A Dream To Create Lending Equality

/in /by

Buying a home and taking out a loan to pay for it are probably the biggest financial decisions most people will ever make. Home loan repayments then become one of their largest monthly commitments, which can go for as long as 30 years It’s an exciting and daunting prospect.

But many lenders can neglect the human element of these pivotal life decisions. They overlook that within a short space of time their customers are burdened with difficult decisions and are then bombarded with a vast array of information that is not only confusing but is often conflicting! They can overlook that their customers need support and guidance so that they know that they are making the right choices. And they overlook the fact that buying a home is more than just borrowing money.

In this system, big business takes over and people are often viewed as sales targets. The service and support received at this critical stage can help to set them up for life, but sadly they often won’t receive the care they need. It was Peter Ellis’ dream to change this. To create a company that would help people get the right assistance with full transparency. This is provided at a time when they need someone to truly listen to them and provide the way forward to help them reach their goals.

As a group that was often overlooked, it was important to Peter that more than anyone else he could help those who were struggling to get finance. They may have been previously declined or didn’t meet the bank’s lending criteria. These people just needed a mate or someone to turn to, to help them understand the nuances of obtaining a loan. And, so, Lending Mate was born.

Lending Mate’s primary focus was to address what many lenders tend to forget – the human element of taking out a home loan. Peter wanted a company that would treat the individual as an individual or, as he says it, “fit a loan to a person, not a person to a loan”.

Peter has been a mortgage broker for nearly 10 years and over that time, he came to realise that most banks and many mortgage brokers were offering the same loans with the same lenders to the majority of their clients, because it seems quick and easy. But as soon as the borrower didn’t quite fit the mold everything changed and many times it became too hard to find options when they just want to move onto the next client. What borrowers don’t understand is the fine print of who doesn’t qualify. This can keep the dream of owning a home out of the reach for many Australian’s.

Truth and transparency is key to Lending Mate’s success. To be assured that you and your unique circumstances will be carefully considered and that you will be given an honest opinion as to the most effective solution for your situation. Peter’s goal was to create a culture of transparency, where his customers know both the positive and negative aspects of the options available to them. It’s a refreshing change from the polished approached of many lenders that are here to sell to interest rate and then bury the details in their terms and conditions in tiny fonts.

One client, Sue Hartman, found Lending Mate just in time. Sue had been declined three times by other lenders and was almost at the point of giving up her dream of buying a home for her family. After listening to Sue’s experience, Peter detailed her circumstances and what she wanted to achieve. Peter then worked to find a suitable loan that would enable her to proceed. He helped Sue understand what was going on in the background to cause the previous loan declines and stages that the loan was going through. Most importantly with Peter’s help she got her family into their dream home just in time for Christmas. Sue said, “Without Peter’s help and commitment I don’t think we would have ever been able to buy this house.”

If you’re ready to buy your home, don’t put your dreams in the hands of someone that is more about conversions than compassion. Peter Ellis started Lending Mate to create a new experience for Australians looking to borrow money. When it comes to owning your own home, don’t give up. Don’t take no for an answer. Peter Ellis and Lending Mate will provide the help and advice needed to put you back in control.

By Peter Ellis

The Borrowers Advocate, Lending Mate™

 

Peter is a trail blazing campaigner with a vision to put power back into the hands of borrowers. He was disheartened by an industry where home loans were less about the individuals borrowing the money and more about sales targets. Those impacted most were people that didn’t tick all the boxes to fit the ideal profile, who were often being left to fend for themselves.

Lending Mate™ wants to restore this power imbalance and start a movement where borrowers get a fair go. Lending Mate™ is having someone on your side, genuinely working in your interest to enable you to get ahead financially. We aim to provide the information, help and guidance you need to put you back in control.

 

 

Disclaimer Statement: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
Lending Mate™ trading as Free From Financial Worries Pty Ltd (ABN 88 134 812 165), Credit Representative number 442518 is an authorised representative of Connective Credit Services Pty Ltd (ABN: 51 143 651 496), Credit License number 389328.

Is This Mortgage Stress?

