How much can I borrow?(top)

Most lenders apply two criteria to determine how much you can borrow. First, lenders want to understand how much you can afford – often referred to as how much you can “service". The myth is that you can only borrow about three times your gross salary. However, this is not true! Different lenders apply different calculations in determining the “serviceability" of a loan, but in general they all require that your monthly income exceeds your monthly expenses (including the loan you are about to take out). Your monthly income includes any income that you regularly receive every month such as the combined salary of all adults on the loan, regular overtime, rental income, Centrelink payments, etc. Your monthly expenses include any expenses that you regularly pay out every month such as other loans that you may have (eg. Car Loan), credit card expenses, rent expenses, insurance expenses, etc. Most lenders also apply a living expense each month and this is based on your marital situation and the number of dependent children that you may have living with you. As different lenders have different calculations on how to determine the "serviceability" of a loan, the results can vary greatly and where one lender may not approve a loan for you, many others might. At Empire Financial Management Group, we have alliances with over 40 lenders and we can find the right loan for your financial circumstances.

The second criteria lenders use to determine how much you can afford is based on the value of the property that you are buying. In general, most lenders allow you to borrow up to 80% of the value of your property, without any issue. Above 80%, most lenders will allow their customers to borrow up to 97% of the value of the property, but in doing so they must pay Lenders Mortgage Insurance (LMI). LMI is a one-off fee and is based on the value of the property. At Empire Financial Management Group, we have some loan packages that will allow customers to borrow up to 100% of the value of their property. Where LMI is required, we can even get it waived for certain professions – saving our customers thousands of dollars!

What is my credit rating and is it important in getting a loan?(top)

Your credit rating is an important part of getting a loan. It is a history of how and when you have obtained credit in the past. If you have ever defaulted on a loan or have been bankrupt, there is a good chance that it is on your credit history. A default is generally a debt (a bill or a loan) of over $100 that's being owing for a minimum of 60 days. Anyone can check their own credit history by calling Baycorp Advantage (Ph: 02 9464 6000). In the past, a bad credit rating meant an instant knock-back for a loan, but today Empire Financial Management Group has alliances with several lenders that will be able to help you, even if you have a poor credit history.

What kind of questions will a lender ask me?(top)

Questions in a home loan application form vary from vendor to vendor, but typically most questions are framed around the five Cs - Capacity to repay the loan; Character of the borrower(s); Collateral being offered; Conditions that may affect the borrower's capability to repay the loan and Capital the borrower's already have. Hence, some of the questions that you may be expected to answer could be:

Will rates go up in the near future?(top)

No one knows for sure what will happen with interest rates in the near future, but given the fact that we are still enjoying the best interest rates in several years combined with the fact that the last set of rate changes have been up rather than down, it is likely that rates will increase in the future. By how much and when is anyone's guess. Some economists predict that rates will rise by 0.25% by the end of 2005, while others believe that rates will continue to hold for the next 12 months. If interest rates do go up by 0.25%, you can expect to pay an extra $33 per month on a $200,000 home loan that is currently on the standard variable rate of 7.32%.

What are Fixed Rates and Variable Rates?(top)

A variable rate loan is one that moves up and down with movements in the professional money markets. Often these rates are linked to the reserve bank rate. Currently, the standard variable rate at most banks is 7.32%, however many lenders will offer discounts on the standard variable rate. At Empire Financial Management Group, we have several packages that offer discounts on variable rate loans that lower the annual rate substantially. Depending on whether you qualify, some of our loan packages can offer rates under 6.5% annually.

A fixed rate is an annual interest rate that, as the name suggests, stays fixed for a number of years. Most lenders offer fixed rates of up to 15 years. Lenders usually set a fixed rate based on their predictions on how interest rates will move in the future. At Empire Financial Management Group, we have many fixed rate packages that are discounted similar to discounted variable rates.

Which is better for me – A Variable Rate or a Fixed Rate?(top)

In determining whether to get a Fixed or Variable rate, you need to predict what interest rates will do in the near future. If you would like the flexibility of being able to make extra repayments into your loan and are not concerned about a rate rise, then you should look at a variable rate. If on the other hand, you believe that interest rates will rise in the near future and would like to ensure that your repayments remain the same over a set period, then you should look as a fixed rate. If however, you are concerned about a rate rise, but still want the flexibility of extra repayments, you can hedge your bets by getting a Split Loan. At Empire Financial Management Group, we have Split loans that can give you discounts on both the lenders fixed and variable rates.

What is a Comparison Rate?(top)

The comparison rate is the most basic check that you need to make when shopping for a new home loan. It allows you to compare different loan product by taking into account all of the fees and charges of a mortgage, except for:

At Empire Financial Management Group, we prepare a 5-year comparison schedule in addition to a comparison rate chart for all of our clients. This comparison schedule allows you to compare the different loan products that you qualify for and accurately determine where your loan balance will be after the first 5 years of the loan.

What should I look for in a good Home Loan?(top)

There is no hard and fast rule to determine what makes a good home loan. With hundreds of loan products on the market today, there is certainly a variety of choice and choosing the wrong loan product could cost you thousands. It is important to note that while “rate" is the first thing most people look for in a Home Loan, the cheapest loan may not be the best. The most important feature in a loan may be “Flexibility". Flexibility in a loan allows you to change features of a loan as your circumstances change. For example, you should be able to make extra repayments at no additional cost, exit the loan at any time without any penalty, split your loan between fixed and variable without penalty and take a repayment holiday should the need arise.

In actual fact though, the most important aspect of a loan is dependent on what you plan to do with the loan in the future. At Empire Financial Management Group, we have over 800 loan products to choose from and after understanding your individual circumstance, we can recommend the right loan for you.

Why should I ask Empire Financial Management Group to help me find a loan?(top)

Empire Financial Management Group will assist you the borrower in finding the loan that most suits your individual circumstance. We will do all of the necessary paperwork and submit the application and chase up the lender to ensure a quick approval for your loan. Best of all, our service is completely FREE to you the borrower because the lenders pay us, and because one of our company goals is to ensure that we offer the best products for our customers, regardless of the commission that may mean for us, we will gladly share our commission structure with you - should you wish to see it.

In addition, because our goal at Empire Financial Management Group is to ensure that our customers get the best mortgage solution that we can offer, we will either get your application fee waived or give you a rebate on the application fee - up to $600 for loans under $300,000 or up to $1000 for loans over $300,000.

What is Lenders Mortgage Insurance and will I need it?(top)

Lenders Mortgage Insurance (or LMI) is a fee paid to the bank to insure your property. Generally banks ask for this fee to be paid if a borrower wants to borrow more than 80% of the value of the property. LMI premiums vary from lender to lender and are heavily dependent on the amount you would like to borrow as a % of the property value. As an example a borrower looking for loan of $270,000 on a property of $300,000 (ie 90%), can expect to pay approximately $3600 in LMI. In most case, this can be added onto the loan.

At Empire Financial Management Group, we can get loans for up to 100% of the property value. In addition, in some circumstances we have been able to get the LMI waived by the lender, if the borrower is from a certain profession (eg. Medical Practitioner).

When buying a property, what will I need to pay in addition to the property price?(top)

In addition to the property price, there are a number of other fees that you may be asked to pay such as application fees, loan settlement fees, valuation fees, legal fees, Lender Mortgage Insurance fees and government charges like stamp duty and transfer of mortgage. As an example, on a property value of $300,000 where the loan is $270,000, you could be expected to pay fees of up to $20,000.

While we can't do anything about the government charges, at Empire Financial Management Group, we can reduce or waive many of the fees above and that means cash directly in the borrower's pocket.