first home buyer€¦ · No matter where you are, we can help take you to the next step. Amie’s...

first homebuyer

Your guide to buying your first home

S U P P O R T I N G YO U T H R O U G H T H E H O M E B U Y E R J O U R N E Y

ContentsWho are FFG? 4

Why use a mortgage broker? 5

What we offer you 6

Getting you Application-Ready

7

Credit Scores 101 8

Parties to the transaction 10

Ideal Timeline 11

Loan Application Process 12

Most Common FAQS 14

Settlement Day 18

Guarantor Scenarios for First Home Buyers

19

A Helping Hand from the Government

20

Understanding the Lingo 21

FFG Fast Insider Tips 22

FFG Case Studies 23

Lender Panel 24

Products at a Glance 25

Final Thoughts 26

Top Savings Tips 15

Buying at Private Sale vs Auction 16

Making an Offer on a Property 17

FIRST HOME BUYERS EBOOK futurefinancegroup.com.au

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WHY SHOULD YOU READ THIS?

Welcome to Future Finance Group’s First Home Buyers Guide.We want to supply you with as much useful information as we can to arm you with the tools and knowledge you will need before taking the important (and exciting!) step of buying your first home.

With Future Finance Group you don’t just get a home loan. You get a dedicated team behind you who will support you through the home buying process from start to finish.

No matter where you are, we can help take you to the next step.

Amie’s StoryHappy Reading First Home Buyers!

Like you, I was a first home buyer at the young age of 19 & I remember the feelings, a combination of emotions, excitement & being overwhelmed, so I have really tried to create this Ebook to help you along with your journey.

I commenced my career in finance when I was only 17 after working at subway & learning about business & customer service. After being associated with other companies i started FFG in 2014. I had a real passion for helping people - especially first home buyers. I wanted to create a business whereby clients had an experience like no other. Every single member of my team at FFG share the same vision & values where efficiency & customer service are paramount.

I hope you truly enjoy this book.

Amie xx

We have been using the help of Future Finance Group for the last few years. In two short years Amie and her team have helped my partner and I purchase an investment property. Now they have recently helped us achieve getting our dream farm! They’re [sic] communication skills and persistence is second to none. They are all extremely professional and purely want the best outcome for their clients. But more importantly they are all completely personable and help you through every step and explain anything that isn’t understood. We will continue to use the assistance of Future Finance Group for any other future adventures. Thank you Amie and your team.

Todd C & Chloe J

Thank you so much to Amie and her team of absolute professionals for working tirelessly with us, fellow business owners, to help us achieve our goals! The time the team spent on the process and deal on our behalf is immeasurable and meant we could continue to focus on business while it was all taken care of.

Nicole M.D


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Buying a first home is a daunting process for anyone and you are not alone. There’s no one that understands this more than the team at

FFG which is the reason why such a large portion of our clients are first home buyers.

Mission StatementWe help future focused first home buyers, home owners and investors secure finance for real estate. We do this through team work, our innovative process and attention to detail creating a positive and unique home loan experience.

We Love First Home Buyers: We are committed to helping first-timers achieve their dreams of owning their first home and guiding them towards financial prosperity.

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We Listen: We take the time to really listen and understand our clients’

unique situations

We’re Vibrant and Youthful: We’re a young-at-heart, energetic, innovative and future focused company

We’re honest: We don’t over promise. We’re upfront, honest and realistic. There are times where our clients’ may simply not be ready to purchase. This is okay! Assisting you with budgeting and action plans is also part and parcel of our roleOur Teamwork: We work well

together as a powerful team and collaborate with our trusted partners to achieve the best outcomes for our

clients

We Stay Relevant: We are largely technology focused and strive to

make our client processes as easy as possible. Competing electronic

signatures, online forms and uploading documents has never been

easier and is part of our focus towards your ease of convenience

who are we?So what is our secret sauce?


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WHY USE A MORTGAGE BROKER?

Mortgage broking is a relatively new industry. It began evolving in Australia in the 1980’s

Brokers make it their business to compare and contrast the best loan options for you

Over half of Australian loans are arranged by brokers

More than 90% of customers are happy with the performance of their mortgage broker

The average mortgage broker has access to 34 lenders and uses an average of 10 lenders on their panel

Brokers depend on strong relationships – statistics show that more than 70% of mortgage brokers’ business is referred from existing customers. Clients place a high amount of trust in mortgage brokers

Did you know?As consumers we’re becoming increasingly more

time poor.Spending time weeding through loan products is not at

the top of anyone’s agenda. Having a knowledgeable broker to assist you navigate the world of finance will

save you time, money and headaches!

