Q. How much can I borrow?
This depends on the lender, how much income you are earning, what expenses you have, and the type of property you wish to purchase.
Q. What is the difference between a Fixed Rate Loan and a Variable Rate Loan?
Fixed Rate Home Loans have interest rates and loan repayments that remain the same for an agreed period of time, and then at the end of the term, reverts to a variable rate.
A Variable Rate Home Loan has an interest rate that can move up and down according to fluctuations in the housing market. You should consider a fixed rate if you want the certainty of knowing what your repayments will be and therefore help you budget, not to try and “beat the market” as breaking out of a fixed rate (fixed term) loan contract could cost you thousands of dollars.
Q. What is a Comparison Rate?
A Comparison Rate reflects some of the costs of a loan into a single interest rate. The aim of the Comparison Rate is to help you make a more informed decision on the costs associated with a loan, and help you to compare various loans and services offered by financial institutions and mortgage providers. The formula for calculating a comparison rate is regulated by the Consumer Credit Code, and all Australian financial institutions and mortgage providers use this same formula.
Q. What is Lenders Mortgage insurance (LMI)?
Lenders’ Mortgage Insurance protects your lender in the unfortunate event of you defaulting on your home loan. When lenders agree to lend a customer money, there is a small risk that they won’t get the money back if the customer is not able to meet the repayments. Although they have the house as security, if property values decline that security may not be enough to cover the outstanding loan when the lender comes to sell it.
This insurance helps lenders broaden the net of who they are able to lend to by taking some of the risk out of lending the money. It means that more people are likely to get a loan and the home they want sooner.
Lenders’ Mortgage Insurance should not be confused with Mortgage Protection Insurance, which covers borrowers for the payment of their mortgage installments in the event of unforeseen circumstances including unemployment, illness or death. This insurance is paid annually and can vary depending on the outstanding balance of the loan.
Q. What is Loan to Valuation Ratio (LVR)?
LVR stands for Loan to Valuation Ratio. This is the measure of the amount of the loan compared to the value of the property. For example, if you have borrowed $160,000 and your property is valued at $200,000, the LVR would be 80%.
Q. What is a split loan?
A split loan or combination loan brings together the benefits of variable and fixed interest rates into a single home loan. This can be an attractive feature for some customers as it allows you to customise the loan and reduce the effect of interest rate changes.
The loan can be split in many ways however 60% variable/ 40% fixed or 50/50 splits are the most common. If you need the security of a fixed rate home loan but want the flexibility of a variable rate loan, then a split loan may be the answer.
Q. What is redraw?
Redraw is a feature which allows you to withdraw the extra money you’ve paid into your home loan. That is, the extra money you have paid in addition to your scheduled repayments.
You can redraw as often as you like, as long as you have made additional repayments over and above your scheduled repayments.
Q. How do I know if I qualify for the first home owners grant?
Generally speaking, you will be eligible for the first home owners grant in your State or Territory pursuant to the relevant grants available at that time, if neither you or your spouse have owned a home nor claimed the grant previously.
For more information on the first homeowners grant visit www.firsthome.gov.au.
Q. What documents do I need to provide
Generally you will need to provide the following:
- Completed and signed Standard Application Form
- 100 Point Check AML Customer Identification Checklist (with accompanying identification) per applicant
- First Home Owner Grant application (if you’re a first home buyer)
- Signed copy of Contract of Sale (required for purchase only)
- 6 Months Home Loan Statements (required for refinance only)
- Rates Notice for existing property used as security (required for refinance/equity releases only)
- Copy of last 3 months’ loan statements for any loan to be paid out (required for loan consolidation only)
- Evidence of income – most recent payslip or letter from employer detailing conditions and most recent group certificate.