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Negotiating a settlement period

loan broker - hands shaking across a business desk

In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.

loan broker - hands shaking across a business deskWhen you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.

Up until the settlement goes through the home is the property of the existing owner.

And with a large home deposit at stake, you’ll want to ensure you choose the right period length.

How much time should I give myself?

Generally, settlement periods are 30, 42, 60 or 90 days.

In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.

Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).

You see, both the buyer and the seller must agree on the settlement period.

However, you may have competing motivations, so this can be tricky.

Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.

Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.

If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.

You might push for a longer settlement period if:

– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want to deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).

You might push for a shorter settlement period when:

– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.

It’s important to get right

One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.

While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.

This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.

Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.

Other states have a little bit more leeway.

In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.

Final word

So that’s negotiating a settlement period in a nutshell.

The best news? That’s about as much negotiating as you’ll need to do. Because when it comes to negotiating a loan with a lender, we’ve got you covered.

If you’d like to find out more about our services, get in touch, we’d love to help you out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Mortgage Time Bomb

Hot Off The Press, Courtesy
Of Channel 9 News

Almost one million Aussie households are
staring down a mortgage ‘time bomb’

mortgage debt spelled out on scrabble tokensAlmost one million middle-income Australian households are facing a mortgage time bomb as soaring living costs plunge families into repayment stress.

A new analysis by Digital Finance Analytics (DFA) has shown that the number of households currently in mortgage distress has risen by 20 percent in the last six months to 910,000.

At the current rate, more than one million households will be struggling to make repayments on their home loan in 2018.

Primary factors ratcheting up the stress faced by families include stagnant wage growth, living pay cheque to pay cheque and the looming threat of a rise in interest rates.

Martin North, Principal of Digital Finance Analytics, says that the risks of more middle-income families borrowing enormous loans from the banks are rising.

“Risks in the system continue to rise, and while recent strengthening of lending standards will help protect new borrowers, there are many households currently holding loans which would nothand calculator with Mortgage showing in the calculation screen now be approved,” said North.

“The number of households impacted are economically significant, especially as household debt continues to climb to new record levels. Mortgage lending is still growing at three times income.
“This is not sustainable.”

Broken down by region, NSW had the most households in stress with 238.703, followed by Victoria with 250,259, Queensland with 162,726 and WA with 121,393.

Households are defined as being “stressed” when their net income does not cover ongoing costs, including repayments on their home loans.

Households that have a tight budget but manage to make ends meet are defined as being “mildly stressed”, and those who are unable to make a mortgage repayment within the next 30 days are defined as being “severely stressed”.

word cloud with debt as the central wordNine Network’s Finance Editor Ross Greenwood said that it’s “pretty obvious” why families are struggling.
“Families are struggling with rising costs. Rising health insurance premiums, rising electricity bills and on top of that, many families have taken on very big mortgages,” said Greenwood.

“Now if their wages aren’t growing fast then quite clearly they are going to struggle.

“Another worrying statistic is that there are now 52,000 households that this organisation has identified that are now 30 days behind on their mortgage repayments, that means technically banks could walk in and close them up.”

Independent Analysis

I have been in the mortgage brokering industry now for approximately twenty years and I have now seen a whole generation of Australians take out mortgages who have no experience of what a 7-8% interest rate mortgage is. Many of these borrowers insisted on borrowing to their maximum capacity. Although in the last six months banks have been tightening up on what any new borrowers can get loan amount wise, there is still many years of previous borrowers who pretty much were able to borrow almost anything they wanted.

Recently we have seen not only banks but many other commercial enterprises prey on the Australian consumer with increased prices (energy companies being one of the notable ones). Although many borrowers have budgeted diligently there would be very few of them that would have factored in some of the essential services price rises we are seeing.

The Solution

For many there may not be a solution, however our advice is to drill down on your budget and find every last cent you can find and start paying it onto your mortgage. I would recommend you beg, borrow, and tighten your budget belt to find whatever you can to pay toward your home mortgage in order to escape the mortgage stress that may be headed your way in the not too distant future.

Also, get with your home mortgage broker, because if you have a 4 in front of your home mortgage you are probably paying too much.