For more information see: The Value of Mortgage Broking July 2018 - Deloitte Access Economics consulting with Mortgage

Broking Industry Group

https://www.mfaa.com.au/sites/default/files/users/user133/_Value_of_mortgage_broking_Web_version.pdf


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WHAT WE OFFER YOU?

WE PREPARE YOUR ACTION PLAN• We help assess your Living Expenses and determine a

suitable budget• We prepare your Savings Plan to help you achieve

your short and long-term financial goals• We determine your Borrowing Capacity (BC) • We complete a Comprehensive Credit Check on your

behalf• We calculate the funds breakdown required to

complete your transaction

PRE-APPROVAL• We obtain your pre-approval also known as Approval

in Principal – this helps strengthen your offer with the agent so you have the best chances of securing your first purchase

• The Pre-Approval is

FACE TO FACE MEETINGS • Our brokers will always meet with you face-to-face

for your initial consultation and loan document signing (unless unsuitable) – our team are always accessible

HOUSE HUNTING – THE RIGHT PROPERTY FOR YOU• We offer free property reports for any residential real

estate that you’re interested in • We can put you in touch with local real estate agents

who will gladly assist you in finding your dream home

SETTLING• Our brokers are the liaison point between you and

the bank therefore we will work with the bank towards settlement of your matter


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LIVING EXPENSESBANK STATEMENTS

Bankstatements.com.au – simply log-in with your netbanking details and the bank statements will be sent to us safely and securely

We will require an itemized breakdown of the expenses that you incur on a monthly basis. Some examples of the expenses are: food & drink, entertainment, petrol & car expense, utilities, etc

CREDIT REPORT

We require clear copies of your Driver’s Licence and Passport OR Birth Certificate

We will obtain your Comprehensive Credit Check to ensure that your report and score are favourable to the proposed lender and/or address any issues with you prior to submitting your application

100 POINTS OF ID

WISHLIST Your desired property

If self employed:

• Latest 2 Tax Returns • Profit and Loss Statement• Notice of Assessment

PAYG• Latest 2 payslips • Group Certificate

PAYSLIPS & EMPLOYER DOCUMENTS

We will ensure you have a clear understanding of the property type, location and specifications (bedrooms and bathrooms) that you desire

get readyWhat documents are required for a

new loan application?


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HOW IS YOUR SCORE CALCULATED?Your credit score can be affected by a range of factors, including:

• Numerous credit enquiries in a short time frame.

• Nominations to be a guarantor.

• Overdue debts and defaults (listed for 5 years).

• Bankruptcy (listed for 10 years and under).

Late payments for mobile phones, electricity and gas services.

Interest-free store finances. Court writs or judgements.Don’t have your credit report? Get it

free from a credit reporting bureau such as Equifax.

WHO LOOKS AT YOUR CREDIT SCORE?These are just some of the places:

Banks. Rental agents. Insurance companies.

YOUR CREDIT SCORE IS IMPORTANT AS MANY LENDERS USE IT TO UNDERSTAND YOUR PAST CREDIT PROFILE.It can determine your ability to:

Get a home loan or credit card. • Obtain insurance.• Connect electricity or gas.

Rent a house.

credit scoresAs a First Home Buyer, do you know your

credit score or why it matters? Your credit score is important as many lenders use it to understand your past credit profile. This infographic helps

explain the basic facts you need to know about credit scores and how they might affect you.


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4 FACTS ON DEFAULTS

Received a default notice? Keep calm. Just because you receive a default notice, it does not mean it will be listed on your

credit report.

1. You can default on credit card payments, mortgages or even bills.

2. Lenders issue a default notice when you fail to pay debt that is due.

3. Legally, lenders must contact you multiple times to chase up your payment.

4. If you still fail to repay the amount, a default could be listed on your credit file.1

CREDIT SCORES-BY THE NUMBERS

71%

The percentage of Australians who have never accessed their credit report.2

$150The minimum amount of debt for a

consumer default notice.3

60The number of days overdue before a

consumer payment default can be listed.3

5The number of years defaults and credit

applications can stay on your report.4

30The percentage of Australians who found

mistakes in their credit file.5

1. https://www.oaic.gov.au/privacy/privacy-archive/privacy-resources-archive/when-can-a-default-be-listed-on-my-credit-file2. http://www.experian.co.nz/media-alert-two-thirds-of-australians-unaware-of-credit-reporting-improvements/3. https://www.oaic.gov.au/individuals/privacy-fact-sheets/credit-reporting/privacy-fact-sheet-35-when-can-a-default-beincluded-in-your-credit-report4. https://www.moneysmart.gov.au/borrowing-and-credit/borrowing-basics/credit-reports5. https://www.choice.com.au/money/credit-cards-and-loans/home-loans/articles/ how-to-protect-your-credit-rating

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PARTIES TO THE TRANSACTION

When you buy your first home, there will be a few different people whose assistance you may require. So how does it all work?

