Monthly Archives: March 2016

House Overpriced

How to identify an overpriced home?

Homeowners can value their house higher than what they're worth for a few reasons. The seller could be starting at a higher price because they are expecting some bargaining. Another reason for an over inflated price could be the homeowner having an emotional attachment and are therefore over-valuing their home. It could also be the case that the home underwent costly renovations and the homeowner is trying to recoup this cost as a return on their investment without it actually being seen as having added much value to potential sellers. Finally, the price of the home might be on the market at a higher price based on misguided advice from friends or agents.

Buying an overpriced home could be one of the biggest mistakes that any buyer can make. To avoid falling into the trap of purchasing an overpriced home, here are some factors to consider before finalizing your home loan deal.

Neighbourhood

If the house you are looking at is much pricier than the neighbourhood properties of similar size, then you might end up buying an overpriced home. Understand the neighbourhood profile, take some time to research the estimation of real estate value around the area and look at the recent sales history. Analyse the price differences and reasons behind the listed pricing.

Property Marketplace

You can find a number of online property marketplaces where you can discover and compare different types of homes in different locations (such as Domain and Realestate.com.au). If the home you are looking at is listed on the market for a longer time than similar properties, then it could be an overpriced home.

Renovation requirements

Understand the current status and area of improvements for a new house you are planning to buy. The home price may seem reasonable or even low but if you need to work on major home improvements on different areas like walls, ceilings, kitchens, bathrooms, roof or within the structure of the house, then you might fall into a trap of buying a home which will cost you more in the long run. Get a thorough building inspection done and ensure upfront in your agreement that the home includes major necessary improvements.

In order to ensure that you avoid having to pay off the mortgage of an overpriced home, contact the team at AusFinance today. Our experts provide free tailored advice to identify potential pitfalls to ensure you choose the home that best fits you.

Low Interest Home Loan

5 Low interest mortgage traps that can cost your dearly!

The priority for any first time mortgage seeker is home loans with low interest rates and this reason is obvious to us all. The approach is justifiable and can potentially save a considerable amount of money for the borrower's personal use over the life of the loan. Even if the mortgage is cheaper by 0.1%, it is likely that we will opt for that instinctively because of the amount of money this can save when we are talking about a $500K loan on a thirty-year mortgage! But this overly-simplified way of looking at home loans can be deceptive for mortgage seekers.

The home loan lending sector is one of the most competitive business sectors with a range of lenders competing for your business. This competition has led lenders to create an array of home loan products which might not reveal the true costs of borrowing a loan to the lender. Unravelling these traps for a first time mortgage seeker is difficult without the help of a professional home loan expert. AusFinance has helped many first timer home loan seekers in Sydney and across other states in Australia. Based on our daily experience of saving our clients from entering into ‘low interest’ home loans which are more expensive in the long run, here are the most common pitfalls that you should lookout for before signing up for a low interest rate mortgage:

  1. Advertised Interest Rates

Mortgage interest rates on advertisements might look attractive but after applying for the mortgage, a borrower may not qualify for the advertised interest rates. Interest rates can change depending on the market and your financial situation and the interest rates advertised might not be the same as what you have access to in the loan. An experienced mortgage broker can recommend mortgages with the best interest rates for you available from a host of lenders not just ONE lender so and a broker can explain to you the actual rate you’ll be paying.

  1. Undisclosed Service Fees

Interest rates are usually considered crucial for borrowers to decide the best home loan but borrowers often forget to include service fees that are associated with the mortgage, such as closing costs, that are charged by the lender and third parties. Some of these may include a credit report fee, loan origination fee, attorney's fees, home inspection fees and more.

These are areas where your lender could make up for the low interest rates that they provided for the mortgage and make the loan less attractive than what you may expect. You should consult with the lender and understand all of these costs.

  1. Qualifying Loan Type Vs Advertised Loan Type

Mortgage interest rate differ according to the type of mortgage loan depending on the loan period and your financial profile. If the advertised mortgage interest rate is for a 20 -year fixed rate and your financial situation suits a 30-year fixed mortgage, then you might not get the rate you were originally expecting. A quality mortgage broker can assess all of these variables for you and consult with a range of lenders to recommend the best possible product based on your individual situation.

