FAQs

Frequently
Asked Questions

Make educated decisions

Frequently
Asked Questions

Make educated decisions

Here is a pick of some popular questions asked by our clients. Get in touch if you need to better understand other jargon or terms used in the loans space.

What is LMI

When you’re looking to buy a property, it’s important to understand the concept of Lenders Mortgage Insurance (LMI) if you’re planning to borrow more than 80% of the property’s value. It’s a one-time fee that protects the lender from loan default risk and depends on deposit size and property value. Although LMI adds to the mortgage cost, it can enable purchasing a property with a smaller deposit, which is beneficial for first-time buyers struggling to save a large deposit.

What is LVR?

Loan-to-Value-Ratio: LVR is the amount of money you want to borrow divided by the property’s value. If your LVR is high (above 80%), you may need to pay Lenders Mortgage Insurance, which adds extra cost to your loan. As a first home buyer, it’s important to understand your LVR and try to keep it low by saving a larger deposit. This will help you borrow more easily and keep the cost of your loan down.

What is Stamp Duty?

Stamp duty is a state and territory tax imposed on specific transactions, including property purchases. The amount varies based on the property value, location, and first-time buyer status, and it can be a significant expense to consider when buying a property. Some states provide concessions or exemptions for first-time buyers or lower-valued properties.

How do Extra Repayments benefit a loan?

Traditionally only available with variable rate home loans, some fixed rate loans now offer this feature. Extra repayments allow you to pay additional sums on top of your regular repayments to bring down the principal and in so doing, pay less interest.

What is Home Loan Portability?

This feature allows you to swap the security property on your home loan. In other words, if you buy a new house, you may be able to keep the same loan which could save you on loan set up and discharge fees.

What are Principal & Interest (P&I) loans?

With a P&I loan you start reducing the principal immediately. While your repayments may be higher with a P&I loan, you are paying off the principal simultaneously, and ultimately saving on interest costs.

How does a Bridging Loan work?

In simple terms, Lenders take over the mortgage of your current property and finance the purchase of your new property. The debts are combined and if required, can also include any additional purchase costs that may be associated with your new home like stamp duty and legal fees. Repayments of the combined debt are often calculated at interest only. When the first home is sold, the net proceeds will be used to reduce what had become the combined debt value. The outstanding debt amount, then becomes your new mortgage from then on.

What is an Offset account?

One of the more popular features is an offset account. It operates like a savings account that is directly linked to your home loan. Any money in your offset account reduces the interest charged on your linked home loan.

What are the benefits of an Offset Account?

An offset account is a linked savings or transaction account that reduces the interest charged on your home loan. Its benefits include saving on interest charges, flexibility, tax-free interest earnings, and potentially faster home loan repayment.

What is a Split Loan?

A split loan combines different loan products in one mortgage, providing borrowers with flexibility and control over repayments. Borrowers can divide the loan into different parts with varying interest rates, repayment terms, or features. This approach allows borrowers to manage cash flow, balance risk, and take advantage of interest rate decreases.

What is a Redraw facility?

This feature is typically found with home loans that allow extra repayments, although it is unusual to have a redraw facility as part of a fixed rate home loan. A redraw facility allows you to withdraw funds from the extra repayments you have made.

What are Interest Only (I/O) loans?

On an interest-only home loan (mortgage), your repayments only cover interest on the amount borrowed (the principal). For a set period (for example, five years), you pay nothing off the amount borrowed, so it doesn't reduce.

At the end of the interest-only period, the loan will change to a 'principal and interest' loan. You'll start repaying the amount borrowed, as well as interest on that amount. That means higher repayments.

What is a Line of Credit (LoC)?

A line of credit loan gives you access to the equity in your property. You can draw, pay back and redraw the funds as many times as you like for various purposes. It can help you counter any shortfalls in rental payments over the term of your investment as well as give you access to funds to purchase your next property investment. Just remember to keep track of the funds you withdraw so you stay on top of the tax deductibility of your interest repayments.

How do I speed up loan approval?

We understand collecting relevant documents to support your loan application can be stressful. There are a few things you can do to make the process quicker, and we will assist you with the rest.

1. Have a stable employment track record.
2. Minimise your debt portfolio.
3. Establish a strong savings and repayment history.
4. Stay aware of your credit rating.
5. Don’t make too many loan applications.
6. Gather documents to support your story.
7. Be open and honest.

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