FAQs

Does it cost me to use Clever Finance Solutions?

No, all of our services to you are at no cost to you.

I have been thinking about buying my first home, should I find one first then make an appointment?

You can see us before you find your property, car or any financing needs. We can help you work out the loan amount with repayments that fit into your budget. You can immediately schedule a time to meet Barry that suits you. He can call you at a scheduled time, or meet you on skype or visit you at your home or office.

I have a business and I would like to buy a car through my business. Is that possible?

We can assist you in getting finance for your car purchase through your business (subject to approval).

I find bank loan forms really daunting and I’m not sure how to fill them out.

You are not the only ones who feel that way! We will guide you through your loan application by explaining what they mean to help you answer the form questions as accurately as possible.

Why is the cheapest interest rate not always the best for Investors?

Getting the cheapest interest rate may be ok if you only want one or two properties in your investment portfolio. If you want a multiple property portfolio then you need to use a lender that will allow you to go back and unlock equity in your other properties, for purchasing your next property without saying that you don’t have enough income to allow this.

If I draw out equity from a property is it tax deductible?

The Australian Tax Office looks at what the equity(money) is being used for, rather than where it comes from. If you are using it for an income producing investment then most likely it’s tax deductible, however it’s always best to check with your accountant.

Offset accounts and Redraw, aren’t they the same thing?

It depends in what context you are using them. In a scenario where you have a property that you currently reside in and you want to purchase a bigger property and move into that, whilst keeping the existing property as an investment property, they will affect the tax deductibility of the loans over the property in different ways.

Why use Equipment Finance (leasing) to purchase equipment for my business rather than Equity from my home?

Equity from your home may be at a cheaper interest rate but it’s always important to consider your long term security. If you can’t make the repayments on an equipment loan they repossess the equipment, if you have borrowed against your home to buy the equipment and can’t make the repayments, they repossess your home. Consider also if you have borrowed against your home, these funds are not readily should you want to move somewhere else or upgrade your home.

How much deposit do I need to buy a home?

For the purchase of a home you need as little as 5% of the purchase price, plus government costs such as stamp duty. Some states have government incentives to assist with a purchase as well.

We are not sure if we are ready or how to go about buying property?

We are there to hold your hand through the process, we can work out with you what amount you are able to borrow and then how to go about looking for a property and finally the process from putting in an offer to moving in.

I heard my credit file is important when applying for a loan, how do I see it?

The easiest way is to request a copy of your credit file here http://www.mycreditfile.com.au/

What is a Low-Doc and Full-Doc loan?

A Full-Doc loan is where the lender can verify your income from payslips, tax returns etc. A Low-Doc loan is for self employed applicants and is used where tax returns are not available, instead BAS statements and/or a letter signed by the accountant is used.

What’s the difference between positive and negative gearing?

Negatively Geared: This is where the borrowing / holding costs are greater than the rental income. So for example your rent is $700pm, but your rates, land tax, interest / gearing costs are $1000. This is said to be negatively geared by $300pm.

 

Positively Geared: Any property can be positively geared, it just depends how much cash deposit you contribute to it or how low the borrowings are against the property. So for example your rent is $700pm, but your rates, land tax, interest / gearing costs may be only $650pm, this is said to be positively geared by $50pm.

 

Positive Cash flow: This is where the income is greater than the expenses, regardless of gearing. Pretty much nearly every property has a positive cash flow if you don’t have any borrowings against it. Positive cash flow can be attained before tax or after. It basically means that there is a surplus of cash after expenses.

 

Negative Cash flow: This is where the outgoings are greater than the income [No gearing]. A term not often used, but a local example could be where the land tax, rates and maintenance exceed the rent, say like on an old property in Mosman that your retired Mum owns. So it is quite possible to have a negative cash flow property, but after Income tax is calculated the investment could become positively geared.

What are the different types of Valuations?

Desktop: is done via a computer and where the Lender uses the median price of the suburb combined with median security. No inspection is done on the property, this type of valuation is usually only used in capital cities.

 

Kerbside: Is when the property is inspected from the road, no one actually see’s the inside of the property and is usually when the security and price is median to the suburb.

 

Full Valuation: is just that, a qualified valuer appointed by the bank inspects the property and issues a written report complete with pictures and measurements. This is the most common and widely used form of valuation.

What is Mortgage Insurance?

Mortgage Insurance is generally payable by the borrower when the loan amount is greater than 80% of the property value (greater than $400,000 for a $500,000 property for example). Mortgage insurance is there to protect the lender in case you are not able to repay your loan but gives you no cover. It does allow you to borrow more than 80% of the property value and let’s face it, a 20% deposit isn’t possible for a lot of people.

What’s a Residential Property and a Commercial Property?

Residential properties are houses, units, villas, townhouses, terraces etc, mostly somewhere where people reside. Commercial properties are shops, factories, offices, warehouses, service stations etc where a business is generally run out of.

How is lending different for a Residential or Commercial Property?

Residential property lending is generally easier and you can borrow up to 95% of the property value for terms up to 30 years. Commercial property lending is generally limited to 70 – 75% of the property value, with terms generally at 15 years but up to 25 years and some lenders perform annual reviews to ensure the loan amount to property value stays within their guidelines.

Can I buy property in my Self Managed Superannuation Fund (SMSF)?

An SMSF can purchase Residential or Commercial property, with or without a loan but there are strict requirements around this.

Why should I use a mortgage broker?

As the mortgage market becomes more complex, it pays to think about your options. A mortgage broker will negotiate with banks, credit unions and other credit providers on your behalf to arrange loans that suit you. Mortgage brokers can not only help you select a loan but manage the process through to settlement as well, dealing with any unforeseen hiccups that can occur.

