WEALTH HUB JOURNAL

Complete Guide to Your Property Finance

If you’re financing a new property, you likely have questions. In this guide, we’ll discuss everything you need to know.

At Wealth Hub Australia, our extensive referral network of industry professionals will guide you step by step through the process of finding the best home loan for your needs. They work with all the major lenders to help everyday Australians purchase their new home or expand their portfolio with investment properties.

Our in-house mortgage broking team, Wealth Hub Finance, will ensure you get the best rates and pricing, and that your loan is optimized for your financial goals.

For questions about your loan finance, call us at 1300 202 318.

Finance: The Basics

Following your consultation, we will send you an email introducing you to our process. It will explain the structure of your loans and further elaborate on how they will be used. We’ll also ask for any necessary documents we haven’t received.

Next, we will facilitate your application with the lender, and you’ll receive regular updates as we go through the settlement process.

In the email you’ll also find:

• Application forms — Please sign, date, and return these to us so we can present your application to the lender.
• Assessment document — Sign and return this also. Keep in mind that rates quoted here are the banks’ standard variable rates. Wealth Hub Finance will negotiate with the lenders to achieve lower rates.
• Discharge authority form — If relevant to your loan application, please sign and return this. It allows us to inform your outgoing lender that they are to pay out your loan and close it once we’ve reached a settlement. If you’re staying with the same lender, this form does not apply.
• Statement of credit proposal disclosure — Keep this for your records. No need to sign this document.

When we have all necessary documents, your application will move to conditional approval and finally formal approval from the lender. We will update you regularly during this process. Let’s look at conditional and formal approval so you can understand the differences and how this affects you.

What Is Conditional Approval?

Conditional approval from the lender follows the initial assessment. If the lender requests additional documentation, we will inform you and facilitate this step.
At this stage in the process, valuations of your properties have been ordered, and you’ll be notified in the event that a valuer needs to inspect your property. We will contact you once valuations have been finalised.

Equity Release

We’ll apply for this loan near the start of the process. It’s used to purchase your investment property, and in most cases it’s linked to your owner-occupied property.

It’s necessary because it ensures there are funds on hand to cover the initial costs, like the deposit and setup costs including:

• Stamp duty
• Legal expenses
• Holding costs
• Your contribution to the purchase

We’ll go over these amounts in our initial meeting, and the figures will be based on the property value and how much, if any, you still owe on your owner-occupied debt.

This loan will also cover any additional contributions requested by the lender.

As for the interest you’ll pay, it will be determined only by the funds you actually use. The rest will remain in the account to cover additional payments, including your property deposits.

To make payments on this loan, transfer the necessary amount from your equity release into your offset translation account.

What Is Formal Approval?

When the lender formally approves your loan, you’ll receive an email that contains the letter of approval as well as a breakdown of the loan amounts and your interest rates.

The next step is for the lender to prepare your mortgage documents. Once we’ve received these from the lender, we will look over them to be sure all is in order, and then we will mail them to you for your signature.

Be sure to review the documents yourself before signing, and contact us if you have questions.

Pre-settlement

There are two things to keep in mind about the pre-settlement step: your Certificate of Currency and offset accounts. Let’s take a look at each of these:

Certificate of Currency

You may need to have your Certificate of Currency updated during a refinance or equity release. We’ll let you know if you need to contact your insurance provider so they can update it with your new lender. You’ll also need to do this for a new property so the Wealth Hub Finance team can finalise and settle your loans.

Offset Accounts

An offset account is a transaction account linked to an eligible loan for a home or investment, and it ensures your accounts are set up optimally.

Before we can send your loan documents back to your new lender, it may be necessary for you to set one up.

If your lender requires you to do this at a branch, all parties on the loan will need to visit the bank in person. Then you’ll send us the account information afterward and we’ll link it to your other loans as needed.

However, some lenders will do this on the backend. If that’s the case, we may ask you about your preferred requirements ahead of time.

You’ll also use your offset account for making direct debit repayments.

Settlement

It can take up to three days to verify your documents after they’ve been sent back to the bank. We will let you know the date of your loan settlement once your outgoing lender has accepted it.

