When buying a home, you’ll often come across the term LVR, which stands for Loan to Value Ratio. But what does this actually mean?

LVR plays a crucial role in figuring out how much you can borrow for a property, the deposit size you’ll need to save, and whether you qualify for a specific mortgage product. Essentially, LVR represents the percentage of the property’s value, as determined by the lender, that corresponds to your loan amount.

For example, if the property you’re eyeing is valued at $500,000 and you intend to borrow $400,000 for its purchase, your loan would make up 80% of the property’s value, resulting in an LVR of 80%.

Understanding your LVR is vital as different lenders and loan options come with varying maximum LVR limits, and some may cap the LVR for small properties or specific locations.

Lenders use the LVR to evaluate loan risks. A higher LVR translates to increased risk for the lender. It’s worth mentioning that an LVR exceeding 80% might necessitate you to pay Lender’s Mortgage Insurance.

Remember, higher borrowing amounts and LVR typically mean higher interest payments. If you require assistance in determining your LVR, navigating other financial jargon, or seeking guidance throughout the loan process, feel free to get in touch with me!

It’s been a long time between posts! Today a quick look at some things you can work on to Boost your borrowing power.

When looking to purchase a new property the amount you can borrow is an important factor in getting the property you want or need. You may find that the amount you wish to borrow is more than your borrowing power. In some cases there is nothing that can be done and you need to change your plans or time frames to accommodate this. However sometimes changes can be made to help Boost your borrowing power and get you the property you really want!

You can check your rough borrowing capacity here!

Clear Personal Loans
While you may only owe a small amount on your personal loan or car loan, the effect it can have on your borrowing power can be substantial. Even if  your car loan only have $4000 left owning, the repayment based on the original $20k loan would be used. We added a car loan of $20k at 10%pa with a repayment of $424/m to a borrowing capacity scenario. The difference the addition of the car loan made was $56k.

Reducing Credit card limits and closing Store Cards
Many of us are guilty of having multiple credit cards with limits available, even if we don’t use or need them. It is often a case of  “I don’t use the card” or “I pay it off in full” and while this may be true, from the lenders perspective these are debts which need to be taken into account when establishing your borrowing capacity. Even if you have a credit card with a limit of $20k, which you don’t use the bank will still be assessing it based on the $20k limit. This could add a liability repayment of $700 a month to your expenses which will have a major impact on your borrowing ability.

Review your Expenses
All lenders require you to submit your living expenses as part of your application to see if you are above or below their determined “average cost of living”. If you are living above the average cost there is an opportunity to review your expenses. Look at expenses such as Pay TV, additional cars which may not be required, eating out, reviewing your insurances or utility providers. Any area which you spend in excess and where changes can be made will free up funds to assist with servicing of your loan.

Choosing the right lender
This is where the value of a Mortgage Broker comes into play even more. Depending on your income type, for example casual, Some lenders will accept the income at a higher percentage than other. For example one lender may take only 80% of income via casual employment where as another lender may take the full 100%. Other income sources such as Overtime, bonuses, government income, pensions and rental income are also commonly capped by lenders at below 100%. Finding a lender which will accept the income you have to best support your application can be so important.

Buying your first home is an exciting time however saving your deposit can seem like a very daunting task! Especially when this is possibly the largest sum of money you have saved in your life. So to help you tackle the task here are some of our top tips to get you on the way to saving your deposit and buying your first home!

Create a Budget

Without a budget, it is easy to think that you don’t actually have any money to save and equally as easy to overspend on things you don’t actually need! Knowing what you spend your money on monthly is a great way to find areas you can save. Go back through your last few months of statements and see where your money is going. You may be shocked to find out how much you spend on things you don’t need!

ASIC provides a great budget planner, get it here and we have our very own budget planner on our calculators page.

 

Tighten your belt

Sometimes you have to make sacrifices to achieve goals. This may mean that your weekly take-away meal or restaurant dinner becomes a home-cooked meal for the time being. Instead of buying new clothes for each outing let yourself get creative and create new outfits from your existing wardrobe or do your own manicures for a while. All these little “luxuries”, however big or small add up and before you know it you could be wasting hundreds of dollars a month on things that are not necessities. Try applying some of these simple tips and watch your savings grow. You will be buying your house in no time!

