When home buyers and investors start out on their property journeys, they can sometimes feel a little lost and confused when deciding on which mortgage is right for them. In today’s loan market there are a huge number of mortgage options, each slightly or dramatically different from the last.
When applying for each home loan, lenders will calculate how risky you are as a candidate. When it comes to assessing your risk rating, banks will generally look into a number of your financial and lifestyle attributes such as:
Career History
When assessing how likely you will be able to successfully repay the loan the banks will look at your career history. A candidate who has a proven history of establishing secure employment over a prolonged period of time, they consider to be at a small risk of not being able to fulfill repayment requirements.
Annual Income
Your annual income pays a key role in your desirability to banks so it’s always a good idea to ask for that pay rise or perhaps earn additional income via a second job before applying for a home loan.
Debit
Many first home buyers don’t understand how factors such as credit card debit can be detrimental to a successful loan application. Ideally an applicant should have no debit, if a credit card is deemed necessary the smaller the limit is the most desirable. Banks will also take your credit card payments into consideration so make sure you don’t miss any. The banks will also consider how deligent an applicant is with paying bills on time such as phone or electricity.Late payments or defaults on these will have a detrimental impact to you.
Profession
Some professions can even attract reduced home loans because they’re classified by the banks as being fairly low-risk when it comes to job security while also having the opportunity to earn high incomes.These professions can include:
- Accountants
- Lawyers
- Healthcare Professionals
- Engineers
- CEOs
- Other high income professionals
So if one of these professions sounds like you, or you are a high income earner, lenders will likely be most responsive to offering an interest discount to you.
Normally with a standard professional package you may qualify for a discount of up to 1.0% below the Bank Standard Variable Rate (BSV) without any negotiation. Even if you’re not employed in one of these professions, it’s always a good idea to negotiate for a better deal because the banking sector is a competitive marketplace. One little misconception people make is to take a 1 year or honeymoon deal. These tend to have a very low (and we mean very low) 1st year rate but then from there on, they are quite expensive. Remember, that banks are businesses that want to do business, so it’s never a bad idea to ask for the best deal possible. Possible factors that you maybe able to negotiate discounts on include:
Break fees
Break fees are often charged by lenders when a borrower refinances to a different bank during a fixed rate period. These can be quite high depending on the length of time left on the loan.
Application fees
An application fee is a one-off payment when you start your loan.If you are not charged an establishment fee, you may pay higher ongoing fees, but you may be able to negotiate this fee.
Early exit fees
Also called ‘early termination’, ‘deferred establishment’, ‘deferred application’ or ‘early discharge’ fees. These may be charged if you pay out your home loan in full early, within a specified period (for example, in the first five years).
