How much can I borrow? Ask a Mortgage Broker

Renovation Collaborative

Today, we move on to the next step in the Renovate or Sell journey - Borrowing finance.

You might think of mortgage brokers only for getting the best home loan rates, but they've got a lot more knowledge and value to offer than that. Loans for construction and renovation are definitely not one size fits all.

When it comes to construction projects, everyone has different objectives: large projects, small projects, owner-builders, licensed builders, and even modular or relocated homes. And that's just the beginning. Not all banks will finance everything, because from the bank's perspective, there are different levels of risk. So, finding out what finance is available for your project ideas is essential before you go too far.

I talk to highly respected mortgage broker Richard Jefferies from Newbridge Home Loans in Brisbane.

KEY POINTS SUMMARY

There are so many key points from today that narrowing it down to three is hard, but I'll start with these.

1.Depending on your personal financial situation and construction project specifics, you can access a number of loan types. You may also be able to access finance for the design stage consultants as well as the construction.

As a general guide, the standard loan types are construction loans and smaller renovation loans. A construction Loan is for projects over about $150,000. It involves a licensed builder and payments made over the standard stages in a construction contract. The alternative is smaller renovation loans for more cosmetic work under the $100,000 mark. This is for bathrooms, kitchens, and other similar projects where you don't necessarily have to have a licensed builder. You can manage the process yourself, and the amount of money will be paid out in a lump sum drawn down at your discretion.

2.Some projects will require specialized loans, and limited lenders will be available. Typical examples of this are when you're going to be an owner builder for a large project of a size potentially that would have usually been covered by a typical construction loan. Also, if you're looking for finance for a relocated home, modular home, prefabricated home, or something similar.

3.If you need finance, getting in touch with a mortgage broker at three key stages is essential.

• The first stage is the initial discussion. Before you start any design, you need to determine your budget so it can guide your design brief.
• The next stage is pre-approval finance. When you've got some draft floor plans and more of an idea of what you want to do, be aware that pre-approval finance is only valid for 90 days.
• The final step, obviously, is the final approval stage. When you've got all of your information together and your building approval in place,

It's important to note that you should consider your mortgage broker as part of your consultant team. You need to keep them up to date as the project progresses and ensure they're aware of any budget changes that may affect the amount of money you need to borrow.

INTERVIEW QUESTIONS

01:17 What is the benefit of a mortgage broker over your usual bank?

02:18 What are the Newbridge Home Loans five Ls of lending?

03:36 What is covered in the first L: Level, or the amount you can borrow?

04:59 What is involved in having someone as a Guarantor for your loan?

08:13 What is covered in the second L: Loan Type?

16:12 How does getting finance work if you are an owner-builder?

17:44 What is covered in the third L: Lender?

18:49 Do prefabricated homes or relocated homes affect finance or lenders?

21:58 What is covered in the fourth L: Lodgment?

25:48 What is covered in the fifth L: the Life of the Loan?

26:52 When is the best time to approach a mortgage broker for preliminary advice?

30:26 After your loan is approved, when do loan repayments start?

36:00 What information do people need to take to a Mortgage broker for an initial discussion and then for pre-approval finance?

38:48 When choosing a Mortgage Broker, do you need to find one that's local?

WANT TO READ MORE?

Download the written version of the entire interview as a PDF.

S1:E8 Mortgage Broker-Transcript

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• You'll also find 11 easy-to-read courses demystifying the entire home design and construction process.

www.renovationcollaborative.com.au

IN THE NEXT EPISODE

Next week, you'll find out what's happening with home loans in 2024 and 2025. I'll be talking again to Richard Jefferies from Newbridge Home Loans

RESOURCE LINKS

Richard Jefferies, Newbridge Home Loans

www.mynewbridge.com.au

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