Real Estate AgentsReal Estate Agents will usually be your first point of contact when you’re home shopping and will be present at every open home inspection you attend. It is important to note that Real Estate Agents are retained and paid by the Vendor (seller) and must therefore primarily look after their clients’ interests first. For this reason, market knowledge, doing your research and entering into well-informed negotiations are crucial when making your first purchase.

Pest and / or Building Inspectors We encourage all of our buyers to engage a pest and / or building inspector to inspect the property you intend to purchase and that this be written into your contract. The principle of caveat emptor applies when you sign a contract of sale - this is Latin for the principle of “Buyer Beware”. If a purchaser signs a contract for a house that is structurally unsound or riddled with termites, the law does not allow purchasers to claim they ‘did not know’. With a financial commitment of this size, getting pest and building reports to ensure there are no nasty surprises is imperative.

Financial PlannersOnce you’ve taken the exciting step of purchasing your first home it is very important that you obtain the proper insurance(s) in order to protect your most precious asset/s. This is not only limited to your new home but also includes the most precious asset – you! Life Insurance and Asset Insurance all form important aspects of your financial future and should be addressed with the assistance of Financial Planning experts.

Brokers / BanksAs a first time buyer, it is very likely that you will not have all of the funds to cover your purchase and you will need a loan. The benefits of having a broker working on your behalf means you can rest assured your loan structure will cater to your needs and that you are paying the best interest rate possible for your situation.

Solicitors / ConveyancersOnce you’ve found the perfect home, transferring the property into your name requires legals and paperwork. Once you sign the Contract, the conveyancing process will need to begin and if you have not already done so, you will need to engage a solicitor or conveyancer to act for you until settlement. There will be collaboration between the Real Estate Agent, broker and your solicitor/conveyancer therefore working with trusted advisors is very important.

Top Tip: When approaching banks directly for home lending, keep in mind that they will only be able to offer you loans exclusively with their bank. Sounds like a simple concept however this can be quite limiting where lenders apply a ‘cookie-cutter’ approach to lending with limited awareness of your personal circumstances.


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ideal timelineWell that’s great, but where do you begin and who do you approach first?

Although not always possible, please see an ideal timeline below.

BROKERWhere all clients should start their home-buying journey. Don’t walk into the process of home-buying with uncertainty. Examples of questions brokers will help you answer:

• How much can I borrow?• What will the purchase cost me?• What are the associated fees and

charges? • Do I have to pay stamp duty?• What is the FHOG and does it apply

to me?• Do I have enough of a cash deposit?

Make sure you know the answer to these questions when you begin looking at homes.

REAL ESTATE AGENT• You will commonly encounter agents

at open homes – keep in mind they represent the Vendor’s interests

• Make sure that your first home inspection is your most thorough one

• You should be looking at homes in the most objective light possible and take off any rose-coloured glasses

• Ask your Agent for a copy of the Contract and s32 Vendors Statement

PEST AND / OR BUILDING INSPECTORSTake the opportunity to make your offer subject to pest and building inspection- ensure this clause is inserted in the Contract

SOLICITOR / CONVEYANCER

• When you’ve found the perfect property, have your solicitor/conveyancer do a ‘perusal’ of the Contract and s32 Vendors statement

• They will look over the terms of both documents and alert you to what you need to know from a legal and practical standpoint

• Ask the solicitor / conveyancer to assist you in preparing the wording for any special conditions you may want inserted in your contract

BUILDER When choosing a builder, make sure you are aware whether the price is fixed or what extra charges may apply


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Enquiry to Future Finance Group• via online website • via phone call• via email• via text

Pre-Appointment Phone CallFFG Team will speak with you about what you would like to achieve out of meeting with us. During this phone call we will:

• Ensure you have 10 minutes to discuss your scenario & financial goals

• Confirm contact information & preferred contact method• Confirm appointment availability & time• Book Appointment via phone call or face-to-face