What is Lenders Mortgage Insurance (LMI)?

LMI is the insurance you pay to protect the lender from risks associated with granting you a loan of more than 80% of the property’s value. If you default on your loan and the property must be sold as a result, the insurance company pays the lender the shortfall if the property fails to cover the balance of the loan.

How do I avoid Lenders Mortgage Insurance (LMI)?

You may not have to pay LMI if you borrow 80% or less of the property’s purchase price but that is not guaranteed.

What documentation do I need?

The documents you will need but are not restricted to:

  i. Bank statements confirming savings

  ii. Other bank statements for existing loans and credit cards covering the most recent month’s transactions

  iii. Rental letter from managing agent showing current rent is paid (if applicable)

  iv. Employment letter or contract

  v. 2 most recent and consecutive payslips

  vi. PAYG summary, which is your group certificate from the last financial year

  vii. Tax return for the last financial year

  viii. Rental income statements (if applicable)

  ix. Family trust statements (if applicable)

  x. Other investment statements like dividends (if applicable)

How long does it take to get a loan approved?

It generally takes 2-4 weeks to get a loan approved. However, it can take longer depending on loan type and other circumstances. If you need a loan approved quickly because you want to purchase a house at auction or have a deadline for a cooling off period, please let Clever Finance Solutions know so that we can try to expedite the process.

What happens if I have difficulty making repayments?

The earlier you notify your lender the more options will be open to you. The lender will want to know why you cannot make the repayment, help you plan how to pay it and where the money will come from, and how they can help you continue to make repayments.

Are there different types of loans?

There are three main types of loans:

  i. Fixed rate- The interest you repay is fixed and doesn’t change with national interest rates. This can be higher than the lowest variable rate.

  ii. Variable Rate- The interest you replay changes when national interest rates change.

  iii. Combination or split loan- You can split the loan between a fix rate loan and a variable rate loan.

If I choose to go with a fixed interest rate option, can I change it later?

Yes, once the fixed rate has expired. If you are adamant that you want to change to variable then you will generally be charged a fee for breaking the fixed rate before it expired.

Can I make extra repayments?

Extra repayments are an excellent way to pay off your mortgage faster so the answer is yes you can, but the terms and conditions may vary with individual products.

How do I make extra repayments on my mortgage?

Making extra repayments can be as easy as setting up direct debit for a higher amount or you can make lump sum payments. However, with a fixed loan rate, there may be a limit as to how much extra you can repay.

Can I get access to the extra repayments I’ve made?

Yes, but there may be fees involved with individual products.

Can I split my loan between different accounts?

Yes, but there may be minimum loan repayments associated with each account.

What are the advantages of getting pre-approval?

Firstly, it means that you know exactly how much you can spend on a home and all the uncertainty surrounding not getting a loan is non-existent. It also means that you can settle quickly, if it’s a possibility, and shows the realtor that you are serious about purchasing a home.

How long does pre-approval last?

Pre-approvals are usually valid from between 3-6 months. If you have not found a property in that time, it is possible to get an extension with a few updated documents like recent pay slips.

I am self-employed, how hard is it to get a loan?

It is not necessarily any harder than someone who has a company job. It can be slightly more paperwork but the main thing you will need is tax returns.

I don’t fit the standard bank credentials; can I still get a good interest rate?

Definitely! And it is just a situation as this that Clever Finance Solutions excels for its clients. With almost a decade of experience, thinking outside the box to get unique clients the right loan is what Clever Finance Solutions prides itself on.

What is an offset account?

An offset account is an account that is linked to your loan account. The money you put into this account can offset the amount you own on the loan and you’ll be charged less interest the more money that goes into this account.

What are the advantages and disadvantages of an offset account?

The main advantage is that is allows you to save money on the interest of your loan without actually paying the funds into the loan itself. You can also withdraw on this account at any time without penalty. However, offset accounts are usually only associated with variable loans that have higher interest rates or loans that have a lot of features, including extra fees.

Are there any hidden fees associated with a loan and what are they?

There are several scenarios where fees might apply. However, Clever Finance Solutions will ensure you aware of all the fees associated with your loan. Some of the fees may include:

  i. On establishment of your loan, there is a governmental mortgage registration fee.

  ii. After establishment of your loan, there are no early repayment fees now except for fixed rate loans but all lenders will have a discharge fee at the end.

  iii. Late payment or default fees can be an issue if funds are low.

  iv. Most major banks have their annual package fees paid once a year for the duration of your loan.

  v. Asking for copies of documents, even statements can result in extra fees.

What is a comparison rate?

By law, this is a rate that all lenders must display next to their advertised interest rate and takes into account some of the fees and charges associated with the loan. It will give you a more accurate representation of the loan’s interest rate once the fees and charges are added.

Am I eligible for Government grants like First Home Owners Grant?

Each state has its own legislation surrounding the First Home Owners Grant. You can either review your state’s legislation here http://www.firsthome.gov.au/ or just let Clever Finance Solutions know that this is your first home and we’ll do all the hard work for you.

Why do I need a Solicitor or Conveyancer when purchasing?

Solicitors and conveyancers ensure that the title of the property has been correctly changed according your state’s current land title laws. They also search for unresolved property disputes and rates owing by seller (basically who gets paid what) so you are not charged for a period that you did not own the home.

How do you decide which loan is best suited to my unique situation?

Basically, every person’s situation is unique. At Clever Finance Solutions, we take into consideration your financial goals, capacity and other variables to figure out exactly which home loan is going to work best for you.

 

 

Contact Us
Suite 204, 250 Pitt Street
Sydney NSW 2000
Australia

Australian Credit License 391091

Phone: 1300 889 139
Fax: 02 8003 9836
Email: sales@cleverfinance.com.au

or book an appointment today!