FS360 Podcast - Episode 38

 Realising that the business needed more space, Warren saw the opportunity of joining with Mulcahy & Co as the perfect way to benefit both his business and especially his clients; the onsite access to Mulcahy’s other group services, such as Financial Planning, Accountancy and Legal Services, means that everything that the client needs is now seamlessly and conveniently available at one address. The business will retain the name “Cosimfree” for the time being.

Warren’s topic for this episode was the Federal Government’s New Home Guarantee, which Warren rated as one of the best schemes he has seen during his 20 plus years as a mortgage broker. Under this scheme the Federal Government guarantees eligible first home buyers’ home loans, thereby enabling borrowers to avoid paying lenders mortgage insurance (LMI) if they are not able to pay a minimum 20% deposit. LMI is paid by the borrower, but it protects the bank or lender, not the borrower. Warren stated that in his 25 years in the business, most of his clients have not had the minimum 20% deposit, have had to pay an average $15,000 for LMI, but none of them have defaulted on their mortgage repayments, which means that every one of those LMI premiums has been a donation to the bank! Warren provided a recent example of clients purchasing a home for approx. $600,000, who were able to save the LMI premium of $24,000 by accessing the New Home Guarantee scheme.

Eligible first home buyers can use the scheme to assist them in buying a new home or land and building, and now also an established home (from 31 January 2022). They can borrow over 80% and up to 95% of the purchase price without having to pay LMI. The minimum 5% deposit will be subject to lenders’ requirements that it is genuine savings, although Warren stated that there may be a possibility, depending on lenders’ rules, for the lender to accept proof of regular rent payments to meet the criterion of “genuine savings”.

With the wide variety of fees and conditions imposed by banks and other lenders, applying for a home loan is especially confusing for first home buyers. Add to this the range of government schemes, and the home loan application becomes both time consuming and difficult to navigate for the first timer. A mortgage broker such as Warren has the experience, expertise and time to research the options for the client, and assist them in selecting the best product. Warren has also enabled clients to stay with their existing bank, if that is their preference, whilst also negotiating a favourable loan.

Whilst the headlines are announcing that interest rates are climbing, Warren explained that it is fixed rates that have gone up, whereas variable home loan rates have actually come down. He also talked about one of the banks which has extended the lower interest rate, usually only offered to new clients, to existing clients, for example those looking to refinance.

“Best interest duty” is a new piece of legislation, introduced in 2021, which requires mortgage brokers to demonstrate that they are acting at all times in their client’s best interest, with steep fines applying for non-compliance. Warren said that he has always acted in his clients’ best interests, but interestingly this legislation does not apply to banks!

Warren closed by stating his goals for Cosimfree in 2022: making sure that his staff are comfortable and secure in their new space and that his client base are comfortable with the move. He works with fellow broker Liam, and seven loan processors who work as a cohesive team to carry out all the essential background work on applications and documentation for the clients. The whole team celebrate every time a loan is approved, by hitting a Nepalese Singing Ball with a gong!

Readers can find clients’ reviews on the Cosimfree Facebook page.