FFG Compliance Process, FFG Fees & Charges Email sent to clientOnce your appointment has been booked. We will send you our Compliance & Process email. This email will contain the following:

• Compliance process• Appointment process• FFG fees & charges• Quote Example PDF attached• Credit Guide & Privacy Statement PDF attached• Welcome to FFG Booklet (Including our Client for Life

Strategy)

Welcome to FFG Email sent to clientThis will be the second email that you will receive from our team. It will contain the following:

• Appointment confirmation & details• Supporting documents required prior to your appointment• Link to complete our ‘Getting to know you’ form online• Link to upload supporting documents to our online encrypted

FileInvite portal

Consultation AppointmentThis will be a face-to-face appointment where you will get to meet with your broker. During this appointment, your broker will:

• Listen to your Home Loan goals & objectives• Discuss Loan application process• Discuss FFG fees & charges• Review & reconfirm your details on the GTKY Form &

Supporting Documents• Complete detailed living expenses form

Loan Proposal After your consultation appointment, your broker will review & research policies, products, lenders & servicing and put together your personalised loan proposal or action plan which will include:

• Lender Selection• Product Recommendation and Why?• Purchase Price Matrix (If purchase)• Property Structure Matrix (If refinance)• Request for any other missing documents required

Client Proposal AcceptanceAfter you have reviewed your loan proposal, it is a requirement for us as your mortgage broker, to receive written consent from you as the client that you are happy and would like to proceed ahead with our recommendation & have FFG facilitate your home loan submission.

DOCUSIGN/Wet Pen SignaturesPrior to us submitting your home loan application, we require you to review & sign the following documents:

• Home Loan Application Form• Home On-Boarding Form• Compliance & Client Needs Analysis• Quote• Discharge Form (If refinance)

To speed up the process we use Docusign that allows smartphone/tablet users to review & sign these documents electronically using their finger. On occasion we will send out your Home Loan Application forms via Post for you to sign wet pen signature, as this is a requirement by some lenders also.

FFG Invoice IssuedAs per your discussion with your broker in your consultation appointment, your invoice will be issued. This is required to be paid within 7 days of issue date.

Home Loan Application SubmissionYour loan application will be lodged with the lender within 24 hours of receipt of ALL required supporting documents and signature pages.

Loan Tracker IntroductionNow that your home loan application has been submitted to your lender, you will be introduced to our Loan Tracker Shannon! She will call you to give you an ETA on when your application is due to be assessed by the lender. She will be your main contact for all application updates.

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loan applicationLoan Application Process


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Conditional/Pre ApprovalThe lender will complete:

• Income verification• Comprehensive Credit checks• Living Expenses• Check funds to complete are available

Once the lender has verified these, we will receive a conditional approval from the lender with any outstanding requests prior to unconditional approval (If Refinance)If there are no outstandings required that need to be met, this is also when a Pre-Approval is issued and you can start house hunting – YAY! (If Purchase)

Valuation ProcessIf Purchase – We will order a valuation on your purchased property when your offer has been accepted by the Real Estate Agent and your Contract of Sale has been signed by both yourself and the Vendor. The valuer will then contact the Real Estate Agent within 24 hours once it has been ordered and arrange a inspection time that suits.If Refinance – If valuation has not already been ordered prior to loan submission, the lender will order this on your behalf. The valuer will then be in contact with you within 24 hours of the valuation being ordered, to arrange an inspection time that suits.

Unconditional Approval We will receive unconditional approval from the lender from receipt of their satisfactory valuation(s). Shannon our Loan Tracker at FFG will then contact you to confirm written unconditional approval has been received.If Purchase – This is when you will pay your deposit as per your contract to the Real Estate Agent and you get to put the SOLD sticker up!If Refinance – Discharge forms to your existing home loan are sent.

Loan Documents IssuedYour loan documents will be issued within 24-48 hours of receipt of unconditional loan approval letter.