In some cases, the outgoing lender can delay this process. However, if this happens, the discharge authority form can speed things up. The earlier that form can be submitted, the better.

In situations where your settlement is for a purchase, it will be handled with the lender by your solicitor. We will let you know once your settlement is in effect, and we can email you a disbursement schedule on request.

If you’re using online banking, it may take up to 24 hours for the funds to be deposited. Contact us if you have any questions.

Frequently Asked Questions

Here are answers to some of the most frequently asked questions. If you have more questions about your finance process, the Wealth Hub Finance team is here to help. Don’t hesitate to contact us.

1. What happens after a fixed-rate or interest-only period?

If a fixed-rate period for your loan expires, your loan will have a variable interest rate. These can fluctuate based on a reference rate. Following an interest-only period, your repayments will include principal as well as interest. At the end of either of these periods, it’s best to set up an appointment to review your loan structure.

2. Do I pay the interest during the build?

Your equity release covers additional funds needed during the build. This is often called a buffer. The interest component is handled by these funds. At any stage of construction, contact us with any questions about your payments.

3. What’s an equity release?

This is a loan you apply for early in the process of purchasing investment property. It’s linked to your owner-occupied property and ensures you have sufficient funds to pay deposits on your build as they’re due.

You can sometimes apply for an equity release a year ahead of time, but this is contingent on the payment schedule for your deposits and the settlement of the land.

4. What is redraw?

Redraw lets you access money you’ve paid toward your home loan over the minimum payment.

We’ll ensure any redraw is retained by refinancing your limit, not your balance. You only pay interest on your balance, so if your balance is lower than your limit, anything extra is available as redraw. For example, if your limit is $500,000 and your balance is $450,000, you have access to the remaining $50,000.

You’ll only pay interest on it if you use it. If you do, it will be structured so that you make principal and interest repayments, so each repayment pays down your debt.

5. How do I repay the construction loan?

Your construction loan will be repaid to the bank through progress payments on your behalf. When the builder sends us invoices, we’ll prepare the documentation and email it to you for your signature. After the forms are submitted, the bank will pay the builder.

6. What’s an offset account?

It’s a separate account linked to your home loan. The balance in your offset account offsets the balance on your home loan, so you’re just charged interest on the difference between the total balance on your loan and the amount that’s been offset. This lowers your interest on your loan.

7. What do I have to pay for myself?

The only things you’ll have to pay for yourself are expenses that aren’t funded by your loan. These are known as “shortfalls”. For example, with a construction loan, the land component will be settled on first. But any shortfall here will be covered by the equity release.

8. So what exactly is a shortfall?

A shortfall is a payment you have to make in addition to your loan payment. They will come out of your equity release loan. A shortfall is also called a ‘client contribution’. They’re decided by the bank, and we’ll break any shortfalls down for you in an email before you make your first progress payment.

*Our officers, employees, agents, and associates believe that the information and material contained in this handbook is correct at the time of printing but do not guarantee or warrant the accuracy or currency of that information and material. To the maximum extent permitted by law, our officers, employees, agents, and associates disclaim all responsibility for any loss or damage which any person may suffer from reliance on the information and material contained in this handbook, or any opinion, conclusion, or recommendation in the information and material, whether the loss or damage is caused by any fault or negligence on the part of our officers, employees, agents, and associates or otherwise. The information relating to the law in this handbook is intended only as a summary and general overview on matters of interest. It is not intended to be comprehensive, nor does it constitute legal, financial, or taxation advice. Whilst our officers, employees, agents, and associates believe that such information is correct and current at the time of printing, we do not guarantee its accuracy or currency. Many factors unknown to us may affect the applicability of any statement or comment that we make to your particular circumstances, and consequently you should seek appropriate legal advice from a qualified legal practitioner before acting or relying on any of the information contained in this handbook. The information contained in the handbook is of a general nature and does not take into account your objectives, financial situation, or needs. Before acting on any of the information, you should consider its appropriateness, having regard to your own objectives, financial situation, and needs.*