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Most lenders will lend up to 95% of property valuation where a single property is offered as security for the loan, provided the property is assessed as being a suitable security. Some lenders will also add most of the Mortgage Insurance premium to the loan amount, provided the total loan amount does not exceed 97% of valuation. Refer “Lending Updates” link.

 

 

100% Finance Loans

Most lenders will lend up to 95% of property valuation where a single property is offered as security for the loan, provided the property is assessed as being a suitable security. Some lenders will also add most of the Mortgage Insurance premium to the loan amount, provided the total loan amount does not exceed 97% of valuation. Refer “Lending Updates” link.

Several banks will lend 100% of the purchase price where another property, usually the parental family home, is available as additional security for the loan.

Example: if the purchase price is $400,000 a 100% loan can be structured as follows:

$320,000 (80%) loan in the purchaser’s name secured by the new property
$80,000 (20%) loan in the purchaser’s name secured by the parents’ property

Parents are required to sign normal mortgage documents as well as a property guarantee limited to the amount of $80,000.

Important points to consider with these loans include:

  • solid income proof and employment history are required
  • parents must be willing participants and receive independent legal advice before signing documents
  • NO MORTGAGE INSURANCE is payable, saving about $10,000 in the above example
  • when the total loan balance reduces to 80% of the purchased property value, the parental guarantee and mortgage over their home can both be terminated

What is a Reverse Mortgage?

A reverse mortgage is a finance facility which has been specifically designed for senior Australians to help them access the substantial amount of equity tied up in their homes. Funds borrowed against the equity in their home can be used for any purpose to help seniors enjoy a better quality of life than would otherwise be available.

Reverse mortgages have rapidly become an important retirement planning solution allowing seniors a flexible way to finance important projects without being forced to sell the family residence and without the worry of having to make regular monthly repayments to the lender.

Funds can be taken in the form of a cash lump sum, monthly income, a cash reserve fund or a combination of all these methods.

The lender will register a mortgage over the property and hold the title as security in the normal manner. Income is not assessed and monthly repayments during the life of the loan are not required from seniors but may be made voluntarily. Generally, but not always, the outstanding loan balance, including accrued interest and fees, is repaid when the house is sold or passes to the estate of the last surviving borrower.

What is an Accommodation Bond?

An Accommodation Bond is an amount paid to an aged care provider so seniors can gain entry to an aged care facility. It is basically an interest-free loan that the resident makes available to the aged care provider, the bulk of which must be repaid by the provider when the resident leaves the home or passes away.
Depending on the facility, an Accommodation Bond charge may range from $130,000 to over $400,000. It is designed to cover the cost of gaining access to the facility.

Funding an Accommodation Bond for aged care has usually involves selling the family home. A simple and effective alternative is now available. Accommodation Bonds can usually be arranged within three weeks, allowing the home to be retained by the family.

What is a Deposit Bond?

In Australia when a person or entity enters into a contract to purchase residential property, it is common practice for the purchaser to lodge a cash deposit of up to 10% of the purchase price with the vendor’s solicitor as security for the purchaser’s obligations. The deposit gives the vendor (the seller) a fund which they can claim if you fail to complete the transaction.

A Deposit Bond, by agreement with the vendor, can replace the need for a cash deposit. It is a convenient way of purchasing a property without the need to arrange a large cash deposit or immediately cashing in or selling an investment that may mature at some point in the future. The Deposit Bond is issued by an insurer to the vendor for all or part of the deposit required.

If the purchaser fails to complete the purchase of the property, the vendor or the holder of the Deposit Bond has the right to present the Deposit Bond to the insurer and claim the full amount of the Deposit Bond. The insurer will then seek reimbursement from the purchaser for any monies paid by it plus any other costs and expenses.

In essence, a Deposit Bond enables the purchaser to defer payment of the 10% deposit until settlement date.

A Deposit Bond is NOT a policy of insurance. It is a form of guarantee.

Under a conventional mortgage, you borrow funds from a lender to purchase a property, then make regular “principal and interest” repayments to the lender. Over time, the loan balance reduces and eventually you repay the loan in full and own the property outright.

