If you are not an accredited and licensed mortgage broker, you must not get involved in the process of selecting loans. You should refer clients to a properly accredited mortgage broker or lenders directly.
If you are an accredited and licensed mortgage broker, the first step in determining which lender and loan option is best is to ascertain the type of borrower he or she is.
The next step is to clarify whether there are any lending restrictions associated with the residential property being offered as security. This may be because of the nature of the title or the type, size or location of the property.
You will need to qualify whether the borrower wants a principal and interest loan or an interest only loan and whether they want a fixed or variable rate or a combination of both. The decision must be made by the borrower. As property advisors, you are not qualified to advise on the benefits and drawbacks of fixed versus variable rates.
It is then important to determine which of the possible lenders offers the best overall package, taking into account interest rates, application fees, ongoing fees and the importance of features such as redraw, 100 per cent offset account and capacity to repay the principal without penalty.
Further and possible final consideration may need to be given to the way in which the lender treats rental income is their serviceability assessment. Some lenders may only allow 60% of rental income and other might allow up to 75%. This will have a potential impact on the client’s ability to borrow funds for this purchase and subsequent future purchases, therefore limiting their ability to access further funds to build a possible portfolio of property investments.