/in /by

Do things seem to be pretty tight financially? Are you not saving like you used to? Are you eating into your savings and emergency fund to pay the bills each month? Are you at risk of not being able to meet your mortgage repayments?

Even though interest rates are at historic lows you may be feeling that your finances are under increasing pressure.

If so, you are not alone. According to Digital Finance Analytics* currently 21.78% of mortgage holders are experiencing some degree of mortgage stress, which is around 1 in 5 households.

 

What is causing it?

Basically, over the past year or two increases in our incomes have ground to a halt. This means that what we are earning is not keeping pace with increases in our expenses which have continued to rise.

We have experienced sharp rises in energy bills and insurances in particular. Bills keep coming in and in order to get by we put a bit more on credit and start paying just the minimum and so it starts to creep up.

House prices have also continued to rise steadily. If you have had to buy a new house in the past year or two you would have had to pay more, and in a low interest rate environment, the repayments on a larger mortgage have seemed do-able.

Back in 2010 with the fear of the GFC spurring us on we were saving around 11% of our incomes. This has been trending downwards in the past few years and currently sits at 7.5% according to Digital Finance Analytics.

 

Diagnosing mortgage stress

Mortgage stress is a bit like a medical condition – initially, most people hope it’s a temporary thing, but eventually they realise they have a real problem that is not going to go away.

So what is it and how do I know if I have it?

An outdated definition of mortgage stress used by government organisations is if your mortgage repayments are 30% of what you earn you are considered to be in mortgage stress. More recently analysts have come up with symptoms around what you are experiencing which take into consideration all your financial situation not just your income and mortgage payments.

Check out these definitions from Digital Financial Analytics* and see which one most closely matches your situation.

 

Mild mortgage stress is when you are maintaining repayments but have had to re-prioritise expenditure in order to keep up. You are borrowing more on loans and credit cards and cutting back on luxuries and dipping into your savings.

Does this sound familiar?

  • Are you currently up to date with your mortgage payments but feel worried about being able to meet them in the future?
  • Have you cut down on luxuries to ensure you have enough money to pay your mortgage?
  • Have you re-prioritised your expenditure to ensure the funds are there when repayments are due?
  • Have your credit card balances been creeping up?

Severe mortgage stress is where things are getting serious and you are behind on repayments. You are considering selling or are under pressure from the bank about being forced to sell.

Does this sound like your situation?

  • Are you currently behind on your mortgage payments?
  • Have you sought help to refinance your mortgage to make it easier to repay?
  • Are you speaking to your lender about alternative repayment options?
  • Is your lender threatening to foreclose and sell your property?
  • Have you made arrangements with your lender under their customer hardship scheme?

Whether it is mild or severe, coming to the stage where you recognise there is a problem is really important. Nationally incomes are not expected to grow much over the foreseeable future so you can’t just hope that pay increases will solve the problem.

Stress about money can be debilitating. It can impact your life, your relationships and your health, so what can you do to reduce it and gain back control?

 

 What you can do now

  • Budget carefully. Now that you have recognised that you are struggling to make ends meet, really keep track of where it all goes and look for areas to cut down. Surveys conducted by Digital Financial Analytics found that less than half of households have a budget. Knowing what you are spending is key, then you can look at it objectively and make decisions to allocate what you earn more effectively.
  • Don’t get behind on repayments. Even if you are experiencing difficulty, you need to do whatever you can to ensure that it doesn’t impact your credit file. As soon as late payments and defaults are entered on your credit report they take years to come off and can affect your ability to consolidate debt or get finance in the future.
  • Make minimum repayments on all debts before you start paying extra on one. When things are tight, focusing on paying the minimum on all debts can help create stability. If you can keep up with this then you can work to a stage where you can start paying extra.
  • Pay the one with the highest interest rate first. As soon as you have extra cash, work out which debt is incurring interest at the highest rate and pay extra on it first. Work your way through your debts eliminating those that are costing you the most.

If things are getting worse or you are experiencing severe mortgage stress it is no time to bury your head in the sand and hope it will go away. The sooner you start seeking help, the sooner you can be working to get on top of things again.