With a reverse mortgage, the process operates in reverse. Seniors generally own their property outright to begin with and a lender advances you funds for your personal use. As you are not required to make any repayments, interest and fees are added to the loan balance each month, so the loan balance increases over time. The loan is paid out when the property is sold or refinanced by beneficiaries.

Basically, any type of personal debt can be refinanced from one lender to another as part of a residential mortgage refinance proposal, including:

  • Home loans
  • Investment loans
  • Equity access loans
  • Personal loans
  • Credit card limits
  • Personal overdrafts

Business loans may be considered if the new lender is willing to incorporate such debt into their residential mortgage facility. For example, an existing business related debt may be refinanced as part of a new Equity Access Loan sub account.

Commercial loans will generally not be acceptable as part of a residential mortgage refinance proposal.

  • Standard Variable Home Loans:

    This loan has all the features you want in a home loan with a standard variable rate. No interest rate discount is offered to this loan and normal fees may apply.

  • Basic Variable Home Loans:

    This loan has most of the features you want in a home loan with a lower variable rate. These loans are often available with no establishment or ongoing monthly fees. Very attractive to buyers who want to reduce their monthly repayment and save on fees, while still having most of the regular loan features.

  • Professional Package Home Loans:

    These loans have a reduced variable rate with no establishment or ongoing monthly fees on the first loan or any subsequent loans taken. Other benefits include discounts on insurance products, credit cards, financial plans or transaction accounts. Most lenders will charge an annual fee of $300-400 on these loan types.

  • Low Doc Variable Home Loans:

    This loan is designed specifically for self-employed people who do not have sufficient proof of income to qualify for a normal loan. Higher deposit is needed and rates will be higher with this loan.

  • Offset Variable Home Loans:

    Your loan account is linked to a separate savings account to enable interest earned on the savings account to offset or reduce the interest which would normally be calculated on the loan account.

  • Parental Guarantee Loans:

    This loan allows parents to offer their home as additional security so that 100% of the purchase price can be borrowed, plus costs in some cases.
    The loan will not exceed 80% of the combined security value and no mortgage insurance will be payable. See What is a Parental Guarantee? FAQ below

  • Property Share Loans:

    An easy to manage home loan option which allows friends or relatives to purchase a property together but keep their loans separate.
    For example, a $400,000 loan can be split into two separate portions with two separate account numbers. Property Share can help first home buyers and investors to make a puchase which might not otherwise occur.

What is an Equity Access Loan (or Line of Credit)?

This is a mortgage secured credit facility where an overall credit limit is approved by the lender and may be drawn down at any time for any purpose up to but not exceeding the approved limit.

These loans are usually taken by people who already own a home or have good equity.

For example, if you own a $400,000 property outright, you can usually arrange an Equity Access Loan (EAL) of up to $320,000 or 80% of the property value without arranging mortgage insurance. If you have a $100,000 home loan limit outstanding , your lender will be able to approve a separate Equity Access Loan for a limit of $220,000. Of course, approval will depend on your ability to prove sufficient income to qualify for the loan.

Historically, in order to raise the funds for a bond, the family home has often had to be sold. This is a difficult decision and will inevitably cause stress if a forced sale has to be made quickly. Many seniors are now aware that they can access some of the equity in their home by arranging a reverse mortgage to meet the accommodation bond requirements of many aged care facilities. This means that the family home, which will usually increase in value, does not need to be sold and can be retained for beneficiaries.

A Deposit Bond can be a quick and efficient way of arranging the deposit for the purchase of a residential property. Arranging a cash deposit may take time, especially if the purchaser has not sold their current property or needs to sell investments to raise the required deposit.

Deposit Bonds enable purchasers to take advantage of opportunities when they arise.

The amount seniors can borrow is generally based on two key factors:

  • the value of the security property as determined by the lender’s valuer
  • the age of the younger borrower. This is the principal factor in setting the allowable “loan to valuation ratio” or LVR. For example, if a 70 year old is married to a 65 year old, the maximum loan amount is calculated based on the younger borrower’s age.

