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Buying a House

FAQs

YOUR QUESTIONS ANSWERED

What are Break Costs?

You may be charged a break fee if you break your fixed rate mortgage. The break fee generally will vary on how much the current interest rates have dropped since you took on the fixed rate loan.

What is an Offset Account?

An Offset Account is an everyday bank account that’s linked to your mortgage account. You can deposit your salary and savings into the account and the balance is then offset against the amount owing on your home loan. It reduces your interest payable as intesrt is only charged on the net balance.

What is a Credit Rating?

A credit rating or credit score is a number lenders use to help them decide how likely it is that they will be repaid on time if they give a person a loan. Your personal credit score is built on your credit history.

What are (P&I) Principle and Interest Repayments?

P&I loan has repayments which include both principal (the amount owing on a loan) and the interest (the borrowing cost of the loaned funds accrued). The lender will usually work out the minimum principal and interest repayments needed to repay the loan within the selected term.

What is an Interest Only Repayment?

This is when you only pay the interest portion of your loan for a set period, for example the first five years of your loan.  While interest-only repayments are lower during the interest-only period, you’ll end up paying more interest over the life of the loan. After the term is over, many refinance their homes, make a lump sum payment, or they begin paying off the principal of the loan.

What is a Redraw Facility?

A home loan redraw facility allows you to take out any extra repayments that you’ve made over the required minimum repayments on your home loan. Any additional repayments you make goes towards your ‘available redraw’ which can be drawn down when required.

What is (LMI) Lenders Mortgage Insurance?

LMI protects the credit provider against any loss we may incur if you are unable to repay your loan. Lenders Mortgage Insurance (LMI) is a one-off, non-refundable, non-transferrable premium that’s added to your home loan. It’s calculated based on the size of your deposit and how much you borrow. The more you contribute to the purchase price of your property, the lower the cost will be.

What is the difference between an offset account and a redraw facility?

An offset account can reduce the interest on your loan while maintaining instant access to your funds. On the other hand, a redraw facility allows you to make extra repayments, helping you shave years off your loan term. The offset account is like any other everyday account, so it’s the most accessible.

What is (LVR) Loan to Value Ratio?

LVR is the ratio of your loan amount to the value of the property you’re buying, shown as a percentage. To calculate LVR, divide the amount of the loan by the lender-assessed value of the property. If your LVR is 80% or more your interest rate may be higher and you’ll typically need to pay for LMI.

What is a sub-prime mortgage?

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What is a serviceability calculator?

Banks calculate your serviceability to ensure you can afford the mortgage and to determine how much of a home loan debt you can manage. Serviceability is the ability of a borrower to meet loan repayments, based upon the loan amount, the borrower’s income, expenses and other commitments. This generates an overall figure, known as the debt service ratio, a borrower’s monthly debt expenses as a proportion of monthly income.

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