Loan to Value Ratio LVR – why is my home loan LVR important?

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Loan to Value Ratio (LVR) – is it important for my home or investment property purchase finance or refinance?

Mortgage Broker Oak Laurel by Nigel Abery (PhD), Principal Mortgage Broker at Oak Laurel.

What is LVR?

“LVR or LTV is the acronym for loan to value ratio. Loan to value ratio is the finance or banking term used to describe the ratio between a loan (or mortgage) and the asset being held as security against that loan. Loan to value ratio is usually described as the loan as a percentage of the asset value.”

Why is LVR important?

The Loan to value ratio of your home or investment property and mortgage is important when the bank or lender assessed your loan application (including when you are taking out a new loan or refinancing your existing loan). Banks and lenders consider that the greater the proportion of the property that is being borrowed (up to a certain point) the the higher the risk  that they will not get their money back in the event of the borrower defaults on the loan. Generally banks and lenders will allow up to 80% of the property price to be borrowed by PAYG employees without requiring lenders mortgage insurance. Lenders mortgage insurance can cost you (the borrower) thousands of dollars and it insures the bank against you not paying the loan.

Some lenders will also self insure for some borrowers that they consider low risk. Certain banks and lenders consider your profession as a criteria in assessing risk and will waive the lenders mortgage insurance requirements for certain professionals.

The type of property you are borrowing for can also influence the loan to value ratio that the bank or lender will accept. For example if the property is an farm greater than 150 ha many banks will not lend more than 70% of the property value.  Also, recently some banks consider different suburbs as higher risk and will only lend to 70% or 80% of the property value in those suburbs.

 

See more here about: How to calculate your Loan to Value Ratio

 

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High risk suburbs that require bigger deposits for NAB

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High risk suburbs that require bigger deposits for National Australia Bank (NAB)

National Australia Bank (NAB) has released its list of suburbs it considers as higher risk and where it will apply tighter lending restrictions requiring larger deposits.

NAB has two suburb risk classifications: Group A and Group B.

Group A contains “areas where significant deterioration in credit risk has been observed”. Lending by NAB in these suburbs will be limited to 70% of the property value (70% Loan to Value Ratio – LVR). Many mining towns in Western Australian and Queensland are in this group.

Group B areas are deemed to pose less immediate risk, although they are “areas which are exhibiting characteristics which may indicate future deterioration in credit risk”. Lending by NAB to these suburbs will be limited to 80% of the property value (80% LVRs). Many Sydney suburbs and the Central Business Districts of Sydney, Melbourne (CBD, Docklands & South Bank), Adelaide, Perth and Brisbane are on this list.

The full list of NAB’s classified higher risk postcodes is below:

Group A – 70% Loan to value ratios maximum from NAB in these areas

Western Australia:

6390 Bannister, Boddington, Crossman
6429 Boorabbin, Bullabulling, Collgardie
6436 Menzies, Ularring
6437 Leinster, Sir Samuel
6438 Leonora, Lake Darlot
6440 Bandya, Beadell, Cosmo, Newbery
6442 Kambalda East, Kambalda West
6642 Angelo River, Capricorn, Karalundi
6646 Wiluna, Lake Carnegie, Little Sandy Desert
6710 Cane, Onslow, Peedamulla, Talandji, Yannarie
6713 Dampier Archipelago, Dampier
6714 Atonyymyre, Balla Balla, Banynton
6716 Pannawonica, Fortescue, Hamersley Range, Millstream
6718 Roebourne, Whim Creek
6720 Cossack, Point Samson, Wickham
6721 Indee, Mundabullangana, Pardoo
6722 Boodarie, De Grey, Finucane, Pippingarra, South Hedland
6751 Chichester, Innawanga, Juna Downs
6753 Newman
6754 Paradburdoo
6758 Nullagine
6760 Marble Bar

Queensland:

4210 Guanaba, Maudsland, Oxenford
4211 Advancetown, Beechmont, Binna Burra
4680 Gladstone
4717 Blackwater
4720 Emerald, Yamala
4740 Mackay Region
4743 Suttor, glanden
4744 Moranbah
4745 Dystart
4746 May Downs, Middleount
4805 Bogie, Bowen, Gumlu

Northern Territory:

0885 Alyangula

South Australia:

Olympic Dam, Roxby Downs, Roxby Downs Station

Tasmania:

7155 Kettering
7467 Queenstown, Lake Margaret
7468 Strahan, Macquarie Heads
7469 Zeehan, Trial Harbour, Renison Bell
7470 Rosebery

Group B – 80% loan to value ratio maximum from NAB in these areas

New South Wales:

