenders mortgage insurance (LMI) and I would like to clarify what it is and how it differs from lender to lender.
When Is Mortgage Insurance Paid?
Mortgage insurance is paid when a person borrows more than 80% of the properties value and they can fully declare their income. This means proving employment with evidence of latest pay slips and tax returns. Self employed persons will need to show a minimum of two years personal and company tax returns.
If applying for a low doc loan, where a person self declares their income without providing fincial evidence, then mortgage insurance kicks in between 60% and 80% of the properties value.
How Much Does it Cost?
Mortgage insurance is a one time only payment and is usually added to the loan. The cost of mortgage insurance becomes more expensive as the borrowed amount against the properties value increases as well as the actual loan amount.
For example, assuming a property is worth $400,000 and Borrower A lends $340,000 (85% of the properties value) then they would pay significantly less than Borrower B if they borrow $380,000 or 95% of the properties value.
Also, if two borrowers were to lend 90% of a properties value and Borrower A’s property is worth $300,000 and Borrower B’s property is worth $500,000 then Borrower A will pay significantly less than Borrower B
Also, mortgage insurance can vary significantly from lender to lender. In some cases by as much as $5,000 . Ultimately, this may be the difference between choosing one lender over another.
To assess how much mortgage insurance you will pay from each lender it is advisable to get a quote from an experienced mortgage consultant who can quickly calculate the cost difference or you can simply contact us.