 

Looking for your first home in North Brisbane? Buying for the first time can be a very daunting process! So many things to consider when applying for your first home loan.

We have compiled a list of some things to consider when you are thinking about getting into the property market and purchasing a home for the first time.

What you can borrow vs what you can afford

Finding out that you can borrow $1 million is no good to you if your spending habits show that you simply cannot afford that! Once you have met with your Broker and you know what you can borrow based on your income/expenses you should then look at what you can afford to repay. You may work out you can “afford” more than you can borrow- in this case, the borrowing cap set by your broker should remain your top dollar.

Should you complete your sums and realise that the amount you could comfortably pay back is lower than the borrowing capacity, then this needs to be your maximum loan amount. Your Broker will be able to help you through this with repayment information and loan calculations. Borrowing within your means is very important when you are looking at a long-term debt!

SAVE SAVE SAVE 

It goes without saying! If you are looking to purchase your first property you need to have cash in the bank. In an ideal world, everyone would buy a house with a 20% deposit. Having a 20% deposit means you do not have to pay mortgage insurance. Mortgage insurance is a premium that insures the Bank/Lender (not you!) in the event that you stop paying your home loan. It is dead money and something you would never get back. Of course, sometimes saving a 20% deposit will take longer than you wish to or can wait. In those cases, mortgage insurance may be a necessary evil.

Speak with your Broker about what options may be available. The bottom line is always aim to save as close to 20% as you possibly can. Every dollar you save in mortgage insurance is a dollar in your pocket.

Clear the debt

If you have personal loans, credit cards, store cards- any type of personal debt when you purchase a property it is suddenly going to become a lot harder to clear these off quickly. Any debt that you have outstanding when you purchase your house is going to take money away from your mortgage and restrict your cash flow. Do your best to clear these debts off before you buy, go into the purchase with a clean slate.

Obtain pre-approval

Once you have worked out how much you can afford to borrow and have your deposit ready to go arrange your pre-approval with your Mortgage broker. This gives you peace of mind to know that based on the information submitted the lender would provide you with the loan you have requested. Then you can shop with confidence! There is nothing fun about going out and finding a property only to find after you have signed a contract that you had a default on your credit file which you were not aware of and now finding a lender will be more difficult. Cover all bases and protect yourself.

Create a Buying Budget

Once you have met with your Broker and completed your pre-approval you will know based on your financial situation what your price range is. Now stick to it! There is no good setting a budget if you then go out looking at properties outside your price range. Shop within your means- avoid looking at properties that you cannot afford and avoid disappointment!

Check Grant Eligibility

Each state has different grants and offers available for First Home Buyers. Your Broker should be able to discuss what may be available in your state/territory. It would also be a good idea to do your own research and know what you are entitled to. In some cases, Grants can form a part of your deposit- speak with your Broker to get more information.

Don’t Rush

Once you have saved your deposit and your broker has given you the go-ahead to “Go Shopping” it is easy to rush out and want to buy the first house you set your eyes on. Take your time to find a property that suits your needs now, or ticks a few boxes at least. It’s unlikely that you will buy “the one” as your first home however you also do not want to get stuck in a house you hate for 10-15 years while you pay your loan down enough so you can upgrade properties!

If you have any questions about buying your first home and want to talk about where you are heading on your purchase journey please call us today!

Why choose Your Place for your North Brisbane loan?

• We hold your hand- We take the time to walk you through to process and answer any questions you have along the way!
• We work for you- It is our clients who keep our business going. In support of our clients, we have chosen not to charge a fee for our service and instead, we are paid by the lenders at settlement (via a commission payment). Our clients get access to our 20+ lenders and hundreds of loan options and work with our clients to find a great option for your individual scenario.
• We shout the coffee- You pick the cafe, I’ll get the bill. Match made in heaven!

Phone Elise Today on 0422 527 759 or email at elise@yourplacemortgagebrokers.com.au