Over recent months it has been very noticeable that banks have been increasing interest rates and tightening credit policy for interest only loans, regardless of whether they are for Investment or Owner Occupation.
Mortgage Brokers (also often referred to as Finance Brokers, Mortgage Planners or Credit Advisers) act as an intermediary between lenders and borrowers to negotiate loan facilities.
Over the last 10 – 15 years the usage of Mortgage Brokers in Australia has increased consistently and it is now estimated that approximately 1 in every 2 new home loans in Australia is sourced through a Mortgage Broker.
So why do so many borrowers utilise a Broker rather than going to their local Bank? Some of the benefits and reasons include:
There are many kids in Australia who have treated their parents as a ‘bank’ as they have grown up. Whether it was getting the newest game or latest technology before they had saved enough pocket money, or even as big as asking for assistance to buy a car in their late teens.
But these days with the cost of housing many kids are seeking much larger withdrawals and assistance from the ‘Bank of Mum & Dad’ to help them get into property ownership.
Lenders Mortgage Insurance, commonly referred to as ‘LMI’, is an insurance that covers a Lender should a borrower default on their loan and the lender incurs a loss.
As a general rule LMI is payable on Home Loans where the loan to valuation ratio (LVR) is greater than 80% and allows borrowers purchasing property to potentially gain a loan at up to 95% of the purchase price of a home.