Frequently Asked Question's

Frequently Asked Question's

You can select one of the following three scenarios:

The Ideal Scenario: 20% of the property purchase price. This saves you money since you won’t have to pay any lender mortgage insurance.

What Most People Do: 10% of the property purchase price. However, in this case, You will have to pay lender mortgage insurance to the lender which, depending on the proposed use (owner occupier or investment), loan size and the state of security, can typically amount to 2% of the property price. You may need to pay this 2% upfront if the lender refuses to integrate this insurance amount into the loan.

And last, you must be able to put down at least 5% of the property purchase price. In this situation, your application needs to be very strong (i.e., a stable job, not many credit checks in the recent past, etc) to get approved. Also, the lender mortgage insurance premium jumps significantly from what we estimated in the previous situation mentioned above. Most lenders don’t allow this insurance premium to be added to the loan when you are already borrowing 95%. You need to come up with extra funds for the insurance premium.

In all the above scenarios, please note that you also need to bring extra money, equal to 5% of the property purchase price, to cover stamp duty expenses and other closing costs (such as the legal, council, etc). These costs may vary depending on whether you qualify for stamp duty concession or even exemption. You can get in touch with us to determine the deposit for your dream house.

This is a normal day-to-day transaction account linked to your home loan and offers the additional benefit of interest offsetting. Any money held in this account is subtracted from the balance from the home loan account while calculating interest. For example, if you have $10,000 in the offset account and the home loan balance is $80,000 today, the lender will charge interest on the difference ($80,000 – $10,000 = $70,000) only. This helps to shorten the overall loan term and lower the interest paid. If the account is the everyday offset account, then they calculate the interest on daily differences.

If you need, you can still withdraw funds from your offset account by using your debit card and all other regular banking facilities are still there. Most of the offset accounts usually come with the package home loan products. The offset feature is only offered on variable-rate home loans in general. However, the account may come with higher monthly fees and you may be required to maintain a minimum balance in the account.

Borrowing capacity depends on your income, nature of employment, a tax-free component of your salary, and any existing loan commitments (such as car loans, personal loans, credit cards, etc). The capacity also depends on your living expenses such as food and grocery, childcare and education, travel, transport, entertainment, healthcare, etc. Lenders need to be satisfied that the declared living expenses are in line with the general Australian standard for the family size and income level that they have.

The aforementioned variables complicate things, and trying to know your borrowing capacity online without having complete and accurate information about your income and expenses is simply impossible.

A general rule of thumb that we can suggest is you can borrow up to 5.5 times your gross income, assuming you have no other liabilities and no dependent children. For example, if your household’s combined income is $110k per year, you can expect to borrow up to $605,000. You can then add the deposit you have and calculate how much property price you can look up to.

We highly recommend getting in touch with one of our brokers to discuss your personal circumstances and get a reliable estimate of your borrowing capacity.

Please be aware that you also need to bring extra money for stamp duty expenses and other closing costs (such as the legal, council, etc), which is another 5% of the property purchase price. Sometimes, you may be eligible for stamp duty concession or even exemption so these costs may vary accordingly.

Most lenders naturally want you to use their banking products when you borrow a home loan from them. In order to encourage you to do so, they offer home loans into two broad categories – basic home loans and package home loans.

When you choose the package home loan, they charge you some annual fee but also offer you lots of incentives such as no annual fee on the credit cards, provision of an offset account, ability to split your loan into fixed and variable, etc. Don’t be afraid of annual fees, if you know how to use the package properly and manage your finances accordingly, you will reap more benefits than what you pay on annual fees.

When you are borrowing, you can choose to have a fixed rate or variable rate for the entire amount you borrow. Depending on your needs, you can also make it hybrid, i.e. part fixed and part variable. The brief descriptions of these loans are as below:

Variable rate loan: The interest rate is left variable. Time and again, your lender reviews their funding costs and determines the interest rate they would like to charge you. If the rate goes up, as a result, your home loan payment will go up and if it goes down, so does your repayments. With this loan, you can make unlimited extra repayments if you want to and connect an offset account to the loan account. This means any extra money in your offset account reduces the interest on your home loan. The downside of this product is that the rates can change at any time.

Fixed-rate loan: You can fix the interest rate on your home loan for a specific period (from 1 year to 7 years, for example). The most popular fixing periods are for 1 year, 2 years and 3 years. When your rate is fixed, you continue to pay the same interest rate no matter what happens in the lender funding costs. You will still pay the same rate that you fixed even if the rate increases.

You can’t switch to a variable rate if the rate goes down as you must continue to pay the pre-set rate until the fixing period expires. If you want, you can end the fixed rate agreement at any time but this comes with the breaking costs. Please check with your lender before taking any such action.

Such fixed-rate loans may not allow payments of more than a specified amount during the period even when you have extra money that you want to put towards the loan amount. The offset account will not work when you have a fixed interest rate loan product (with the exception of the special loan products).

Split Loan: In a split loan, a part of your loan has a fixed rate, while the rest has a variable rate. Your repayments will remain the same for the fixed part, while they might fluctuate for the variable portion. Splitting your loan may bring the benefits of both fixed-rate loans and variable-rate loans along with their drawbacks.

It is best to talk to a professional to help you evaluate your needs and circumstances before choosing a home loan product.

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