 

Where do you go to for help?

  • Your lender will be able to outline what hardship arrangements they offer. If you start getting into difficulty, talk to your lender and credit providers early. They are obliged to help in hardship situation. See if they can give you some breathing space to help sort things out.
  • Financial counsellor or financial planner.
  • Specialist broker. Because there is a mortgage involved a specialist broker can look at your situation and go through what options you have available to you.

It probably won’t just be any broker who will be able to assist. They need to have dealt with situations like this before and understand what options are out there that may help you. Ask them extensive questions about their expertise. They should be experienced in specialist lending and know lenders that offer different options which are usually outside mainstream lenders. Find out if they regularly deal with these type of lenders.

For some lenders and brokers, as soon as you are experiencing difficulty, they may feel that it is just be too hard to work out. They know that the amount of work that they will have to do can be a lot compared to how much they are paid and can mean that they may think it is not worth their time. They might just want to speak to the next person who has a really simple loan that fits the box and will be able to do quickly and easily. So, instead of just saying they can’t help they can just try to fob you off or passively hope that you go away. If a lender or broker is not returning calls or taking weeks to come back to you with the simplest request, then maybe you should take the hint and go elsewhere.

There are organisations like Lending Mate™ that I founded, who openly say that it is this type of loan is what they are most interested in. Having a focus on difficult loan scenarios and situations means that you develop knowledge and relationships with lenders who are in a position to help. You also get skilled at pitching the loan in the right way to get the lender to see the strengths in your situation. We also have relationships with other organisations who can offer assistance as well. Our motivation is really about helping individuals and we give an honest appraisal of the options available.

Just like being diagnosed with a medical condition, if you recognise that you have mortgage stress, either mild or severe, it is time to seek some real help. Mortgage stress does not have to be terminal but unless you take action it could wreak havoc with your finances and your life. Reach out to people who can help and weigh up what is going to be the best course of action to get you back in control.

By Peter Ellis

The Borrowers Advocate, Lending Mate™

 

Peter is a trail blazing campaigner with a vision to put power back into the hands of borrowers. He was disheartened by an industry where home loans were less about the individuals borrowing the money and more about sales targets. Those impacted most were people that didn’t tick all the boxes to fit the ideal profile, who were often being left to fend for themselves.

Lending Mate™ wants to restore this power imbalance and start a movement where borrowers get a fair go. Lending Mate™ is having someone on your side, genuinely working in your interest to enable you to get ahead financially. We aim to provide the information, help and guidance you need to put you back in control.

* http://www.digitalfinanceanalytics.com/blog/the-anatomy-of-mortgage-stress/

 

Disclaimer Statement: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.

Beware Of The Asterisk *

/in /by

Do you know how the lenders get you? It’s with the fine print.

You know when you see one of those seemingly attractive offers that sound too good to be true – and just before you jump online to apply you may notice the asterisk at the end? It may be a super cheap home loan interest rate or a loan that comes with a free holiday or points to redeem for flights.

Of course, that asterisk is there for the lenders benefit, not yours. It means the seemingly attractive offer comes with a catch and potentially a lot of people won’t qualify.

One of the disclaimers attached to the asterisk is “subject to lending criteria”. That’s another way of saying, “The attractive offer is yours if you qualify, but not everyone does and if you don’t – we’ve legally covered ourselves.”

 

Where do you find the list that details who qualifies?

You can find some of it when you look at the loan product information. You may find details like it only applies to :

  • Loans secured by owner occupied properties not a property you rent out
  • Principal and interest repayments as opposed to interest only
  • Loans where you have more than 20% equity in the property which means that the loan has to be less than 80% of the property value
  • Certain loan amounts, say greater than $150k and less than $500k, or if they are trying to be sneaky for borrowing over $750k only!

Unfortunately, the majority of the “lending criteria” referred to is contained in volumes of lending policy which is considered proprietary information that only the lender and advisors that they trust to recommend and write their loans have access to. This is where there is a frustrating lack of transparency that really puts you at a disadvantage.

