FAQ :: Blue Key Finance

Q:	What costs are involved when purchasing a property?
A:	As a rough guide, it is recommended that you budget 5 -7% of the purchase price to cover fees and charges. These fees and charges may include (but are not limited to): Stamp duty Transfer of land Building/pest inspection Valuation fees Lenders mortgage insurance (LMI) Solicitor fees Insurances Connection fees – phone/gas/electricity Rates Removal fees
Q:	How much money can I borrow?
A:	The amount you can borrow, commonly known as your borrowing capacity, will differ from lender to lender. To get an indication of how much you can borrow, use our borrowing capacity calculator. You should then make an appointment with us to get a complete individual assessment of your situation.
Q:	What affects my borrowing capacity?
A:	Your borrowing capacity will be affected by how many dependent children you have, your current income and your total current debt commitments. These variables play a major part in how much a lender will lend you. Mind you, there is a large range with borrowing capacity between lenders.
Q:	How can I improve my chances of obtaining finance?
A:	To improve your chances of obtaining finance through a mainstream lender reduce the number of credit cards or card limits you have. Lenders look at your maximum limit, not what you owe – the bigger the limits the less you can borrow. Secondly, review your credit history. If you’re suspicious of any defaults or mistakes, you can order your own credit file for free by visiting http://www.mycreditfile.com.au/ or by phoning Baycorp Advantage on 02 9464 6000. Finally, if you’ve fallen behind in repaying existing debts, make sure you pay the arrears immediately.
Q:	I am self employed and have not prepared my tax returns, am I still eligible for a home loan?
A:	Self employed people now have access to ‘low-document’ or ‘no-document loans’ which means no proof of income required and no declaration of assets or liabilities needed either. These products now attract interest rates equal to those who actually verify their income.
Q:	I have credit impairment, am I still eligible for a home loan?
A:	People with poor credit histories now have access to non-conforming loans. They begin with slightly higher interest rates yet with a good repayment record you can move on to a conforming, or regular loan, with a lower interest rate.
Q:	What are some ways to reduce a mortgage quicker than 30 years?
A:	Pay more frequently than monthly – with fortnightly repayments you will actually be making one additional repayment a year. However, for this to be effective it is important that you ask your lender to halve your monthly repayments rather than recalculating them Make extra repayments above the minimum – even $80 a month on a $200,000 loan at 7.32% will save you 3 years and 3 months off your loan term Extra money like inheritance, a good tax return, a bonus from work should be credited into your home loan. If you have a redraw facility you still have access to this extra repayment when needed Make your first repayment at settlement Consider a 100% offset feature Salary crediting: you can use a credit card with a good interest free period to pay for your regular living expenses and at the end of the month have the card ‘swiped’ (or paid off) against the home loan If interest rates fall ask your lender to leave your repayments as is Do a regular stocktake on your home loan. A loan may start off as good but have its competitiveness eroded by increased fees or rates, or by the introduction of better priced products on the market Interest repayments on an owner occupied home loan are non tax-deductible, which means it makes good sense to give priority to paying off your home loan quickly instead of directing funds towards paying off investment loans or having them sit in low interest-bearing deposit accounts (where any interest received will also be taxed).
Q:	How is interest calculated?
A:	Interest is calculated on your outstanding balance on a daily basis and charged to your home loan account once a month. For this reason, and because of the number of days between interest charges varies, the amount of interest charged each month may also vary. To calculate monthly interest, the balance is multiplied by the interest rate, then divided by 365 days in a year, then multiplied by the number of days in the current month.
Q:	Why would I take out an interest only loan?
A:	This is a loan used mainly by property investors. It allows the borrower to pay only interest for an agreed period instead of principal and interest (i.e. the principal balance remains the same during the interest only period). This maximises the investors tax deductions whilst also freeing up cash flow for other investing opportunities.
Q:	How often can I make mortgage payments?
A:	Most lenders these days offer flexible regular repayment plans. You can choose to pay weekly, fortnightly or monthly. Your repayment can therefore be matched to your pay cycle.
Q:	How much do I need to save for a deposit?
A:	The deposit required depends largely on the type of home loan and, of course, the lender you select. As a general rule, you will require a total of 5 - 7% of the purchase price as a deposit.
Q:	What is the First Home Owner Grant?
A:	The First Home Owner Grant is a lump sum benefit provided to first homeowners. You may be eligible for the ‘First Home Owners Grant’ - a one off payment of $7,000 when you buy or build a home. Visit http://www.firsthome.gov.au/ for eligibility criteria and to download the application form. In addition, you may also be eligible for the Victorian State Government’s ‘First Home Bonus’ (FHB) of $3,000 if a contract is signed pre 30/06/2009. The FHB is applicable only to contracts < $500,000.
Q:	How do I know if I am eligible for the First Home Owner Grant?
