Finance advice

Bad credit – what are your mortgage options?

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People with poor credit scores often think they can’t get a home loan. According to Veda (thanks to research by Savvy) 600,000 Australians are high or extreme credit risks. Though some people with extremely bad credit may have to wait until their history improves to apply, the majority of people with bad credit do have options when it comes to taking up a home loan.

Mortgage preparation: What you have to do as someone with bad credit

CEO of Savvy Finance, Bill Tsouvalas says brokers and lenders will generally try to help people with bad credit into a home loan, if they can afford it. “We wouldn’t dream of approving someone for a loan if they had little chance of paying it back,” he says. “However, to help your chances of gaining approval, it’s a good idea to save up at least 20% deposit for houses in your price range.”

Lenders will assess borrowers based on their credit reports and insist on an upfront deposit. This reduces their “skin in the game,” or exposure to default. Though you may have had a troubled financial past and have taken steps to remedy your situation, your history may not be clear of defaults for up to seven years.

What you must sacrifice as a bad credit customer

The reality for bad credit customers is that you will likely be paying more than average interest rates due to your perceived risk. You can try to reduce this perception by showing potential lenders bank statements and payslips to show you practice responsible personal finance and banking. You should also show your lender a budget and projections on how you intend to pay back the loan, to give them extra piece of mind. “Creating a budget and sticking to it is one of the surefire ways of demonstrating low risk to a lender or broker. It goes a long way when you are shopping around,” Tsouvalas says.

Bad credit mortgages still offer options

In many cases, bad credit mortgages still offer a range of options, including offset accounts to reduce interest payments, redraw facilities, lines of credit and choices of variable or fixed rates. “Don’t think you have to settle for less when you have bad credit,” Tsouvalas says. “There are many loan products out there that offer extras, though it does depend on your individual situation. In fact, banks and lenders are still eager for your business, despite the prevailing view of banks not wanting to deal with bad credit customers. That couldn’t be further from the truth!”

Bad credit isn’t forever

The upshot is your bad credit won’t follow you around forever. If you make repayments on time and in full – even some extra repayments – lenders will eventually place you in a “correctible credit” category. In as little as two or three years, you could refinance your home loan at a “prime” rate. “All it takes is time,” Tsouvalas says. “If you’re responsible with your repayments, you will be on track to repairing your credit history and financial standing.”

Tip: Check your credit history for mistakes

“There’s a perception out there that your credit history is unchangeable; however, that’s not true,” Tsouvalas says. “Utilities companies may slap you with a default if you don’t pay bills on time. If you take out gas, electricity or internet for a shared house under your name, a non-payment by a ‘horror housemate’ affects your credit history. You should check your credit history and clear up any irregularities and defaults in error. This can go a long way in improving your chances of gaining a much better home loan interest rate.”

 

 

 

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Savvy

Savvy

Founded in 2010, Savvy had a singular vision: to bring Australians the best automotive and home finance and insurance solutions from all over the market using the latest in technology. Through determination and hard work, Savvy has gathered a team of experts and made valuable connections to financiers, banks and lenders all over Australia to provide the best finance and insurance deals in Australia. 
Savvy prides itself on giving customers the best financial advice and service in Australia. From no-obligation quotes to assisted online approvals, our financial professionals are friendly, knowledgeable and help you find all kinds of car and vehicle finance. Our people are dedicated to helping customers find the best deals from our extensive network of financiers and lenders.
http://www.savvy.com.au/

 

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podcast

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  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1209 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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