Lending policy can cover things like if the type of employment you have is acceptable, how long you need to be with your employer for and if you have changed jobs and industry, how long you have to be there. It also details things like how much you can lend based on your income and expenditure, whether the type of property and postcode is acceptable and how they treat comments about your property that the valuer includes in their report. The list goes on and is extremely extensive.

 

So how do you find out if you match the lenders criteria for the loan?

You will soon find out if you apply for the loan and get knocked back. This is a risky strategy as you will not only be sharing lots of personal information about yourself but one of the first things that they will do is a credit enquiry which is then listed on your credit file.

Enquiries like these stay on your file for a number of years and let every potential lender know with whom, when and possibly how much you have applied to lend. You will possibly be asked to explain if these enquiries proceeded and the reason. Too many enquiries can damage your credit rating and can make lenders wary.

The other way is to contact the lender and have a very detailed conversation about exactly what criteria they have and whether you qualify. At the end of the day there are some things that you won’t be able to cover off upfront so when you apply there is always a risk that something will crop up that you didn’t think of.

Alternatively, you can chat to a mortgage broker. Depending on how well they know lending policy they should be able to take you through all the criteria for the loan. All lenders have peculiarities in what they will or will not accept and this can change very quickly so the broker needs to be on their toes and keep up to date with the latest.

 

What do you do if the bank says “no”?

Firstly don’t panic. Even though you may feel angry and embarrassed and probably stressed, now is not the time to make sudden decisions or apply for every loan possible in the hope that someone will say yes.

Don’t just give up. Just because your situation may be slightly different to what the lender is looking for right now, doesn’t mean that you have no options. There is a whole range of lenders who have loans to suit a wide range of different situations and scenarios.

Find out as much as you can as to why your loan was declined. The lender may be able to tell you or they may not even know if it is a “computer says no” type decision. Anything you can find out will be the gold that you will be able to use to turn things around.

 

The trick now is finding someone you can trust who has the expertise to point you in the right direction.

Because lenders can only advise on loans that they have, you often won’t get any help from them on what to do next.

A broker should have access to a range of lenders so depending on their expertise they may be able to help. You will need to quiz them in depth on their expertise so you are comfortable that they know what they are doing. They can just as easily apply to multiple lenders on your behalf and have more declines which is not what you want.

Ask them about:

  • How many lenders do they deal with regularly
  • What is their strike rate with loans and do they get many declines
  • Do they deal with lenders outside the mainstream ones and know their policies well
  • How many tricky loans have they gotten over the line

Ideally you will want to find someone who is a specialist. It is not a time to leave it to a novice. Find someone you can trust that has the runs on the board to get loans approved. They should have your best interests at heart and be prepared to work hard to not only understand your situation in minute detail but to pitch your loan in the best possible light. This will take time and effort so if they are just rushing you through then it’s possibly time to look elsewhere.

Sometimes brokers can find these types of loans too much work for how much they are paid and so they are more interested in chasing the next easy loan that comes in the door. So if you are being given the run around, not having your calls returned or emails are going unanswered take the hint and go elsewhere.

As large, bureaucratic organisations, the lenders often take a one-size-fits-all approach to mortgages and customers. They use these asterisk-covered offers to entice you, and then use ‘lending criteria’ to deny you the very offer that got you interested in the first place. That’s because the lenders are about fitting people to policy rather than policy to the peoples individual unique scenario.

So next time you see an asterisk, resist the temptation to rush into the bank or apply online.  Instead, take the time to find out what it takes to qualify. There’s a good chance the offer won’t be all it’s cracked up to be and that there is another lender who has an offer that will suit you to the ground!

By Peter Ellis

The Borrowers Advocate, Lending Mate™

 

Peter is a trail blazing campaigner with a vision to put power back into the hands of borrowers. He was disheartened by an industry where home loans were less about the individuals borrowing the money and more about sales targets. Those impacted most were people that didn’t tick all the boxes to fit the ideal profile, who were often being left to fend for themselves.

 

Lending Mate™ wants to restore this power imbalance and start a movement where borrowers get a fair go. Lending Mate™ is having someone on your side, genuinely working in your interest to enable you to get ahead financially. We aim to provide the information, help and guidance you need to put you back in control.

