When buying or building a home, there are many products to choose from and also many requirements and costs associated with obtaining finance. This page provides a basic introduction to these topics. For more information call us on 0414 727 349.
The standard loan product. Variable Rates increase/decrease in line with Reserve Bank cash rates. This product allows you to make unlimited extra repayments and usually carries no penalties for early payout. Other options usually included are weekly/fortnightly repayments and redraw facilities.
Most lenders have professional packages that provide tiered discounts off the Standard Variable Rate. Generally, if you borrow more than $250000, you will receive tiered discounts off the SVR. These usually entail an Annual Fee in lieu of Application & Monthly fees.
Better known as Honeymoon Rates, most Lenders offer a discounted variable or fixed interest rate for the first 12 months of your loan. The loan converts to the Standard Variable Rate at the end of this term. Some Lenders will allow you to switch to another Product at the end of the term however a Switch Fee may be payable. Limitations may apply to extra repayments.
The Basic Variable Rate is set at a predetermined margin below the Standard Variable Rate, usually 0.5-0.7%. This product allows you to make unlimited extra repayments and other options usually included are weekly/fortnightly repayments and redraw facilities. Repayments can be Interest Only or Principal & Interest.
Fixed Rates are available for terms of 1 – 5 years, though a select few offer 7, 10 & 15yr terms. Usually, a limitation will apply as to the amount of extra repayments you can make during the fixed term. You may also incur an Early Repayment fee should you payout your loan before the expiration of your Fixed Rate term.
100% Offset Accounts are linked to your home loan and operate as a standard transaction account. The daily balance of your savings account is deducted from the balance of your home loan and you are charged interest on the remainder. This means that if your loan balance is $100 000, and you have $10 000 in your Offset Account, you will be charged interest on $90 000. 100% Offset Accounts are predominantly linked to SVR products only.
Similar concept to the 100% Offset Account except your home loan also acts as your savings account. Lenders will set your credit limit to 80% of the value of your property however some Lenders will allow the limit to be set at 90% of the value. These products usually attract a slightly higher interest rate. A strong financial discipline is required for this type of product. Essentially, you do all your regular spending on an interest free credit card, deposit all your income and savings into your Line of Credit, and then clear your credit card on each statement date. Because you are charged interest on the daily balance, the more money you have deposited into your home loan, the less interest you pay. This product is ideal for Self Employed applicants and Investors where there is regular turnover of larger amounts of cash.
Construction loans are provided by most Lenders. Usually while constructing, the Standard Variable Rate is the only product available. However, on the completion of construction, you may have the option of switching to any product. Repayments while constructing are on an Interest Only basis. Your full repayment commences once Final Drawdown has been completed.
Most Lenders will require you to have a minimum 5% saved over a period of 3 – 6 months (genuine savings). Some Lenders will waive the requirement for genuine savings where the deposit is >10% (usually 15%-20%) however verification of the source is required ie FHOG, gift, sale of asset etc. Funds cannot be borrowed.
Shares owned greater than 3-6 months, Equity in property or funds from the sale of a property will substitute for genuine savings.
The Family Guarantee products allow you to borrow 100% of the purchase price if you have a direct family member who has sufficient equity in property and is prepared to offer a ‘Security Guarantee’. This also alleviates the need for Lenders Mortgage Insurance, which provides a significant saving.
The same applies for Investment loans however some Lenders will require a minimum 10% deposit (not 5%) for Investment properties.
Usually a minimum of 3-6 months is required, providing any probationary periods are completed. If you have a history of similar employment, and no Lenders Mortgage Insurance is required (ie <20% deposit), the minimum term may be waived.
Usually a minimum of 3-6 months is required, providing any probationary periods are completed.
Usually 3-12 months with the same employer, or continual employment in the same field, is required (Lender dependant).
A minimum of 2 years is required ie you must be able to provide Financials for the previous 2 years. This must be in the form of a Tax Return and must include the Profit & Loss Statement and Depreciation Schedule (if applicable). Some Lenders may require only the previous Financial Year Returns.
Overtime can be included at 50-100% however it must be a condition of employment or continual for the previous 12 months. This will usually be supported by your previous Financial Years Group Certificate.
Commission can be included at 50-100% however it must be consistent for the previous 12 – 24 months. This will usually be supported by your previous Financial Years Tax Return.
70 – 100% of the gross rental may be considered as income. This will have to be supported by a current Tenancy Agreement or a letter from a Letting Agent stating the proposed rental income.
Selective Lenders will allow Family Payment as income however dependants must be 12yo or less.
Selective Lenders will allow Child Support as income, however, dependants must be 12yo or less and payments received via the Child Support Agency.
A satisfactory repayment history of all current commitments is required.
The previous 6 months statements must be provided.
The previous 6 months statements must be provided.
The latest statements must be provided. These must not show any overdue amounts or be in excess of the card limits.
Lenders will perform Credit Checks on every application. Any issues arising from this check will have to be resolved. The number of enquiries on your Credit Check may impact on your loan application. You can order a Free Credit Check in advance if you have any concerns. Please contact us for assistance.
There could be a number of fees payable when setting up a new home loan, refinancing an existing one, or discharging a home loan. Below is a summary of the Fees that could apply.
Payable on all loans except where the Loan is under a Professional Package. In this instance, you will pay an Annual Fee.
Most Lenders include the cost of one Valuation in the Application Fee. However, you may still be charged Valuation Fees if there is more than one property involved in securing the Mortgage.
Some Lenders charge a fee for attending Settlement. This is due to the outsourcing of the settlement process. In some cases, this forms part of the Lenders Legal Fee.
Lenders Legal Fee
Some Lenders charge a fee for the preparation of the Loan & Mortgage documents. This is because the Lender outsources this function to Legal professionals.
Lenders Mortgage Insurance (LMI)
Lenders will require LMI if the borrowings exceed 80% of the value of the property. The LMI is paid by you on Settlement and is a ‘one off’ fee for that transaction. Some Lenders will allow this fee to be capitalised on the loan – whole or in part. The higher the loan to value ratio (LVR), the greater the LMI cost. If you refinance and you exceed 80% LVR, you will pay the applicable LMI again. Please remember that LMI protects the Lender from any loss arising out of any defaults. LMI does not protect you in any form.
Lenders charge a fee for preparing a discharge and the associated documents when you choose to pay out or refinance your loan.
Fixed Rate Penalty
If you break a fixed rate term, you may be liable for any economic loss the Lender makes due to the break.
Mortgage Registration Fee
This is a Government charge and is payable every time you Register or Discharge a Mortgage on the Title Deed. It is collected by the Lender on behalf of the Government
When purchasing a property, there are other Fees payable. These are, but not limited to:
- Stamp Duty – collected by the Solicitor on behalf of the Government
- Registration of Transfer (Form 1 – Transfer) – collected by the Lender on behalf of the Government
- Conveyancing Fees
- Building & Pest Inspections
- Property Insurance
- Moving Costs
Stamp Duty Calculator: https://www.osr.qld.gov.au/calculators/transfer-duty-grants-calculator.shtml
Registration Fees Calculator: http://www.nrm.qld.gov.au/property/titles/feecalculator.html