Mortgage Loans

Mortgage Loans

Frequently Asked Questions (FAQ) on mortgage Loans

How do I know which type of home loan is best for me?
Your financial goals, income, and expenses are the factors a loan officer would use to determine the best loan product for you.

What is a Fixed rate?
A Fixed Rate Mortgage requires a monthly payment amount that never changes over the life of the loan.

What are No Doc Loans?
No Doc, or No Documentation Loans are beneficial for self-employed individuals, contractors, and wait service staff. No Doc Loans require that no employment, income, or assets be stated on an application. These loans are usually offered at higher rates than many other loan options.

What is a Definition of a A Home Loan?
A home loan - sometimes called a mortgage - is simply a long-term loan. You get one through a bank, credit union or other financial institution. Although it is likely to be the biggest loan you ever have, it is designed to be paid off slowly through manageable monthly or fortnightly repayments.

You choose how long you need to pay off the loan. Terms of 30, 25 and 20 years are most common. The lender will use your house as collateral against the loan.

How does a home loan work?
A home loan is made up of principal and interest. Principal is the amount you borrow. Interest is what you pay to borrow the money. At the start of the loan, your repayments largely consist of interest, with a small amount going towards the principal. As you reduce the principal, your interest charges fall until eventually the loan is paid off.

Case Study: If you took out a $100,000 loan at seven per cent over 25 years, you would end up paying a total of $212,100 - $112,100 in interest plus the $100,000 principal.

What's in it for the lender?
Home loan lending is the core activity of many banks and financial institutions. They make their money from:

Interest on the loan
Loan establishment fees
Ongoing fees and charges
These charges reflect the cost of money as set by the Reserve Bank, the risk associated with the home loan, the cost of administering it and the need for all businesses to make a reasonable profit.

How much money can I borrow?
The amount of money you can borrow, commonly known as your 'Borrowing Capacity', will differ from lender to lender. Some lenders will lend you more than others. To establish your approximate Borrowing Capacity click here or alternatively fill out our online application form and your local mortgage consultant will provide a more specific overview for your individual situation.

How much do I need to save for a deposit?
The deposit required depends largely on the type of home loan, and of course which lender you select. As a general rule if you are an owner/occupier you will require 5% of the purchase price as a deposit. If you are an investor you will require a deposit equal to 5 - 10% of the purchase price. 

How do I know if I am eligible for the first home owners grant (FHOG)?
As a basic rule you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia , with the intention of occupying the property as your principle place of residence within 12 months of settlement. It is important to note that if you are purchasing the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.

How much money will I need to set aside for Stamp Duty?
Stamp Duty is a State Government tax based on the selling price of the property. Each State/Territory has different rules and calculations, some even offer discounts to first home buyers. Stamp Duty can form a significant additional cost when purchasing property. To find out how much Stamp duty you are likely to pay click here to go to our Stamp Duty calculator.

Other than the mortgage and stamp duty expenses what other expenses can I expect to pay?
As a rough guide it is recommended that you budget between 5 - 7% of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include, but are not limited to:

• Building/Pest Inspection
• Valuation Fees
• Mortgage Insurance (MI)
• Solicitor Fees
• Insurances
• Connection Fees - phone/gas/electricity
• Rates

What is Mortgage Insurance?
Contrary to what many borrowers may think, Mortgage Insurance (MI) DOES NOT protect the borrower should they be unable to make mortgage repayments. Instead, (MI) protects the lender from any losses resulting in the sale of a property due to default by the borrower. (MI) premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80% of the lender's valuation of the property. Some lenders will allow you to add the (MI) premium to your home loan whilst others require you to pay it up-front.

What are 100% Home Loans?
100% Home Loans - Combined with the First Home Owners grant and no stamp duty, this product allows you to get into with market with very little cash of your own.

What are 106% Home Loans?
106% Home Loans - Allows you to borrow the full amount of the purchase PLUS enough to cover Stamp Duty and other expenses.