Home Purchase Through Mortgage Finance Lending Australia Companies

By Jocelyn Davidson

Most people do not have the means to buy a house on cash basis. The common option is to borrow to buy one. Financing is done by mortgage finance lending Australia companies. It all starts with getting pre-qualified for a loan by putting in applications to potential lenders. Lenders look at income, other liabilities one might have and other factors will be taken into account before an application is approved. This is essentially of how credit worthy an applicant is.

Getting pre-qualified by more than one lender is advantageous. Lenders can only make money from credit worthy borrowers. Two or more pre-qualifications can therefore be used to bargain for better loan terms, mostly reduced interest rates. Once this is done, what follows is getting pre-approval.

This means getting approved for the maximum amount you can borrow. After pre-approval, you can start shopping for a home for the amount you have been pre-approved for. Again, getting pre-approval as well as pre-qualified by more than one lender put you in a better position when you are making offers on homes.

In Australia, there are mortgage brokers and mortgage banks. Brokers do not actually lend money. They look for the best options for clients and advice them. One shortcoming with brokers is that they do not engage with lenders directly and so cannot talk to a lender to negotiate for better terms or to protest an application that has been turned down.

Mortgage banks are that actual lenders. However, they limit what they lend to the pre-approved amount which may fall short of the price of the house a borrower wishes to buy. However, many banks act act as both lender and broker as well so clients the best of both.

In addition to the conventional financing of home purchases, there are other options. One is what is known as seller financing where a home seller takes up the mortgage themselves. Then there are private lenders who offers loans based on the value of a home. However, their loans are short term and their interest rates are typically higher more so for those who have failed to secure loans from banks.

Those buying their first home should first understand the available options. Mortgages bind one for a long time and a poor choice can cost one so much over the duration of the loan while a good one can amount to a tidy amount in savings. In Australia, there are products tailored specifically for first-time buyers. One such product is introductory or honeymoon loans. With this loan, first-time buyers get loans with interest rates reduced for a given period of time. 12 months is typical but it may also be 6 months or 3 or 4 years depending on the lender.

This is effected in one of two ways. It can be through a fixed discount or a discounted fixed rate. With a fixed discount, the rate is variable but it is fixed at a certain level or a margin below the standard variable rate. Therefore, during the period that the discount is valid, the discounted rate will vary as market rates change. For instance, if the standard variable rate goes up by 1%, the discounted rate will go up by the same percentage. On the other hand, with a discounted fixed rate, the rate is fixed for the duration the discount is valid and it does not change as market conditions change.

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