Newbridge Home Loans

Your borrowing capacity is calculated based on the surplus savings you have left at the end of the month after accounting for income and expenses, including living expenses, the number of people in your household, and any existing loans.

The easiest way to increase your borrowing power is to reduce your credit card limits. Additionally, you can:

• Pay off existing loans such as HECS debt, personal, and car loans
• Generate additional income through a second job or overtime
• Reduce your living expenses

Mortgage insurance is taken out by the bank to cover themselves in case you are unable to repay your home loan and the property needs to be sold. Generally, mortgage insurance is charged if your deposit is less than 20%, unless you have a guarantor, qualify for the First Home Guarantee, or work in a profession that allows for a smaller deposit, such as medical, legal, or accounting fields.

The largest costs involved when buying property include:

• Stamp Duty (may be avoided if you are a first home buyer within the designated price cap)
• Lenders Mortgage Insurance (can sometimes be added to the loan)
• Transfer fees (government charge for transferring the property into your name)
• Conveyancing fees (the cost of a conveyancer or solicitor acting for you in the property purchase)

A variable rate loan has an interest rate that can fluctuate based on the Reserve Bank of Australia’s decisions and the banks' decisions on interest rates. A fixed rate loan comes with an interest rate locked in for a period, usually 1 to 5 years. A variable rate home loan offers greater flexibility, such as extra repayments, redraw, and offset accounts. A fixed rate home loan is more limited, typically allowing extra repayments of up to $10,000 per year, and redraw and offset accounts are not usually available.

An offset account is an everyday bank account linked to your home loan. Funds in the offset account reduce the interest charged on your home loan, as interest is calculated daily. Offset accounts usually come with an annual fee, so it is important to consider if you will have enough funds in the account to justify the fee.

Equity refers to the portion of your property that you own versus the portion the bank owns. For example, if your property is valued at $1,000,000 and you owe the bank $400,000, you have $600,000 in equity.

A pre-approval typically lasts for 3 months. To extend or update your pre-approval, the lender will usually require updated bank statements and payslips and will want to confirm that your financial circumstances remain the same.

Most lenders are approving loans within 2 to 7 business days. The bank will want to approve you and also value the property, assuming you’ve found one.

A bridging loan provides finance to purchase a new property before your existing home has sold. Some lenders require repayments on the bridging loan, while others allow repayments to be made in a lump sum from the proceeds of your existing home.

Most lenders require you to sell your home within 6 to 12 months.

You can visit myfreecreditreport.com.au to find out your credit score. Typically, a score over 600 is required for home loan approval and to obtain the best interest rate. If your score is below this, you may still get approval, but may need to pay a higher interest rate and/or provide a larger deposit.

Principal and interest means each repayment reduces the amount owed on your home loan, decreasing the loan balance. Interest-only repayments mean you only pay the interest, so the amount owed doesn't decrease. Most people choose interest-only repayments for investment properties (debt is usually tax-deductible) and focus on paying off their personal home loan (not tax-deductible).

Purchasing property with friends can help you get into the market quicker, combining your deposit and borrowing power. However, since property investment is usually long-term, people's circumstances may change, and one person may want to sell when another doesn't. Planning and communication are crucial before making the purchase.

Pay your credit cards and bills on time

• Avoid applying for credit too often; limit to two credit cards every six months
• Spend no more than 30% of your credit card limit

A guarantor helps you buy a home by providing equity in their home as security for the lender. This removes the need for you to provide a deposit. It is important to understand that if you default on your repayments, the lender can sell your home and seek the remaining balance from the guarantor.

It may not be harder, but the documentation required is different. Self-employed borrowers need to provide tax returns and financial statements (profit & loss and balance sheet) instead of payslips. Typically, two years of history are required for self-employed borrowers, compared to only three months (or sometimes less) for PAYG borrowers. Additionally, self-employed borrowers often maximize their expenses, limiting their income and borrowing power.