Call 0800-ARRANGE (0800-277-2643) for a friendly chat about getting a loan for your first home, or options for restructuring your mortgage.

You might be surprised at how easy it is.

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Funding for property trading is more specialised that getting a loan through a trading bank.

Property traders make their money by buying a property at a price which allows them to make a profit by selling it for a higher price - normally after a relatively short period of time.

Trading banks make their money by holding a loan for (hopefully) a long period of time. The small margin they make between what they can purchase funds for to on-lend to customers makes money for them over time.

Funders for property traders however know that they are only going to have their funds lent out for a short period of time so cannot rely on the interest rate margin to make them a profit. For these reasons they charge an upfront fee and a higher interest rate.

These funders also take more of a risk in that the borrower normally does not have the ability to service the debt. The funders rely on a "take-out" for the deal they are funding – for example, if you can purchase a property with a long settlement - and secure an on-sale of that property - then these types of funders would lend based on the guarantee of getting their money back once the property is sold. If you had a loan offer from a standard trading bank - once certain conditions have been met over the period of alternate funding - then this is also seen as a "take-out" for this type of funder.

Times you would seek "property trade"/alternate funding:

  1. When purchasing and on-selling a property within a short period of time.
  2. When purchasing a property that doesn't fit with a trading bank immediately.
  3. There are past loan payment or credit issues which need to be sorted out over 6 months to take back to a trading bank.
  4. You purchase a property cheaply with a good valuation and you want to have the bank rely on the valuation and not the purchase price.
  5. You are purchasing a non-traditional property which needs modifications before a bank will accept it.

There are good commercial, as well as practical, reasons to use property/alternate funding. This type of funding is often only available through brokers like us who have experience and contacts in this area.

If your home has increased in value since you bought it, or you have built up equity in it, you could borrow more money to, for example, fund home improvements or refurbishments or to raise a deposit for a holiday home, or perhaps as a rental investment property.

You can also top up your home loan to consolidate your debts and pay them off as a single loan, a mortgage over your homewill almost always be cheaper than short-term loans or hire purchases.

Some lenders will also offer specials if your top up is to pay for energy systems such as solar panels.

Increasing your mortgage for home improvements might also add value to your property.

To top up your mortgage you'll need to have existing equity in your property, or be able to create more equity by using the funds from the top-up to create it. There is usually a minimum top up amount of (for example) $5,000.

A top-up can be added to your existing home loan,or taken out as an additional loan. Any time you increase your mortgage it makes sense to review your overall lending.

The amount you are able to borrow depends on:

  • what the top-up is for
  • how much of your home loan you've already paid off
  • the value of your home and what your Loan to Value Ratio (LVR) is
  • if you can afford the repayments of the new home loan amount(s) once you've added your top-up amount
  • The bank or funder where you have your lending

There are many variables when it comes to increasing your mortgage and the bank will look at more than the amount you are applying for as a top-up. They will look at the total of all the borrowing you currently have with them when making a decision about whether to lend you any more.

Getting a home loan can be a time consuming and stressful experience especially if you are a first home buyer.

At Edge Mortgages, we're here to take the stress out of this experience by helping make it as easy as possible. We'll step you through the process, so you'll know what to expect and what information you will need to gather.

How much will you be able to borrow?

First up, and if you are like most people, one of the biggest questions will be about how much you will be able to borrow.

This is down to your income and your commitments. The banks will decide how much they will lend to you based on your total income against your total outgoings. The interest rates that are applicable at the time will be also be taken into account when deciding how much you will be able to borrow. But every bank has different lending criteria. This means that one bank may lend you a lot more that another on exactly the same day, given exactly the same circumstances.

Restrictions on loans for people who don't have a 20% deposit recently become an additional challenge for first home buyers.

This is where a mortgage broker can help, by working through all the different options available to make sure you get that dream home and the best deal.

And the good news is, if you've been turned down for a loan by your bank (even if you have been a customer of theirs for a for a long time) it doesn't mean that you won't be able to get a loan from anyone else.

What home loan will suit you?

There are different mortgage structures that can allow you to pay your mortgage off sooner, or provide you with some certainty about your payments.

Should you fix your mortgage interest rate for a certain length of time or have some of it on a floating interest rate? Which should you chose? What about repayment options?

The key to all this is to get an independent, expert overview of your options so you get the best deal given your individual circumstances.

At Edge Mortgages we know a number of different lender's calculators, criteria and options. We can let you know, in one quick phone conversation, much you can afford to borrow, so just give us a call.

No matter what anyone says properties are still expensive to buy and, unless you are fortunate enough not to have to borrow to afford one, this is a question most of us will ask ourselves.

There are two answers to the question. Firstly, how much the bank says you can afford and secondly how much do you feel comfortable borrowing.

How do Banks measure Affordability?

As lenders do not want to their borrowers failing to meet loan payments they take a reasonable conservative approach to calculating how much you can afford to borrow.

  • Each bank has differing calculators meaning you can borrow more with some than others at any given time. We have access to all of their calculators and the results between them often differ greatly.
  • In general they index calculations against the prevailing interest rates and add a margin on top to stress-test your income in light of potential upward move nets in rates.
  • They will only measure a portion of your core income to apply it against mortgage payments. This is to ensure you have the larger share of your income for other living expenses
  • Any debt repayments remaining outside of the lender will have a margin added on top
  • They will only take between 75 & 80% of rental income into consideration to allow for any vacancies
  • No matter how frugally you live the bank's all have statistical measures about how much it costs for a person, couple & children to live each month and apply these

These are all applied to the calculations so the figure the bank will come up with is one that should be relatively affordable – however this only applies to how much they will lend you and won't take into account additional or unplanned expenses that you may incur such as:

  • Support of extended family members
  • High cost sports activities
  • Medical expenses
  • Education
  • Lifestyle choices involving entertainment, travel and other purchases
  • Changes to income levels
  • Starting a family

The final test needs to be how comfortable you feel about the repayments. Remember, the bank only approves lending based on a snap-shot in time – only you know if your plans include changes such as starting a family, spending a lot on an overseas trip or taking time off work.

Make sure the amount you are borrowing meets requirements of the bank and that you are comfortable with it.