 

 

Disclaimer Statement: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
Lending Mate™ trading as Free From Financial Worries Pty Ltd (ABN 88 134 812 165), Credit Representative number 442518 is an authorised representative of Connective Credit Services Pty Ltd (ABN: 51 143 651 496), Credit License number 389328.

Interest Rate Ads And Internet Dating

/in /by

Seeing a great profile on an internet dating site can have a lot of similarities to a very enticing home loan interest rate ad. The best advice might just be to take a deep breath and proceed with caution.

My friend once saw the perfect girl on a dating website. He knew she was perfect, because she had a fun profile and a great smile.

The only thing was, she was looking for someone aged 30-35, and he was 41. Also, she was looking for someone who leaned one way politically when he actually leaned the other.

So it didn’t matter that he thought she was perfect: she was probably never going to date him because he didn’t meet her criteria.

To cheer him up, I then pointed out that she had her own drawbacks. He was looking for someone who wanted to have children, but she didn’t. Also, he was looking for someone who lived within 10 kilometres, when she was 25 kilometres away.

So although she looked great on the surface, there was actually a whole heap of reasons why they just wouldn’t be a perfect match.

 

Wouldn’t you know it, interest rate ads are a lot like dating profiles.

The moment you lay eyes on that deliciously low mortgage rate, you start thinking about how much lower it is than your current rate and picturing how much you might be able to save. Lower repayments, extra cash each month, it is all starting to sound so good that you almost want to jump in and apply straight away.

But, could the rate ad be too good to be true or, once you uncover the details not be your cup of tea at all? So where do you start.

 

Work out what type of loan it is and whether it is going to suit you.

By looking at the ad in detail and reading the fine print at the bottom you will get more of an idea of what type of loan you are dealing with. Sometimes there is not a lot of detail on the ad itself, so you may have go to the website to look at loan product page to find out more. Even then you may have to call the lender to get answers to all your questions.

 

Is it a variable fixed or intro rate?

Variable rates will often just have a percentage per annum or p.a. and “variable” near the rate. They usually either come with an annual fee or no ongoing fees.

The easiest way to spot which one it is, is by looking at the comparison rate which will be shown nearby. If the comparison rate is significantly higher, say by 20 to 30 percentage points, then this usually indicates that it comes with an annual fee. If the interest rate and comparison rate are the same or only separated by a few percentage points then potentially there may no fees or only be setup fees to pay.

A fixed rate will say “fixed” with how long it is fixed for, usually from 1 to 5 years. Fixing your rate is a big decision and should not be entered into without weighing up the consequences. What do you think will happen with interest rates in the future? What if variable rates fall and I am stuck with a higher rate than what everyone else is paying (without paying break costs to get me out)? What are my plans for the property and am I looking to sell sometime soon? Do I want to pay extra and if so am I able to? What is the variable rate that the loan reverts to at the end? Is it competitive or will I need to refinance at the end to get a good rate?

Intro rate loans are not as common these days but still appear from time to time. This is where the super low variable rate stays low for a period of time, usually a year or two, before it increases back to a higher ongoing rate. An intro rate will list the rate with “variable” and a number of years like “2 year variable rate”. The big questions is, how much are you going to save in the two years it is super low and how competitive is the ongoing rate you will land at the end of the intro rate term.

 

What features does the loan come with?

Lenders are pretty good at listing the features that loans come with. What is not so obvious is what they don’t come with, so you will need to do some more digging around to find this out. Have a think about the sort of things you have with your current loan and use this as a starting point to work out if it is going to be similar.

Does it come with an offset account or are you able to pay extra and redraw for free? Can you pay extra without penalty and can you choose your repayment frequency like weekly, fortnightly or monthly? Do they have good internet banking facilities and how do you physically access your redraw? Can you deposit extra funds into the loan via a funds transfer or by visiting a branch? Do they have a user friendly Mobile App?

 

Are there fees involved?