The following table is a guide to what percentage of the property’s value can be borrowed, based on the age of the younger borrower:

Age % Note: Different lenders have different LVR policies. This table is a guide only.
65 – 69 20
70 – 74 25
75 – 79 35
80 – 84 40
85 + 45

Borrowers generally refinance because they are dissatisfied with their existing arrangements for different reasons such as: having too many accounts, combined monthly repayments being too high, interest rates being too high, account fees being too high, a dispute with the existing lender etc. Perceived advantages in refinancing will be linked to one or more of these factors. Benefits can include:

  • reducing the number of accounts you are operating and making things simpler
  • reducing your total monthly payments by possible consolidation of debts
  • obtaining a better rate from another lender
  • reducing fees
  • taking advantage of another lenders special offer or better loan conditions
  • your overall loan position may be improved by refinancing and restructuring

If you are considering refinancing an investment loan, it is worthwhile to speak with your Accountant first to ensure that you are optimising your taxation position by having the correct structure of owners, borrowers and security properties on the new loan.

Most lenders will approve 90% of the purchase price and then add the mortgage insurance premium to the loan amount as well. This could bring the total loan to approximately 92% of the price. You would then need to contribute

  • 10% deposit
  • State Government stamp duty
  • Titles Office fees
  • your solicitor’s fee
  • your share of the annual Council rates charge

A few lenders will approve 95% of the purchase price which means you will need a 5% deposit. You will then pay a higher mortgage insurance premium because of the additional risk to the lender. The other fees and expenses listed above must still be paid.

The First Home Owners Grant will assist you pay some of the State Government stamp duty, but usually not all of it.

In general terms, the best course of action is: start saving as early as possible, save as much as possible and keep your bank statements to prove your savings record.

What our customers say about us

Thanks for all your help and for making it so easy for me. Life will be so different now.

Jan Vincent
Montrose, VICTORIA

Thank you for your time on the phone yesterday and copying me into the below email.
I just wanted to take the time to say that I have never seen such a comprehensive email provided to clients by a Broker before. Very clear and detailed.
I hope it’s ok that I hold onto your details to refer to clients who may need assistance.
Kind Regards,

Shannon Oatley
Director & Licensed Conveyancer
Property Conveyancing Group, VICTORIA

We have found Barry Le Brocq of Melbourne Mortgage Finance to be very patient, caring and diligent in achieving a successful outcome to our refinancing requirement. We have no hesitation in recommending his services to others.

Don & Christine Perrett
Leongatha, VICTORIA

Many thanks Barry for the exceptional service that you have provided. We will most certainly be recommending you to our daughter (Bank of Melbourne branch manager) for any future customers who need a reverse mortgage loan.

Paul & Barb Spark
Somerville VICTORIA

 

LENDING UPDATE 14.06.19

  • LIVING EXPENSES ARE NOW A KEY ISSUE
  • COMPREHENSIVE CREDIT REPORTING NOW IN EFFECT
  • INVESTMENT LOANS AT OWNER-OCCUPIER INTEREST RATES
  • REVERSE MORTGAGE LOANS FOR SENIORS OVER 60
READ MORE

Melbourne Mortgage Finance offers an extensive range of mortgage products and services including

Home Loans, Investment Loans, Equity Access Loans, Low Doc Loans, 100% Loans, Refinance Loans, Commercial Loans, Deposit Bonds, Reverse Mortgages, Accommodation Bonds, Vehicle Finance, Plant and Equipment Finance, Financial Planning and Business Finance.

IMMEDIATE appointment can be made to meet at your home or office

  • NO CHARGE for assisting you. We receive a standard fee from the lender you select
  • reliable service, communication and follow-up. See “Testimonials
  • accreditation with 20 national lenders, allowing you to select from an excellent range of loans
  • we carefully listen to your needs, do our research, then present you with a short-list of three potential loan solutions. You choose the lender.
  • printouts of products, fees, interest rate and loan features are provided
  • arrange for your property insurance and personal insurance requirements to be assessed
  • ongoing availability to assist you after loan settlement
  • over 30 years experience in arranging finance and mortgage loans