Frequently asked questions
What is an LVR?
The expression LVR is short for Loan to Value Ratio. It is the size of your loan compared to the value of your property expressed as a percentage. The LVR is important because it is used to determine what amount you can borrow from a lender. For example: you wish to buy a home with a purchase price of $300,000 and the lender will lend up to 70% in that area. The maximum loan will be $210,000. Most loans that have an LVR greater than 80% will require Lender's Mortgage Insurance (see below).
How much can I borrow?
It depends on a number of factors including the lender you choose, the type of loan, the term of the loan, your income (and the breakdown of your income), your credit history, your current financial commitments and your employment history. Your broker will be able to give you a good idea after taking all these into account.
What is Lender's Mortgage Insurance?
Whenever you have less than 20% deposit, you will almost always have to pay lenders mortgage insurance. As the name suggests, this insurance is a one-off payment by the borrower to the lender (or lender's insurer) to "insure" the loan.
It insures the lender for any shortfall on a loan, so if you were ever in the position where the lender took legal action and forced you to sell your property it would generally cover the lender if there was any difference between what your property was sold for and any loan amount still owing after the sale.
On 100% loans, dependant on the lender and the risk, mortgage insurance can cost up to 3% of the amount your are borrowing. Up to 95%, the amount would typically be up to 1.2% - 2.0% of the loan amount. As you get closer to 80%, the cost can discount substantially.
What is a Professional Package or Pro Pack?
A professional package offers you interest rate discounts depending on the loan size. Fee free transaction accounts and credit cards free of charge and a range of other special offers are available. Professional packages are not just for professionals! Packages can start at a loan amount of $100,000.
What is an intro rate?
An introductory rate loan generally offers a guaranteed low rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable. These rates or loans are also referred to as "honeymoon" rates/loans.
Do I need additional paperwork for a construction loan?
Yes. This type of loan requires a fixed price building contract from a registered builder and council approved plans. Also these loans are usually interest only for the period of construction and then becomes principal and interest once the building is completed. A construction loan allows you to draw funds in stages, usually four or five in accordance with a schedule provided by the builder.
What are the major costs associated with buying a home?
The costs that are normally associated with a property purchase are:
Stamp duty on the purchase
Stamp duty on the mortgage
Loan fees (if any)