  1. Property Use

Mortgage interest rates differ on the basis of how you are going to use your property. Interest rates vary depending on whether it is an owner occupied mortgage or if the property is going to be used as an investment. This difference can also affect the amount of tax your purchase will be liable for.

  1. Credibility: Yours, Lenders & Broker's

Credibility of the borrower, lending institution and the mortgage broker working on your loan greatly affects the interest rates that you could qualify for. You could be entitled to a better interest rate if your credit rating is excellent. Similarly, all big banks are not always preferable and small lenders are not always to be avoided - you should be doing the research on your lenders credibility before choosing a home loan. If you are using a mortgage broker, you should trust that they are able to provide you with the best possible rates for your situation and are capable of assisting you to navigate through the home buying process.

Mortgage interest rates can be complicated and there are many factors which impact your rate, such as the credit rating, the purpose of the purchase, the credibility of the lending institution and on the mortgage broker you are working with. Even if you qualify for a mortgage with lower interest rates, you might be charged steep fees that could make the mortgage costlier.

To avoid getting trapped into a bad mortgage deal, the best thing you should be doing is to do ample research on the available options in the market, comparing the features of the mortgage with various lenders and understand recurring and non-recurring fees. Or alternatively - talk to a mortgage broker at AusFinance and relax while we do the legwork for you. Go on - drop us a line and we will get back to you with your best rate!

Mortgage Fraud

What is Mortgage Fraud?

Mortgage fraud is the practice of falsifying the information submitted in home loan application documents. This is done in order to get approval for a mortgage or to borrow an amount exceeding the figure that using truthful information would allow. Misinterpreting and misguiding any data, facts or figures can be considered criminal activity and unethical behaviour and the mortgage industry offers no exception.

Mortgage fraud can be categorized in multiple ways, such as:

  • Occupancy fraud: Occupancy fraud is a practice when the borrower says that a home will be owner-occupied whereas the intention is for an investment property.
  • Income fraud: Overstating the actual income to qualify for a larger mortgage is referred to as income fraud.
  • Employment fraud: Overstating tenure or falsely claiming employment at a business or self-employment in a non-existing business.
  • Fraud for profit: It involves mortgage brokers and loan officers responsible for unstated multiple transactions and misinterpretation of assets, collateral, loan terms and other financial agreements.
  • Appraisal fraud: It is about understating or overstating the property value.
  • Cash-back schemes: It happens when the property valuation is inflated and failing to disclose cash back agreement to all parties.
  • Shotgunning: It happens when you apply multiple loans for the same home.
  • Failure to disclose liabilities: It is about hiding figures on debt vs income ratio for the approval of a new loan.
  • Property flipping: It happens when a property is purchased at a lower value and intentionally appraised for a higher value to sell with increased profit.
  • Identity theft: It is a practice where a borrower uses and manipulates some third person's identity to obtain a home loan.

Mortgage fraud in any loan process can be executed by one or more individuals including a buyer, financial auditor, mortgage broker, a loan officer, property inspector or a real estate agent. Any of these roles could have played a part in misleading or falsifying information to give the creditor an incorrect picture of the borrower’s true position.

Involvement in mortgage fraud and looking for short term benefits will almost certainly come back to bite you. The repercussions for committing mortgage fraud can arrive through serious consequences personally, financially and legally for borrowers, mortgage brokers and lenders involved. It is imperative that you gain trusted advice from professional advisers, in order to avoid the risk of mortgage fraud and secure the right home loan product for you and your family without any controversies. Identify a mortgage broker based on their accreditation and accountability. Use the same level of thoroughness when picking an auditor, loan officer, property inspector, real estate agent or anybody you find yourself dealing with during your home loan journey.

At AusFinance, we provide you FREE tailored expert advice and service as per your individual requirements and financial situation. We help you to understand the traps and commonplace areas where borrowers can find complications regarding any potential mortgage fraud and guide you through to loan approval and settlement; all the while we represent you to find the best overall package for your home loan.

To get started with your home loan application, get a quote or get in touch with us today!