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How Brokers Beat The Banks

Discover The Five Things a Mortgage Broker Will Do That Your Banker Won’t.

Mortgage Brokers can be Addictive
An understanding of exactly what home loan brokers do can still be an obstacle for some individuals in Australia. A 2015 report at a home loan conference for Australian home mortgage professionals specified that just 40 % of Australians have a mutual understanding of exactly what home loan brokers do. That’s up 7 % from 2012, yet highlights that the broker market is a fairly new one in Australia.

Brokers have prevailed in the United States since the 1980s. This suggests that lots of Australians are still unfamiliar with the distinctions in between using a lender to secure a home loan versus working with a mortgage broker to seek out their ideal mortgage.
Stats likewise gathered by the Report are showing that when an Australian has acquired a home making use of a broker, there’s no reversing back to the old method of doing things. This might simply be because of these five services a broker supplies that simply don’t come as basic services from any bank, American or Australian.

1. Provide you with a more comprehensive range of objective and complimentary advice.
It doesn’t matter how well trained a banker is. Banks just have so many items to offer. The guidance you can anticipate from a mortgage lender will be limited to the items the bank offers.

A mortgage broker, on the other hand, has a much more comprehensive array of loan providers to offer home mortgages from. This indicates that the broker must be well-informed on every possible variation of mortgage product he or she offers. This suggests the suggestions you receive are more likely to be more balanced.

2. Offer you education, so you know what different home mortgage choices cost you.
This is another aspect of being objective. Your home loan broker’s task is to help you comprehend the various home mortgage items that are offered for your credit and earnings circumstance. Your broker can assist you to establish an action strategy so that even if you do not qualify for a much better home mortgage now, you’ll have the ability to get a better rate after carrying out your initial plan.
Some credit unions can offer education though they won’t hesitate to inform you that a credit union is not a bank. Your broker is always there for individual education time.

3. Automatically search for the lowest rate of interest possible based upon your credit history and your earnings.
Since a broker has so many more loan providers to deal with, it’s a lot more likely you’ll find a lower interest rate and a home mortgage plan that conserves your cash through a broker. A broker earns their money by matching you to the mortgages that the bank doesn’t provide instantly.

Your banker may agree to lower the rates if you start haggling with them, yet there’s no guarantee there will not be other not so obvious costs that erase those lower rates. A broker looks at all the loan expenses, and because the broker is education focused, your broker will assist you in identifying all the charges that are concealed in the documents.

4. Work out the best home loan item possible based on your credit rating.
Negotiating with the bank isn’t easy. It takes some time and energy. When you meet directly with the bank, you’ll be your very own mediator.

You are turning to an expert negotiator when you work with a professional mortgage broker. You are working with somebody who understands the best ways to discover the very best rates and the best ways to work out the best deals for your advantage. It’s even possible your broker may find the very best offer from your very own bank– one the bank didn’t provide to you.

5. Provide an evaluation for your mortgage a couple of times a year to see if there’s another way to assist you to pay your home mortgage off even quicker.
The bank isn’t motivated to help you lower your financial obligation, despite the fact that it has now become the pattern for Australian banks to provide a much more comprehensive set of options than were readily available even six months ago. The bank anticipates you will do your research before your mortgage term ends.

Up until now Australian banks are not required to notify customers, in the same way, Australian charge card businesses are now required to inform their customers of the effect of making the minimum payment means to their long-term financial interest. Australian banks are going to make their cash by letting customers continue restoring their interest only and fixed rate terms without notifying them of making the appropriate changes.

Your home loan broker does not have anything to lose by assisting you to get out of debt. So when it comes time to restore your mortgage term, your home loan broker is on your side, searching for the very best choices.

Only a few years ago, the services a home loan broker now offers in Australia were just something readily available in the United States. Now that the practice has come across the Pacific Ocean, it deserves at least discussing your home mortgage requirements with a broker, if only for the five services a home loan broker offers as standard practice. Even if some banks provide some of these services, you’ll find they aren’t constant practice in the banking industry.

About About Dave Fleming

Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.