Why use a Mortgage Broker?

 

In an ever-increasing world of complexity when it comes to banking and, in particular, sourcing a loan for your home, business or car, the value of a Mortgage Broker has never been higher.

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Essentially a Mortgage Broker acts as an intermediary between your (the borrower) and lenders.  But before a loan can be recommended Brokers must work with you to understand your goals and circumstances so the right lenders and loan products can be compared.

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Through their education and experience provident brokers are highly informed about the nuances of buying a property , from undertaking research to find the right property , to sourcing the finance approval through to the steps you must go through to settle on the transaction and will be there to answer any of your questions through the process.

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All Provident mortgage Brokers are registered with ASIC, members of the Finance Brokers Association of Australia (FBAA).

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How are Mortgage Brokers Paid?

 

At Provident depending on what service you require we are paid in 2 different ways.

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When acting as a Mortgage Broker for regulated or consumer lending that is Home Loans, personal loans, individual car loans.  We are paid a commission by the lender.

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Important to note, no matter the commission we are paid by the lender the rates and fees for you loan do not change, rather the banks are paying a commission to brokers in places of a sales wage or bonus they would pay to in branch staff.

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Commissions we receive are transparent as part of the application process we will disclose the commission paid to us in or Credit Proposal and the lender will again disclose this in your mortgage contract.

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The rates of commission between lenders are much the same, so as mortgage Brokers we are impartial to which lender we recommend. Recommendations will only ever be made based on your particular preferences and needs.

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In the case where you have a complex business or commercial finance request, business asset finance or are utilising Provident Cash Flow Advisory services a Fee for Service may be applicable.

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In these cases, all fees will be quoted and agreed upon prior to work commencing so there is no confusion about what is to be paid and when.

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Why is being an FBAA Member important?

 

The FBAA or Finance Brokers Association of Australia is the peak industry body for mortgage and finance broker professionals.

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As members, Provident Brokers have demonstrated they have not only achieved the initial educational qualifications  to become a broker, but in their first 2 years of being a broker have passed through 2 years of Industry mentoring, ensuring they get the right guidance and experience to provide you the right recommendations.

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FBAA members have an ongoing obligation to meet a minimum of 25 hours of ongoing industry relevant training a year, and by being members, they are also obligated to conduct business within the FBAA’s Code of Conduct.

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What is LVR?

 

LVR or Loan to Value Ratio is a key calculation when deciding how much you can borrow against a particular property (Security).

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The loan to value ratio (LVR) is calculated by dividing the amount that you borrowed by the value of your house.

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For example, if you borrow $350,000 and your property is valued at $420,000, your LVR is 83%.

        $350,000/$420,000 = 0.83X100 = 83%

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LVR is particularly important to consider when seeing if you will have to consider Lenders Mortgage Insurance (LMI) as part of your mortgage application. 

 

Typically, any lending above 80% LVR will have LMI as part of the application.

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What is LMI?

 

LMI or Lenders Mortgage Insurance is an insurance that protects the lender in the event of the borrower defaulting on the loan.

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That is if there is an event of default and the security property needs to be sold to repay the lenders debt and there is not enough t from the sale to payout the loan LMI will cover that shortfall.

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Important to note this Is not an insurance that protects the borrower, but the lender.

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Ideally you would aim to have enough deposit (20% or more) to avoid lenders mortgage insurance, but practically this is not always possible especially for first home buyers.

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In the case where you have limited deposit and require LMI;

•  ensure you factor as an additional cost or are aware it will increase the amount you borrow.

• Ensure you have your loan as principle an interest to start repaying the loan from day one and

• don’t look to purchase property where LMI is required if you plan to hold the property only for a short time, as it will be hard to recover this additional cost in a short time.

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For low deposit home loans a Family or Security Guarantee can assist in avoiding LMI.

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How much deposit do I need to buy a property?

 

Deposit is the amount of cash you can contribute to the purchase of a property.

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The amount you need to buy a home could be as little as 2% for a first home buyer, 5% plus purchase costs for a second home buyer. 10-15% for an investor or 20% plus purchase costs if you are wanting to avoid lenders mortgage insurance.

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When you’re thinking about your deposit, think of it this way: The bigger your deposit is—the less you’ll have to borrow—the lower your repayments will be.

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Your Provident Lending Consultant will assess your personal and financial circumstances and work with you to determine your deposit requirements.

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What is a Family Guarantee?

 

Your parents or immediate family members can help you if your financial situation does not appear secure enough for the lender.

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Acting as a security guarantor means they mortgage their property as additional security for your home loan.

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Having a guarantor may allow you to borrow more money or possibly avoid paying lenders mortgage insurance all together.

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There are important considerations for both borrower and guarantor when considering a Family Guarantee. We encourage both parties to obtain independent financial and legal advice when considering this as an option.

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Which Banks do you use? 

 

Provident Lending and Business Solutions has access to over 30 banks and lenders, ranging from the “Big 4” through to second tier funders such as Bankwest and Macquarie through to online lenders, mortgage managers and white label mortgage products.

   

You can get a full list of the mortgage lenders we are accredited with by requesting a copy of our Credit Guide.

 

We do not only assist with mortgages and beyond these we have a full suite of funders to assist with purchase of a car, funding a business purchase, assisting with cash flow gaps or even personal loans. 

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As an independent Brokerage operating under our own Australian Credit License, we have no vested interests from banks or aggregator businesses. Therefore, the lender and product options will be recommended to you based on what is important to you not what is important to shareholders. 

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