Check out what it is going to cost to setup the loan. This may or may not be listed, or be written a little ambiguously, like “no application fee” but other items are listed “at cost” like valuation, processing fee and lender legal fees.

What ongoing fees will you be paying? Is there an annual or monthly fee? Is there a fee to change to a competitive variable rate at the end of the fixed or intro period? Is there fees to access redraw? Are there any other fees that you will likely be paying on a regular basis?

 

Do I qualify?

If all of the above is starting to stack up OK, then the next questions to ask is, if you apply will you qualify?

Most home loan ads have listed in the fine print “subject to lending criteria”. This is just a blanket statement to show that they are not being misleading when they know that some people or loan scenarios won’t qualify.

 

Here’s the reality: Interest rate mean nothing if you don’t meet the lending criteria.

Lending criteria can refer to basic loan details for example:

  • minimum and maximum loan amounts like $150k to $500k,
  • how much equity you have for example borrowings under 80% of the value of the property,
  • the type of security like owner occupied or investment) or
  • type of repayments like principal and interest or interest only.

These can usually be found quite easily by looking at the loan product details or talking to the lender.

The more difficult thing to ascertain with lending criteria are the rules in the background as to what the lender will or will not accept. These are contained in large lending policy documents which are not disclosed or shared with borrowers. It is the sort of thing you might only find out when your application is declined, which can be a real shock if you are pretty sure that you are the perfect candidate.

It can include things like how long you have been in your current job and have you changed jobs or industries lately. Do you have any adverse listings on your credit file and how many credit enquiries are considered OK. What type of security property is it and is it located in an acceptable postcode? Do you have any hiccups in your repayment history, even if these can be explained. And the list goes on and on.

To work out if you qualify you will need to have a very extensive chat to the lender or work with an experienced broker to go through your details. Never apply for a loan until you are pretty certain that everything you can tick off upfront is OK.

Applying without doing this can lead to your application being declined and not only wasting your time and effort putting it together but also putting a credit enquiry on your credit file which can impact your credit score in the future.

 

Lastly, crunch the numbers to see if the new rate will get you ahead in the long run.

Part of your calculations needs to be, will you be financially better off in the long run if you switch loans. Do a couple of scenarios over a few years and work out how much interest you will save each year and then deduct the costs to change over loans and any ongoing fees.

Don’t forget to factor in all the costs involved like the discharge and legal fees to close your current loan as well as Government registration and transfer fees on the loan and title.

 

Is it worth changing loans?

There are a lot of things to be considered when you weighing up a new loan with an attractive low interest rate. You may be able to work through this yourself by spending time chatting to the lender or you may call in the help of a mortgage broker to help you.

Whatever you decide ensure that you get the right advice that will put you in a better position in the long run. Find out the motivation of the person you are dealing with and double check that they have your best interests at heart. Would they advise you to stick where you are if that was the right option for you? If in doubt get a second opinion as it will be you that will be stuck with the new lender and new rate long after the lender loan adviser and mortgage broker have moved on.

So is the super low rate the right loan option for you? To say it is an easy question to answer would be as foolish as fixating on Brad Pitt or Angelina Jolie on the dating site: deep down you know it may be too good to be true – and they’d probably be too high-maintenance anyway!

 

By Peter Ellis

The Borrowers Advocate, Lending Mate™

 

Peter is a trail blazing campaigner with a vision to put power back into the hands of borrowers. He was disheartened by an industry where home loans were less about the individuals borrowing the money and more about sales targets. Those impacted most were people that didn’t tick all the boxes to fit the ideal profile, who were often being left to fend for themselves.

 

Lending Mate™ wants to restore this power imbalance and start a movement where borrowers get a fair go. Lending Mate™ is having someone on your side, genuinely working in your interest to enable you to get ahead financially. We aim to provide the information, help and guidance you need to put you back in control.

 

 

Disclaimer Statement: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
Lending Mate™ trading as Free From Financial Worries Pty Ltd (ABN 88 134 812 165), Credit Representative number 442518 is an authorised representative of Connective Credit Services Pty Ltd (ABN: 51 143 651 496), Credit License number 389328.