Loan Document Sign Up AppointmentWe will arrange a face-to-face appointment with your broker to sit down and sign your loan documents. During this appointment your broker will discuss with you:

• Funds to complete (If Purchase)• Funds Breakdown (If Refinance)• Home Insurance• Bank Account Structure• Introduction to Financial Planner

Consultation with Financial PlannerDuring your consultation with your Financial Planner, they will discuss the importance of protecting your biggest asset…YOU! They will also discuss:

• Income Protection Insurance• Life Insurance• Superannuation• Create debt reduction and retirement planning

Pre-SettlementPrior to your loan settling, we will ensure that your loan documents have been received & certified with the lender. We will also confirm the below:If Purchase:

• Notify Conveyancer that lender is ready to book settlement date • Notify client that settlement has been booked in with date &

time• Confirm that funds to complete are sitting in correct bank

account for settlement

If Refinance:

• Attempt to Book in settlement with existing & new lender• Confirm payout figures for all debts being paid out• Confirm settlement date & time

Settlement DayHooray! It is finally here.Once your new home loan has settled and we have receipt of settlement from the lender & conveyancer, we will call you to congratulate you!If Purchase – You will pick up your keys from the Real Estate Agent & get to move into your new home – Congrats!If Refinance – It can take 3-5 business days for your new details to be online and for you to have access to any surplus funds/and evidence of consumer debts have been paid.

Post SettlementAfter your home loan has settled, we will contact you 5 weeks after to check in and see how everything is going. We will confirm:

• Your first direct debit has gone through smoothly• Your bank account structure is set up correctly• If you’re confident & happy with your new home loan

1 Year Home Loan Anniversary WOW! It has been a fasr 12 months since your home loan settled with us. We will contact you to do your first Home Loan Review, to ensure that your current home loan is still going smoothly for you. We will also discuss:

• Your plans for the next 5 years• Your new financial goals• If you have had any changes to your circumstances

Long Term Home Loan Reviews• 2 Year Home Loan Anniversary• 3 Year Home Loan Anniversary• 4 Year Home Loan Anniversary

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Example:If you purchase a property for $500,000 you would need:

$25,000 = 5% deposit

$1,500 = settlement fees and charges

$3,000 = buffer (conveyancing and adjustments)

Note: The more deposit you have the better / more competitive your loan product and interest rate.

Question:How much deposit do I need?As a general guide, you will need approximately a 5% deposit plus the settlement fees & charges as well as a buffer of about $3,000 to cover things such as conveyancing and adjustments (includes council rates and water rates).

deposits faq14

futurefinancegroup.com.au FIRST HOME BUYERS EBOOK

TOP SAVINGS TIPS

Put your goals in writing

Setting and quantifying your end goal helps you achieve it much sooner.

Determine your spending and expenses

Not knowing where you money goes is a common pitfall for many of us. Identifying our spending from our

splurging is important.

Budgeting

Budget is all about money allocation. Take control of where you are allocating your funds. This way you won’t feel like money is ‘slipping through your fingers’ without

your control.

Make sacrifices where you can

No one likes this one but getting towards your goal may mean cutting back.

Stick to your savings goal

Setting up automatic direct debits so that a portion of your wage goes to savings is a big help. This locks away

your savings before and reduces any temptation to spend it

Don’t be disheartened if you break budget along the way. Always keep your eye on the prize and get back towards your savings path if you stray.


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BUYING AT PRIVATE SALE vs AUCTION

Ability to NegotiateFreedom to negotiate freely with the Vendors via the Real Estate Agent without a time-pressured environment

Flexibility in termsThe ability to incorporate certain terms into your contract to suit your needs such as when the deposit should fall due or when settlement should be

Cooling off periodAs a general rule, buyers will get a three day cooling off period from the date they sign the contract. This gives you the ability to withdraw from the contract

Special ConditionsPrivate sales allow purchasers to place conditions in the contract for their benefit such as ‘subject to finance’ or ‘pest and building’ clauses

Less Stressful EnvironmentMore relaxed environment with less urgency than Auction

CertaintyYou know that once the hammer falls, the property is yours

Clarity of Competition You know exactly who you are bidding against and who your competition is. There is no room for any bluffing

Pro

Con

Con

Pro

Less CertaintyYou may not have the immediate certainty that the property is yours until it goes unconditional

Visibility is decreased As your main point of communication in the negotiation process are real estate agents, it is difficult to know how much competition you have when making your offer

Private sale

Sense of UrgencyIt is easy to get swept up in the emotion of an Auction. The direct competition and pressure situation may cause purchasers to go significantly over budget

Unconditional purchaseThere is no cooling off period or conditions for the purchaser’s protection. There is no backing out of a successful bid at Auction

Need deposit on Auction dayUsually, Vendors will require a 10% deposit be payable on Auction date. This amount will of course vary according to what the sale price is.

Unknown ReserveA ‘reserve’ refers to the lowest price the Vendor is willing to sell for. It is difficult to know where the goal posts sit at Auction

Auction


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MAKING AN OFFER ON A PROPERTY

When you believe you have found your property, it is then time to get the formalities into motion.

