To help you better understand your options we have put together some FAQs to help answer many of your questions. If your question is not answered below please contact us so we can answer it for you.
How much deposit do I need to buy a residential property?
Contrary to what you may have heard, you don’t always need to save a 20% deposit before the banks will talk to you, although mortgage insurance generally applies to borrowers who have less than 20% of the purchase price, and these costs can be significant. Some lenders are willing to lend you up to 95% of the purchase price of the property. This means you only need to come up with a 5% deposit, plus costs such as stamp duty.
Should I choose a fixed or variable interest rate home loan?
This comes down to your circumstances.
Fixed home loans have an interest rate fixed for a set period of time. At the end of the fixed rate term, the loan will usually switch to the standard variable rate offered by the lender.
Variable home loans have an interest rate which will move with changes to market interest rates. This means the interest rate can rise or fall over the term of your loan.
What is a split loan?
A split loan is two loans, one has a fixed rate and one has a variable rate, which allows you to manage some of the risks of interest rate rises by locking in at a fixed rate, while still being able to make extra repayments with the flexibility of a variable interest rate loan for your home loan.
How do home loan repayments work?
The majority of home loans are set according to a loan term, and an interest rate. Repayments can be Principal & Interest, where a portion of it repays the loan balance, and a portion of it is your interest cost, or Interest Only.
What is a redraw facility and how does it work?
A redraw facility is available on most variable rate loans and allows you to access additional repayments that you have made on your loan over and above the required minimum repayments.
Can I get a home loan if I am self-employed?
Yes, in fact some lenders have much more of an appetite for such borrowers and have simplified their criteria to be eligible for a loan. Typically they will require historical information relating to the business, such as tax returns verified by notice of assessment.
What is a Line of Credit?
A line of credit (LOC), is an arrangement between a lender and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain, with interest paid on the outstanding balance. In most instances, there are now better and cheaper alternatives.
What is a Bridging Loan?
A bridging loan, enables the purchase of a new property before the existing one is sold. Bridging loans are interest-only, and the compounded interest is added to the ongoing balance when you sell your house. This amount becomes the mortgage on the new property.
What is an LVR?
Loan to Value Ratio - The LVR is the amount you are borrowing, represented as a percentage of the value of the property being used as security for the loan. Depending on the outcome it can affect the cost to borrow including the interest rates available.
How do I know which loan or lender is best for my needs?
The easiest way is to have someone you know refer you to an experienced mortgage broker, who can present you with the best options, once they understand your current situation and your goals. They will use a process of elimination from a broad panel by eliminating unsuitable lenders or ones that don’t offer the products for your strategy, then finally they will be seeking the best interest rates to suit from the remaining. The final step is to help you understand how the recommendation was derived and how it can suit for you to consider.
What is a Statement of Position?
Statement of Position is a Summary of the borrowers Assets, Liabilities, Income & Expenses which will provide an uncommitted monthly income. It helps the lender assessing your loan to understand your financial situation.
What are the options for first home buyers?
There are generally more options for first home buyers to borrow than for others, including the option to have the parents assist with a guarantee. For new properties there are often Government Grants available and in most states there are substantial concessions on Stamp Duty, depending on the purchase price. It is also possible to buy land and build with a construction loan.
How do I apply for a home loan?
Contact us and we will help you understand your options and navigate the process.
How much can I borrow?
What is lenders mortgage insurance (LMI)?
Lender's Mortgage Insurance is an insurance policy that protects the lender from financial loss in the event that the borrower can't afford to keep up their home loan repayments and the net proceeds of an enforced sale of the property would not be enough to cover the loan. It’s usually a one-off payment made by the borrower at the time of loan settlement.
While it may appear that there are no benefits to LMI for the borrower, the existence of LMI reduces the lender’s risk, which means that the lender can lend a larger amount or approve a home loan without the borrower having to provide the 20% deposit. Many people prefer to pay the cost rather than save for a few more years.
Once my loan is funded, who is my relationship with?
While you can liaise with your bank for various administrative issues, there are many advantages to maintaining a relationship with your Mortgage Broker. As they can continue to advise you about your options as your situation changes. They can also process a number of administrative issues and help you to make sure you maintain a competitive interest rate as the market changes.
How do I know whether I qualify for the first homeowners grant?
To be eligible for the First Home Owners Grant you must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a "home" in Australia. Each state has different qualification rules and pay different grant amounts. In QLD the grant is currently $15,000 for buying or building your new property. Conditions apply and it is best to consult your mortgage broker or Office of State Revenue.
How can I refinance my existing home loan?
Just because a better rate is available doesn’t necessarily mean you’ll end up saving money by switching home loans with your current lender or a new lender. However, if you do it right, you could end up saving large sums of money as there are better refinance options available. First step is to obtain advice on the full picture and available options.
Need more information?
For more information on Home Loans, contact us.