Written by Anita Butcher
Anita is a final year journalism student at the University of South Australia.
With a passion for community and local events, you can hear Anita on your airwaves, working for some of Adelaide’s most prominent community radio stations – Radio Adelaide, Fresh FM and Three D radio.
Anita has a keen interest in different cultures, being of Latvian heritage herself. She teaches at the Latvian school of Adelaide, regularly emcees events for the Latvian community and dances with folk dancing group, Auseklītis.
Everything an Agent Should Know
(But Probably Doesn’t)
A Mortgage Broker’s guide for Real Estate Agents
Discussing finance is all part of the job for a real estate agent. But how much do you really know about the current financial options? And what steps can you take to assist in future sales?
Jaidan Ianni is a Mortgage Broker at Go Loans and understands there are many challenges that agents face when selling a property, especially when it comes to finance.
So how does an agent find out if a buyer can do a deal, or if they’re just wasting time?
Ianni believes that understanding what is available to borrows in today’s climate can empower both agents and buyers.
Knowing that first home buyers can use 12 months rental history as genuine savings is just one of his tips, that is useful for when prospective buyers insist they do not have genuine savings.
As a mortgage broker, Ianni also thinks real estate agents should be more confident about asking the financial situation of a potential buyer.
“Some agents don’t have the confidence to ask about finances directly, but some clients don’t want to give that information either. If possible, ask the buyer if you can speak to a broker or bank manager, to find out how strong an applicant is. You don’t have to ask specific numbers, but the broker or bank manager can then give an agent confidence to say where it’s at, and how likely a sale is,” he said.
With this knowledge armed don’t let potential buyers get away. With more qualified buyers means more sales for you.
For more information contact Jaidan Ianni on details below get your buyers qualified.
Did you know?
- Some Lenders don’t even conduct Valuations (LVR dependent)
- Depending on the lender – formal approvals can be achieved within 72 hours.
- Some lenders do not have post code restrictions.
- Some lenders pre-approvals are not worth the paper they are written, on as the information has not been truly been assessed.
- If an existing property needs to be refinanced, the process could take up to 6 weeks.
- The floor size of an apartment can be as small as 40m2 but most would like 50m2 as a minimum.
- Some lenders do not have post code restrictions.
- Buyers who are putting an offer in subject to finance should provide a copy of their pre- approval.
- Though interest rates are an all-time low banks have to assess loans at 7.25% as a minimum.
A Mortgage Broker’s key financial terms
LVR (Loan to Value Ratio): This is how much a buyer is borrowing against the property value (not including purchase costs), in the form of a percentage. The Maximum LVR for a bank is 97% including bank fees.
Lenders Mortgage Insurance: Once the buyer borrows more than 80% of the property value, the banks needs to get insurance which the borrower must pay for (as explained in LVR). The amount is calculated by a sliding scale, which increases as the LVR and size of the loan increase too. If the LVR is lower than 80% it is much easier to get finance. If the LVR is above 80%, the banks have to get mortgage insurance to approve the loan, and lend a buyer the money. By avoiding insurance, there are less hurdles for the buyer to overcome.
Funds to Complete: The remaining funds needed to purchase, other than the loan against the new property. Knowing where these funds are coming from will help determine the strength of an applicant and their savings or can even be borrowed in some cases.
Security Guarantor: A person who guarantees part of the loan to secure against their property. This is usually a family member, and the guarantee is for up to 20% of the purchase price. Guarantees are then liable for 20% if the borrower defaults. Remember this when first home buyers cannot come up with a big enough deposit can their family help.
Borrowing Capacity: How much an applicant can borrow, taking into account their income and current debts. This can vary by more than $40,000 between lenders sometimes. On its own it does not determine the purchase price, as deposit will also have an impact. Remember this if a client is only just short on the purchase price there may be another lender that will allow the borrow more.
Pre-approval: This is initial approval based on income for borrowing capacity and funds to complete. It is important to note that pre-approval generally only lasts up to 3 months, and if the lender changes their policy before a property is found, the applicant may need to be reassessed. In some cases, they are no longer pre-approved. A property generally needs to be valued to complete the formal approval process. Some lenders preapproval is not worth the paper they are written on as the information has not truly been assessed.
Genuine Savings: a savings pattern established over 3 months, savings held without out a decline or equity in property. 12 months Rental history can be accepted as genuine savings with some lenders.
Bridging loan: finances the existing property, new purchase and the costs before the existing property is sold. This is not a used often as there is simpler ways to complete the finance if the client speaks to a broker before rushing into signing contracts on a property
Usable Equity: this can generally worked out from the value from the current loan, up to 90% of the property value.
Equity Release: This is when a buyer can increase their loan to access the equity on their current home. This can be another way a client can come up with the funds to complete instead of savings and not rely on the selling the existing property to purchase.
SIDA Pty Ltd as Trustee for SIDA Unit Trust trading as Go Loans | ABN 37 135 223 308 | ACN 135 223 308 | Australian Credit Licence Number: 449055