You do this by making an offer to the real estate agent. Your written offer should contain the following information:

• Purchase Price• Loan Amount • Deposit Amount, due date and form of payment (Cash

or deposit Bond) – Most first home buyers will be able to pay their deposit from their savings however some clients who use security guarantors may not have deposit savings to contribute. For a fee, a deposit bond also known as a deposit guarantee can be issued which acts as a cash substitute. It acts as a written guarantee to the Vendor that you will pay your deposit at settlement.

• Proposed Settlement date – Settlements are typically 30, 60, 90 or 120 days

• Expiry date of your offer – your offer should not be made indefinitely and should always have an expiry date

Note:Regardless of what verbal negotiations you may have had with

the Real Estate Agent or Vendor prior to signing of the Contract, unless this agreement is included in writing in your Contract of

Sale it is very likely not enforceable. Ensure you protect yourself legally by inserting any required special conditions and speak to

your solicitor about same.

Special conditions – Speak to your solicitor or conveyancer about these for further information:Subject to finance – If you are reliant on funds coming from a lender to complete your purchase, you will want to make sure that they are willing to lend you the funds before being locked into a Contract. The best way of ensuring you are not bound to a contract that you cannot complete if your finance is declined is making your contract subject to your finance approval. This means the deal will go through provided you obtain finance. We strongly recommend a 14 day finance clause be inserted in the Contract. Subject to pest and building – Most pest and building clauses will be for either 5-7 days therefore you should make contact with the inspectors for a booking as early as possible Any other conditions you have agreed upon – For example: The Contract is signed Subject to Lease OR a clause stipulating the Vendor will agree to return the electric garage roller door to a full state of repair and functionality prior to settlement.

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Settlement day is by far the most exciting day for a first home buyer. This is the day you have been working towards and when the property legally becomes yours.

What occurs upon settlement? In Victoria, it is now mandatory for settlements to take place electronically

with very few exceptions to this rule.

Upon settlement, the bank will make your loan funds available for your use – this is

the amount they have agreed to lend you.

Settlement is deemed to have taken place once the purchase

price of the property is transferred to the

Vendor.

The Certificate of Title will then be registered

in your name.

Once the Title is registered in your name,

you officially become the property owner otherwise known as

‘registered proprietor’.

Congratulations! The property is yours and you may now collect your keys.

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GUARANTOR SCENARIOSFOR FIRST HOME BUYERS

It is becoming more and more common for family members, particularly parents, to act as security guarantors for their children. What this means is the lender is willing to take a portion of the family members’ (‘guarantors’) property as security to secure a part of the purchase. They do this by using the equity in the guarantors’ property therefore a valuation will always be conducted to assess that sufficient equity is available. Please note only certain lenders will accept these types of applications.

Example David and Lucy are purchasing their first home. Their offer has been accepted at $500,000 and Lucy’s mum Jenny has offered to act as a security guarantor. She has no mortgage on her property

Their Breakdown of Funds is as follows:

• 10% Deposit: $50,000• Settlement Fees & Charges:

$20,000• Loan Amount Required:

$470,000 = $450,000 contract of sale balance + $20,000 fees

LOAN 2 - $70,000Loan 2: Secured by Jenny’s property valued at $650,000 plus purchase property value $500,000

Loan 1 $400,000 + Loan 2 $70,000 = $470,000 in loans / Jenny’s property ($650,000) plus purchase property ($500,000) = $1,150,000 in security

LVR: 40.87%

LOAN 1 - $400,000Loan 1: $400,000 loan / $500,000 property

LVR: 80% This loan is secured by the purchase property

Understanding the responsibilities of a guarantor

The key responsibility for a guarantor to note is that they will be responsible for repaying the debt obtained by the borrower (purchaser) IF and ONLY IF the borrower cannot meet their repayments under the loan.

The lender will always ensure that guarantors meet lender policy criteria and are deemed acceptable guarantors. In making this decision, they will take factors into account such as the value asset to liability ratio, income and ability to repay loan if borrower cannot, exit strategies, etc.

Most lenders also request that guarantors obtain independent financial and legal advice when signing the legally binding loan contracts.

The loan will always be in the name of the borrower, not the guarantor. The borrowers are directly responsible for the loan however the guarantor must have the ability to repay if the borrowers do not.

Key benefits of using a guarantor

The main benefit of using a security guarantor is that the borrower will not incur charges for Lender’s Mortgage Insurance. This often amounts to a saving of thousands of dollars.

