Caroline Jean-Baptiste is a mortgage broker and award-winning Mortgage Choice franchisee. She is the author of “Buy that house – How kickass women make it happen” and she appeared on the Tilly Money podcast to answer the home loan and mortgage broker related questions.
After working overseas for quite a few years, Caroline came home with a 20% deposit to buy a house. She went to her local bank to see if she could get a loan but they told her she didn’t qualify for one! She was so embarrassed, thinking ‘who was I to think I could ever get a home loan?’ So she went overseas again and came home 5 years later, only to discover there were mortgage brokers. One morning she was watching TV, saw a mortgage broker come on and at the time was looking for a business to get involved in. She watched this mortgage broker who made a massive donation to charity and thought ‘wow this is an amazing business that you can help so many people – not only in a home loan sense but also in a sense of charity.’ She then thought ‘I don’t want anyone to walk into a branch and feel what I did when I went for my first home loan’ and thus her career and passion began.
- Why should I use a mortgage broker rather than going straight to the bank?
The benefit of going to a broker is that we have a responsibility to educate our customers and make sure that their best interests are kept top of mind whenever we are recommending something. We can compare the same thing across two different lenders, whereas if you go to a bank, they just have their own product. We educate people on the jargon used, whether they should consider a fixed or a variable, and compare across a number of lenders whenever we’re making a recommendation. When you go to a broker, you get a lot more choice, a much wider range and if you don’t qualify for one lender, we can make sure there’s another option for you with a different lender. The biggest difference across most lenders is not only rates, but also policy. Some lenders, for example, might be happy to accept short term employment whereas other lenders want to see longer employment. Coming to a broker means you will get advice on different lenders’ policies rather than searching on the internet, and then confusing information with knowledge. If you get the wrong loan upfront it could cost you a lot of money over the term of that loan. Brokers are there for the long term and you’re a customer for life in a relationship where someone’s thinking about you and changes that may be to your benefit, such as a better rate of interest.
- What is the home loan application process?
We want to make the process as easy and pain-free as possible for our customer. There are a couple of options here: you can fill in a form or we can do it for you. The process in a nutshell is you sit down with your broker and discuss the situation. The broker at that time would likely fill in the forms, get all the necessary information, update the assets, liabilities, talk about the income that you can use and make a recommendation. Once the recommendation is made, we have a responsibility to show the comparison. You will have to provide bank statements, payslips, and evidence to support your income, but we package that up and make it as easy as possible with links. If you are form-phobic and feel overwhelmed, we provide all things available to make it as simple as possible for you. Once the application is submitted to the lender, we make sure it tracks along at the right pace and update the client every 2-3 business days. We work through that until settlement and then after settlement it’s an annual review to ensure you’re getting the best rate.
- What information do I need to have ready for my home loan application?
Identification (driver licence, Medicare, passport), evidence of income and evidence of your liabilities.
- How do I know if I’ve saved enough for a deposit? I want to buy a place, but I like the idea of saving more for a bigger deposit, so I pay less over time. I’m 24 and I literally have no idea where to start on buying my first home.
The very first thing that anyone needs to do is sit down and understand their numbers to get intimate with how much they need to save. For each person, first home buyer and upgrader, it’s a different amount. Sit down with your broker and put a plan in place so that you can play with numbers. It’s a great opportunity to ask your broker about waiting another year and saving up more to see how much of a difference would it make.
- What help, or incentives are available for a first home buyer?
- There are stamp duty concession: If you buy under a certain value there’s the first home, stamp duty concession. Stamp duty is a fee that applies to the purchase of a home in most states that goes straight to the government as a tax.
- Then there’s first homeowner grant: Applicable to brand new homes and up to $15,000. When you build a home or buy a brand-new property you can attribute this money to the purchase or take it as cash.
- First home loan deposit scheme: If you buy a brand-new property up to a certain value the government covers the lenders mortgage insurance.
- First home super saver scheme: From July 2017 if you’ve made additional superannuation contributions above the minimum, this amount then becomes available for you to take from your super for a deposit on your first home.
- Home builder program: An additional $15,000 more in regional areas, if you buy brand new or build.
- What do you think about the rule that says you shouldn’t spend more than 30% of your salary on rent or mortgage? Are there any exceptions to this rule?
It’s a good rule of thumb, however your life stage, budget and lifestyle determine how much you can afford or how much you can stretch yourself. Live within your means but don’t underestimate your means or potential to earn income.
- What red flags do you look for when examining spending habits and bank statements?
Big red flags are when you’re overdrawn, if there’s dishonoured payments and late credit card payments. Doing a credit check before you make an application is a good way for you to see what the bank sees, which is two years of conduct on your accounts.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.