2000 Sydney
2205 Arncliffe, Turrella, Wolli Creek
2113 East Ryde, Macquarie Park, North Ryde
2769 The Ponds
2209 Beverly Hills, Narwee
2019 Banksmeadow, Botany
2199 Yagoona
2017 Waterloo, Zetland
2067 Chatswood, Chatswood West
2211 Padstow, Padstow Heights
2008 Chippendale, Darlington
2141 Berala, Lidcombe, Rockwood
2153 Baulkham Hills, Bella Vista, Winston Hills
2210 Lugarno, Peakhurst, Peakhurst Heights, Riverwood
2118 Carlingford
2222 Penshurst
2166 Cabramatta, Cabramatta West, Canley Vale/Heights, Lansvale
2767 Bungarribee, Doonside, Woodcroft
2127 Newington, Sydney Olympic Park, Wentworth Point
2144 Auburn
2566 Varroville, Bow Bowing, Minto, Raby, St Andrews
2140 Homebush, Homebush West
2194 Campsie
2037 Forest Lodge, Glebe,
2768 Glenwood, Parklea, Stanhope Gardens
2142 Camellia, Clyde, Granville, Holroyd, Rosehill, South Granville
2150 Harris Park, Parramatta
2220 Hurstville, Hurstville Grove
2168 Ashcroft, Busby, Cartwright, Green Valley
2151 North Rocks, North Parramatta
2146 Toongabbie, Old Toongabbie
2195 Lakemba, Wiley Park
2112 Denistone East, Putney, Ryde
2208 Kingsgrove

Victoria:

3000 Melbourne CBD
3004 St Kilda Road Central
3006 South Bank, South Wharf
3008 Docklands
3067 Abbotsford

South Australia:

5000 Adelaide CBD
5001 Adelaide CBD

Western Australia:

6000 Perth CBD

Queensland:

4000 Brisbane CBD

 

Note, this relates to National Australia Bank (NAB) policy. Other banks and lenders have their own way of assessing risk and have their own lending policies about maximum loan to value ratios. It you are buying in one of these suburbs and are yet to have your loan approved contact us to evaluate your home loan or investment loan options.

Need help? Contact one of our mortgage brokers in Sydney, Melbourne, Brisbane, Perth or Adelaide.

 

 

Call us:

+614 30129662

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Temporary visa holders in Australia 2015

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Temporary visa holders in Australia 2015

There were 1,764,980 temporary entrants and New Zealand citizens in Australia on 30 June 2015, up by 3.8% from 30 June 2014 at 1,699,570.

The four largest components in Australia on 30 June 2015 were New Zealand visa holders (653,830 visa holders and 37.0 per cent of the total), student visa holders (374,570 / 21.2 per cent), visitor visa holders (227,160 / 12.9 per cent) and Temporary skilled (subclass 457) visa holders (188,000/ 10.7 per cent).

The top source citizenship country for temporary entrants in Australia on 30 June 2015 was New Zealand (654,070 visa holders), followed by China (excl SARs) (161,570), India (144,460), United Kingdom (93,300) and South Korea (50,760). NZ citizens have unrestricted access to Australia under a trans-Tasman deal.

 Of the 161,570 temporary Chinese entrants 82,570 were students, 44,960 were visitors and 11,650 were temporary skilled (457 visa) holders.
Of the 144,460 temporary Indian entrants 48,950 were students, 41,000 were 457 visa holders and 34,630 were visitors.
Of the 93,300 temporary UK entrants 33,350 were 457 visa holders, 29,030 were working holiday makers and 16,020 were visitors.
See more here: statistics about temporary entrants to Australia
Temporary residence in Australia can be a pathway to permanent residence for some. By staying in Australia as a student, skilled worker or on another temporary visa people can experience the Australian culture and may end up applying to stay permanently.
Often if temporary visa holder intend to stay for an extended period or apply for permanent residence they will want to purchase a property here in Australia. Did you know that some banks and other lenders provide home loans to temporary visa holders, including home loans for 457 visa holders?
For short term holiday makers it can also be an opportunity to investigate investing in Australia especially the Australian property market. Did you know that some banks and lenders will provide investment property loans for foreigners?

Contact us:

+614 30129662

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Oak Laurel Mortgage Broker

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What is a construction loan?

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What is a construction loan?

Building your own house can be a exciting and enjoyable experience. However, things can go wrong and can turn your exciting adventure into a stressful and expensive process.

Most people cannot afford to pay for the cost of the land and the construction costs of the new building and require finance.

Financing a construction project is different from a normal home loan as the bank is lending for something that is not yet built. To manage the risk of lending for a building that is to be constructed some lenders offer special construction loans that have conditions around the construction that need to be met in order to qualify and for funds to be released.

Need a construction loan?

Our mortgage brokers can assist you to compare different construction loans and assist in the application process. Contact us to talk to a mortgage broker about a construction loan.

Some of the considerations when getting a construction loan

Banks and lenders will typically have a set of criteria about the construction, how it is to be completed and when they will release funds.

For example most lenders will require that you engage a registered builder with a fixed price contract. This way they know that the builder is qualified and registered and that the price to the completion of the construction is known and agreed at the start. Furthermore, most lenders will effectively make you reapply if you have a variation to the building that requires additional funds to be borrowed.

Some lenders will approve owner builder home loans but usually only to people who are experienced registered builders that are building their own project.