Provided there is a steady increase in the market and the purchasers maintain their loan repayments & property in good order, a new valuation can be ordered 2-3 years following the purchase to re-assess the transaction structure. It may be that in a few short years there is sufficient equity and reduction of loan balance in the property to release the guarantors and discharge them from the guarantee.

DAVID & LUCY 80% LVR

JENNY 20% LVR


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A HELPING HAND FROM THE GOVERNMENT

There are a range of government grants and concessions that can help offset some of the expenses for home buyers.

Stamp duty and transfer fees will be applicable to every residential property transaction unless an exemption or concession applies.

What is Stamp Duty?In basic terms, stamp duty is a form of tax. It is the purchaser’s responsibility to pay the stamp duty and the amount will usually be calculated based on purchase or transfer price. As stamp duty is determined by State and not Federal government, the way stamp duty is calculated will vary from state to state. The grant handouts and/or first home buyer concessions or reductions therefore also vary between states.

Before you start searching for your dream home, take some time to speak with your broker and learn more about the benefits you may be entitled to.

Need more information?

For further information on the First Home Owner Grant or details on stamp duty breaks contact your state’s relevant government office.

ACT – revenue.act.gov.au

NSW – osr.nsw.gov.au

NT – nt.gov.au/ntt/revenue

QLD – osr.qld.gov.au

SA – revenuesa.sa.gov.au

TAS – sro.tas.gov.au

VIC – sro.vic.gov.au

WA – osr.wa.gov.au

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UNDERSTANDING THE LINGO

Loan to Value Ratio (LVR) LVR stands for Loan to Value Ratio. This refers to the proportion of money you intend to borrow when compared to the value of the property you want to buy. I.e. If you were to purchase for $500,000 and you need to borrow $400,000, your LVR is 80%. Banks use LVR’s to determine their risk level in lending you their funds.

Genuine Savings (GS)Genuine savings is a term used by lenders when referring to funds that you have saved over a period of time. Lenders want to see that you have a genuine ability to save funds. This is because an applicant with an ability to save will be more likely to commit to the financial responsibility of paying a mortgage than an applicant without any savings history. Genuine savings should generally be held in your account and accumulated over at least 3 months to 6 months depending on the lender. Lump sum payments such as gifts, inheritances, bonuses or first home owner grants typically cannot be considered genuine savings.

Lenders Mortgage Insurance (LMI) Lenders Mortgage Insurance is an insurance policy that lenders will require you pay where the LVR of your loan is greater than 80%. This means that where you have less than a 20% deposit to contribute towards your purchase you will need to pay LMI. This insurance policy provides protection for the lender (not the borrower!) in the event that you were to default on your loan and fail to meet your repayments. By making clients pay LMI, banks ensure that they are covered against any future risks.

Pre-approval or Approval in Principle (AIP)Pre-approval, conditional approval and approval in principle are different ways lenders refer to the preliminary assessment conducted of the clients’ loan application. At this stage they will typically check ID, verify income and conduct credit checks. Where the applicant passes these preliminary checks, pre-approval is granted pending certain conditions with the most common condition being a valuation.

Unconditional ApprovalObtaining unconditional approval means that the lender has fully assessed your application and agrees to fully approve your loan. Their approval is no longer subject to any conditions and the lender agrees to provide you with the determined loan amount required for settlement.


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Don’t be dishonestwith brokers or lenders – the more honest you are about your financial background & your circumstances the easier it is for us to work with you and find a solution

Don’t cash advanceon your credit card

Avoid having multiple credit cards– banks will take into account your credit card limit, not how much you have owing!

Declare the right incometo Centrelink to ensure your Family Tax Benefits are in line with one another

Show consistentsavings patterns

Be honestabout your relationship status

Don’t applyfor too many mortgages

Start getting your paperwork readyas early as possible – ID, payslips, bank statements etc

Don’t apply for Afterpay/Zip pay

Have a separate bank accountfor savings – don’t live out of your savings account

Know your employment status– don’t get confused between casual & part time or contractor & self employed.

Monitor your living expenses – determine how much money your life style costs you

ffg fast tips


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CASE STUDYwith guarantors:

Meet Renee

CASE STUDYwithout guarantors:

Meet Sam & Jesse

Client Reneeused FFG to assist her in obtaining finance. When we met Renee she required assistance with obtaining pre-approval as she wanted to purchase her very first home. She was a single 23 year old female Langwarrin local.