A:	As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia, with the intention of occupying it as your principle place of residence within 12 months of the settlement. It is important to note that if you are buying the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.
Q:	What is lenders mortgage insurance?
A:	Lenders Mortgage Insurance (LMI) covers your lender in the event of you defaulting on your loan. You are not protected by LMI. If your property is subsequently sold and the amount from the sale is not enough to pay off the loan in full, this insurance will cover the lender for the shortfall. However, you will then be liable to pay for the shortfall to the mortgage insurer. LMI is obtained by your lender. This insurance should not be confused with Mortgage Protection Insurance which covers your mortgage instalment in the event of such things as death, disablement, unemployment, etc. LMI premiums are a once only fee payable by the borrower at loan settlement when the amount borrowed is above a certain percentage, usually 80%, of the lender's valuation of the property, or for low doc loans usually more than 60% of the property’s value. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front.
Q:	Which banks and lenders does Blue Key Finance represent?
A:	We have access to more than 400 home loans provided by over 25 of Australia's leading banks and lenders. Please review our panel of lenders.
Q:	What documentation will I need to supply for a home loan application?
A:	In conjunction with submitting your home loan application, you will need supporting documentation confirming your identity, financial position and to substantiate your income. Documents can include: 100 Points of identification (a passport and drivers licence will suffice). Click here to view the 100 points identification form which outlines other sources of identification and their relative points. Annual rates notice on all properties that you own Last 3 months of credit card statements for each credit card 2 recent pay slips and latest Payment Summary or tax return Last 6 months original savings statement plus an internet printout of savings transactions from the end date on your last statement up to today’s date If you have a personal loan your last 6 months personal loan statement If you are self employed: Last 2 years business tax returns and financial statements and last 2 years full personal tax returns. However, if you’re applying for one of our Low Doc home loans, you don’t need to provide proof of income. Your ABN Current business account statement Accountant’s full contact details We will be able to provide an accurate overview of what’s required for your individual situation.
Q:	Do you charge a fee for your mortgage broking service?
A:	No. We get paid a commission from the lender that you choose after your loan settles. This commission depends on the lender, product & loan amount that you choose. A commission schedule on our panel of lenders will be provided to you which details what we will receive by way of an upfront and trail commission.
Q:	What is your Complaints Procedure?
A:	If you have a complaint about a credit related product or service that has been provided to you the Credit Ombudsman Service can help. Should you have a dispute with us then we will work with you to resolve the matter. If an agreement can’t be reached, you can refer the matter to COSL who can resolve the issue at no cost to you. MLC Mortgages membership # is 405603.
Q:	How do I calculate stamp duty if I were to purchase an established home in Victoria?
A:	The first $115,000 of the Victorian property's purchase price will incur $2,560 of stamp duty. The value of the Victorian property from $115,001 to $870,000 is charged at an additional 6% of stamp duty. For example; If you wanted to calculate stamp duty on a Victorian property valued at $315,000 then you would do this in three steps. Step 1: $2,560 will be charged for the first $115,000 of value. Step 2: Calculate 6% of the difference between $115,001 and $315,000. This equates to $12,000 of stamp duty. Step 3: Add Step 1 and Step 2 together to give you a total stamp duty of $14,560 in this example. NB: Since January 1st 2007, the Victorian Government introduced a stamp duty concession. The concession now cuts the rate of stamp duty for Victorian homes priced above $115,000 and up to $400,000 purchased as a principal place of residence (PPR) from 6% to just 5%. This equates to a maximum savings of 2,850. If you buy a home valued between $400,000 and $500,000 you are still eligible for the concession but capped at $2,850. If you were to buy a home valued more than $500,000 then you will not receive this concession. More importantly, those eligible for the First Home Owner's Bonus of $3,000 (FHB) must choose either the concession from stamp duty or the FHB. You cannot receive both. So, using the same example above, if you were buying a home to live in and are not eligible for the FHOG then to calculate the stamp duty you would repeat steps 1 - 3 above but replace the 6% rate in step 2 with a 5% rate. Total stamp duty would therefore equate to $12,560.
Q:	How are interest rates determined?
A:	Every month the Reserve Bank of Australia (RBA) reviews the official cash rate which is dependent upon the inflation rate. The RBA looks at the inflation rate compared against the unemployment rate, consumer price index (CPI) and retail sales and sets the interest rate based on the analysis of this information. The RBA uses interest rates as a tool to control spending. For example, if economic activity is deemed excessive it may try to slow things down by raising the offical cash rate which will in effect raise the lenders variable home loan interest rate. This will ultimately stop you from spending money by increasing your loan repayments. Those of you on a fixed interest rate will be unaffected by any variance in the offical cash rate during the fixed term of your home loan. Fixed home loan interest rates are determined by what's happening on the bond market, where lenders source their fixed loan funds. At the first sign of inflationary pressures, those fixed rates will rise.