It has been a while since I last posted a blog. I do miss my laptop and with a new keyboard, there is no excuse to not recommence with my blogging now. The topic of 100% borrowings for a home has recently come up again. So what is 100% finance? With cup day and the RBA dropping rates, should we then consider this?
100% finance in short is one's ability to borrow 100% of the equity that is being purchased. This was very common pre GFC. It was about this time in 2007 that lenders could lend 100% here in Australia and one lender went to 107%. Those were the days. Can we still get 100% loans? The short of it is, YES. By why would you?
Getting back to 100% loans. You would most probably find a lender who will "blend" their borrowings of a home loan with personal loans or with a credit card. This is the stop gap measure to force the borrower to "hurry up" in reducing the debts from the personal loan or from the credit card.
Have we not learn from the lessons of recent years? Yes, it is important to own your own home. Have a roof over our heads, but the question still stands, can we afford the loan? Let's say that we can, and the lender with the "blended" solution will help. The next question that you will need to ask is why could I not saved for a deposit? With a deposit, the interest rate would be much more favourable without the complexity of a higher rate with a personal loan or even with a credit card. Not forgetting the mortgage insurance that comes with the 100% lend. The savings from the mortgage insurance and the interest paid for this short term debt, might even be sufficient to purchase a small investment unit.
If we are not in a position to save, then going for this solution is not wise. Yes, some might argue that this will force saving habits, but if they are not there in the first place, what guarantees would there be in the future? We all love to live life to the fullest but are we saving for our future? Are we living within our means?
Monday, October 31, 2011
Friday, January 21, 2011
A Genuine Alernative
I have been reading the latest "The Adviser" a magazine for Australian Mortgage and Finance brokers. In this edition, they discussed the "alternative" lenders currently available to consumers in Australia. The list of alternative lenders or second tier lenders is rather long, AMP Banking, ING, and CitiBank are no means the exhaustive list of second tier lenders.
So are there any differences? These second tier lenders still lend out money to their customers, based upon their lending criteria. They have a variety of loans from Home Loans, Investment Loans, to Line of Credit. These products are the same as the major lenders. So once again, what are the differences?
The above magazine said that since the GFC, the majors are now dominating the home loans market by 90% which leaves the other lenders at 10% market share. But if you are looking for an alternative to traditional banking, perhaps you can consider the other lenders. However here are some things that you may find different.
Transactional Accounts
Not all second tier lenders have transactional accounts that you may be familiar with when comparing with the major banks. However one benefit is that some second tier lenders will offer NO FEE withdraws from other bank's ATM since they do not have ATMs themselves.
Service
Another difference is the level of service you may received from second tier lenders. One lender that comes to mine is based in Queensland. They will ensure that you have the very best experience in your lending. However their lending policy is one of the strictest.
Commissions
As some of these lenders may not have a physical shop front, they will rely on the broker network to write business for them. Some may not even have lending staff, so the entire lending role from interview, collection of information and submission is outsourced to the broker network. Some of these lenders may pay higher commissions, offer their brokers incentive with benefits to consumers. Always with commissions, you should ask your broker what they are being paid to lodge your loan and why they have chosen this lender/product for you.
Cross Selling
Some consumers may like the idea of a one stop shop whereby they are able to get their insurances, loans, credit cards, personal loans and etc from one centralised location. These second tier lenders may not be able to provide all financial services however your broker if accredited, may be able to bridge this gap.
Once again, the above are some differences. To get the best deal, remember to ask questions, research the product or the lender and if you do not understand what your banker or broker is recommending, do not sign the application form.
So are there any differences? These second tier lenders still lend out money to their customers, based upon their lending criteria. They have a variety of loans from Home Loans, Investment Loans, to Line of Credit. These products are the same as the major lenders. So once again, what are the differences?
The above magazine said that since the GFC, the majors are now dominating the home loans market by 90% which leaves the other lenders at 10% market share. But if you are looking for an alternative to traditional banking, perhaps you can consider the other lenders. However here are some things that you may find different.
Transactional Accounts
Not all second tier lenders have transactional accounts that you may be familiar with when comparing with the major banks. However one benefit is that some second tier lenders will offer NO FEE withdraws from other bank's ATM since they do not have ATMs themselves.
Service
Another difference is the level of service you may received from second tier lenders. One lender that comes to mine is based in Queensland. They will ensure that you have the very best experience in your lending. However their lending policy is one of the strictest.
Commissions
As some of these lenders may not have a physical shop front, they will rely on the broker network to write business for them. Some may not even have lending staff, so the entire lending role from interview, collection of information and submission is outsourced to the broker network. Some of these lenders may pay higher commissions, offer their brokers incentive with benefits to consumers. Always with commissions, you should ask your broker what they are being paid to lodge your loan and why they have chosen this lender/product for you.
Cross Selling
Some consumers may like the idea of a one stop shop whereby they are able to get their insurances, loans, credit cards, personal loans and etc from one centralised location. These second tier lenders may not be able to provide all financial services however your broker if accredited, may be able to bridge this gap.
Once again, the above are some differences. To get the best deal, remember to ask questions, research the product or the lender and if you do not understand what your banker or broker is recommending, do not sign the application form.
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