As Renee met with FFG early on into her home-buying journey, we were able to place her on a savings plan and budget to help her achieve her goal by the deadline she set herself. After a 3 year period of working hard she saved a conservative deposit of $10,000 whilst also paying out the car loan she had obtained after turning 18. She had a steady job and had worked as a receptionist in the same company for the past 3 years. She received a gift of $30,000 from her parents who wanted to contribute towards their young daughter’s purchase and offered to act as guarantors.

After obtaining pre-approval through FFG, Renee spent many consecutive week-ends house hunting and attending open home inspections. She made sure to obtain the s32 Vendor statements from the real estate agents and sent them through to her solicitor for review to make sure there were no hidden nasties. Although disheartened after having her offers rejected a few times, her fourth offer was finally successful! Renee was overjoyed!! She found her first property in January 2019 after 3 months of house hunting. The property settled smoothly and within 45 days Renee had moved out of her parents’ house in Langwarrin and into her very own Frankston property. Her 3 bedroom home was more than enough for her and her new puppy Beasley!

Sam and Jessewere recommended to FFG by a family member. At first they didn’t know too much about what brokers did but wanted to buy their first home as quickly as possible – they had been saving every dollar they could. They each had a car loan and had questions about what their mortgage repayments would be once they purchased as they were renting for $400 per week. They queried how much much better or worse off they would be with a home loan repayment versus rental payments. They had recently become parents and had a wonderful 2 year old son so their rental property was now becoming a tad too small. They wanted information on how much they could buy for and how much the bank would lend them. It took them 3.5 years but they had managed to save $35,000. Sam was a full time carpenter earning

a healthy $100,000 and Jesse had 2 part-time jobs working in retail and earning a combined amount of $65,000.

Sam and Jesse met with their FFG broker who helped answer all their questions. They were advised what the maximum purchase price was for their circumstances with a view to maintaining their lifestyle and living comfortably without overwhelming mortgage repayments. After 8 weeks of house-hunting they fell in love with their current Cranbourne West property. With pre-approval in hand they made a confident offer to the real estate agent which was accepted on the first try! 1 year on they are comfortably making repayments on their loans and saving for their first investment property! We’re so very proud of you Sam and Jesse!


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OUR LENDER PANEL


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PRODUCTS AT A GLANCE

Basic home loans Interest rates are often half to one per cent below

the standard variable rate.

Limited features, less flexibility and possible penalty fees for early loan repayment.

Standard variable-rate home loans

Make regular repayments based on the current interest rate. Effective if rates do not rise.

Should interest rates increase, your regular mortgage repayments will rise.

Split-rate home loans Fix a portion of your interest rate to give certainty

to monthly repayments while also benefit from a variable-rate portion should rates drop.

If interest rates do drop you’ll be left paying a higher rate for your fixed-rate portion. If you break the fixed-rate period early you may be subject to break costs and you may be limited to extra repayments on the loan.

Fixed-rate home loans Fix your interest rate for a specific period, giving

certainty to regular repayment amounts.

Should interest rates fall you’ll still need to repay your mortgage at the agreed fixed-rate. There are potentially also high loan break costs payable of you, if you wish to end the fixed-rate term early.

Ending the fixed-rate term early includes repaying the loan early and if you switch from one loan to another before the fixed-rate term expires. Fixed-rate loans may also limit additional repayments that can be made during the fixed-rate term.

Low-doc home loans Can help you enter the property market if you’re

a self-employed, contract or seasonal worker without regular income or proof of income.

Typically have higher interest rates. You may also have to pay Lenders Mortgage Insurance (LMI).

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Congratulations - You’ve reached the end of our First Home Buyers Guide and should now have a solid understanding of

what is involved in buying your first home

Our friendly brokers will be able to tie all this information in for you at your appointment and customise the information to suit your particular needs. Keep in mind that

no two scenarios are ever identical therefore what suits Purchaser A might not always

suit Purchaser B

Remember we are only a phone call away and one of our

greatest joys is being able to help our First Home Buyers take this exciting step!

You are why we come into work everyday!

final thoughts


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We understand buying your home is your dream.Turning this dream into reality is our passion at Future Finance group.

03 8657 8664 Unit 10/385 McClelland Drive, LANGWARRIN VIC 3910 futurefinancegroup.com.au

Future Finance Group is rated 5.0 google stars

so, now what?

Ezmeralda Finance Pty Ltd ATF EZMERALDA FINANCE UNIT TRUST trading as Future Finance Group is a credit representative (Credit Representative Number: 478781) under BLSSA Pty Ltd (Australian Credit License Number: 391237)

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