We know loans can be confusing. We’ve put together answers to some of the most common queries we see coming through our door. Should your questions not be answered below, please get in touch and we can help you directly.
How much money can I borrow?
The amount you can borrow is commonly known as your borrowing capacity. Your borrowing capacity will differ from lender to lender.
What does LVR mean?
Loan to Value Ratio (LVR) is simply your loan divided by the value of the property, for example if your loan was $400,000 and the value of the property $500,000 the LVR would be 80%. Lender’s mortgage insurance will generally be payable for loans with an LVR greater than 80%. Interest rates may also be higher if you borrow above 80% LVR and an LVR below 70% gives you lower rates with some lenders.
What is lender’s mortgage insurance?
Lenders’ Mortgage Insurance (LMI) gives you the opportunity to purchase a property with a smaller deposit. LMI protects the lender (not you, the borrower) should you default and the property is sold for less than the outstanding amount on the loan. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front.
How does an offset account work?
A home loan offset account is a savings account or transaction account linked to your mortgage. Your account balance, or the interest you earn, is ‘offset’ daily against your loan balance, and you will only be charged interest on the difference, which may help you pay off your mortgage faster.
This means the lender charges you less in interest because they are not charging you interest on the full, actual remaining balance of your loan.
For example, if you had a loan of $350,000, with $50,000 in a linked offset account, you will only pay interest on $300,000, calculated daily.
Will an investment loan be any different to my existing loan?
No, they will be categorised as an investment loan but all the features are the same as for an owner occupied loan. Lenders charge a higher interest rate for investment loans due to higher costs associated with writing these loans.
Can I use the equity in my home as a deposit for a new property purchase?
Equity is the difference between the value of the property and any loans on that property. It may be possible to use this equity as a deposit or to increase your existing loan. When you buy a property, costs such as establishment fees, solicitor fees and stamp duty add up to a thousands of dollars. Instead of trying to find cash to pay these fees, take them into account in your loan.
How do I calculate how much equity I have in my property?
My property value is $1,000,000
Calculate 80% of the property value (1,000,000 x 0.80) = $800,000
Current Home Loan $250,000
Equity available = $800,000 – $250,000
You can top up your home loan or refinance to a higher amount using this equity and then use the funds for renos, to buy an investment property, etc. Lending criteria applies.
Why 80% – well that the level the bank’s are generally comfortable with lending you, a 20% buffer in case the market falls.
What other costs are involved in buying a property?
Other fees and charges may include (but are not limited to):
- Building/Pest inspection
- Valuation fees
- Lender’s Mortgage Insurance (LMI)
- Solicitor fees
- Connection fees – phone/gas/electricity
- Council rates and taxes
- Stamp Duty
What is the First Home Owner Grant (FHOG)?
The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation.
Under the scheme, a one-off grant is payable to first home owners who satisfy all the eligibility criteria.
How do I know if I am eligible for the First Home Owner Grant?
As the funding for this national scheme is administered by the individual States and Territories, eligibility criteria will vary.
To see if you are eligible an to obtain more information about the First Home Owners Grant, please select the State or Territory below in which you intend to purchase your home.
For more information Contact us.