The lender will require detailed specifications including comprehensive floor plans and details about the construction materials.

The lender will also usually get a property valuation from an approved appraiser. The appeaser will go through the specifications of the construction contract and building specifications and determine an estimate of the end value of the construction with the associated land by comparing to other properties with similar specification and features in the area.

You will also need to provide a deposit. Now days for owner occupiers many lenders are offering loans of up to 95% of the property value for construction purposes with the same interest rates as normal home loans.

As with all home loans you will need to demonstrate to the lender that you are able to make the repayments on the loan. To do this the lender will consider your income, other loans payments and your expenses. The lender will also need to assess your assets and liabilities position.
Providing that you meet all the lender’s requirements and have good credit, you should be able to get a construction loan.

 

Construction loans

Find out all you need to know about construction loans. The loan process, comprehensive construction loan criteria and more.

 

Contact us:

+614 30129662

Oak Laurel – loans made easy!

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Sydney to reach population of 5 million people in 2016

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The population of Sydney is set to reach five million people in 2016

Many Australians would be aware that Sydney has been breaking Australian house price records, with the median house prices now reported to be over $1 million dollars. Did you know that Sydney is on track to become the first Australian city to have a population of five million people?

According to the Australian Bureau of Statistics, the population of Greater Sydney, which includes the Blue Mountains and Central Coast, reached a population of 4.84 million at the end of June 2014. Sydney is currently on track to grow to above 5 million people in early 2016.

The Bureau of Statistics’s latest population estimates state that Parklea-Kellyville Ridge in Sydney’s north-west growth corridor had the state’s largest growth in 2013-14, having increased by 2700 people. Waterloo-Beaconsfield in the inner-south had the second largest population increase, of 2000 people in 2013-14. The Cobbitty-Leppington area in south-western Sydney was the fastest growing area (19%) population wise followed by Parklea-Kellyville Ridge (up by 9.4%).

The continued population growth in what is already Australia’s largest city will mean that there will continue to be increased demand for housing as all of those people will need to live somewhere. This increased demand for housing will be met in part by new housing creation in an expanding city, it will also be met be infill or brown fill development where well located properties will be redeveloped to higher densities. This will mean that property in well located areas, near amenities (such as good schools, transport, employment and recreation), will only have increased demand and prices over the longer term.

Sydney may be the first Australian city to reach a population of 5 million but Sydney also has the greatest number of people leaving for other parts of Australia. Furthermore, Melbourne has the greatest population growth in total numbers than any other Australian city and will become Australia’s largest city in time.

 

Mortgage broker in Sydney

Are you looking to borrow to invest in the Sydney property market? Contact one of our Sydney based mortgage brokers to discuss your home loan or investment property loan needs?

 

Contact us:

 

+614 30129662

Oak Laurel – loans made easy!

Oak Laurel Mortgage Broker

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RBA to cut interest rates in 2016

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ANZ Chief Economist Expects Reserve Bank of Australia (RBA) to Cut Rates in 2016

Researchers from ANZ, one of Australia’s biggest banks, suggests that the Reserve Bank is likely to cut the official interest rates in early 2016.

The ANZ research note published last week, expects the RBA to make two successive cuts totaling 0.5%, to the cash rate early next year. This would result in an official cash rate of 1.5%. ANZ’s Chief Economist expects that the cuts to the cash rate are likely to come in February and March 2016.

The low Australian dollar and the reduced level of support the housing industry is providing the economy are stated as key factors that would prompt the RBA decision to cut interest rates.

This latest report suggests that borrowers should demand an even lower rate if looking for a fixed rate home loan and something to seriously consider when deciding if they should fix their home loan.

If the report is correct and the Reserve Bank does cut half a percent off the cash rate in early 2016 this may continue to stimulate Australia’s property price growth.

 

Need a home loan?

+614 30129662

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Oak Laurel Mortgage Broker

 

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Lo doc home loans

Lo doc home loans

Are you a self employed person? Self employed people can sometimes have difficulty to provide all of the required documents to prove their income to bank or lender for a full doc home loan. This can mean that without the required documents they are unable to get a full doc loan. However, they may still be able to get a lo doc home loan.

This can be an advantage for self employed people who do not have all the required docs but still want a home loan. This can be advantageous especially in a hot property market.

Lo doc home loans can also be useful for some self employed people who have variable incomes or have had an unusually low income year. If the latest year’s income will not typical income, a lo doc home loan can help self employed people to get the home loan they want. Lo doc home loans are usually a bit more expensive than full doc home loans. However, despite being more expensive lo doc loans can be obtained earlier than full docs where the applicant would have needed to wait for the required docs. Then when the full docs are available the they can upgrade to a lower cost full doc loan.

If you are self employed a lo doc home loan may be a useful option. However, if you are able to get a full doc home loan it is often a better option because full doc loans can be cheaper. Check with a good mortgage broker to see what your home loans options are and what type of home loan is suitable for you!