Home Loan FAQs

Common questions for home buyers

What is a mortgage broker?

A mortgage broker is a professional who will steer you through the process of finding a loan that suits your needs, and then deals with the lender and manages your application process through to approval. They know the lenders and their products, so save you time in choosing a loan that’s right for you.

 

 

 

What is negative gearing?

Negative gearing is when you borrow money to buy an investment property, and the cost of owning that property (interest repayments, rates, repairs etc.) is more than the income received from rent. In other words, you make a loss, which you may be able to claim as a deduction in your tax return.

 

What is off-the-plan?

Off-the-plan is the term used when buying a dwelling, usually an apartment, before it is built.

 

What is a strata title?

Ownership of an individual unit in an apartment or townhouse complex, which also has shared areas, such as a driveway, garden or swimming pool. These shared areas are owned and maintained collectively with the other unit owners.

 

What is a title search?

A title search is needed to show the current owner, the land description and certain restrictions that apply to the land.

 

What is a variable rate?

Interest rates go up or down over the life of the loan depending on the official rate set by the Reserve Bank of Australia and funding costs and the individual decisions of each lender. With a variable loan, your regular repayments may go up or down in line with changes to the interest rate.

 

What is a fixed rate?

With a fixed rate loan, the interest rate payable is fixed for a certain period, usually the first one to five years of the loan. This means your regular repayments stay the same regardless of changes in interest rates.

 

What is a split loan?

With a split loan, one part is variable and the other is fixed. You decide on the proportion of variable and fixed. You enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan.

 

What is an offset account?

An offset account is essentially a savings account that is linked to a loan account. Instead of earning interest on your savings deposit, the funds are used to offset the principal of the loan account. Be aware the account may have higher monthly fees, require a minimum balance or have other restrictions. You should also be aware that there are also offset facilities that are effectively a sub-account of your loan that can be redrawn if certain conditions are satisfied. It is important to consider all of the applicable terms and conditions when selecting an offset account or facility.

 

What is an interest only loan?

With an interest only loan, you repay only the interest on the amount borrowed usually for the first one to five years of the loan. Because you’re not also paying off the principal, your monthly repayments are lower but the cost of the loan is likely to be significantly higher.

 

What is a low doc loan?

A low doc loan is popular with self-employed people, since these loans require less documentation or proof of income than most. However, the interest rate may be higher and a larger deposit may be required.

 

What is a redraw facility?

A redraw facility allows you to make extra repayments on your home loan and then access those funds if needed (subject to the lender’s terms and conditions.)

 

What is a line-of-credit loan?

A line-of-credit loan works the same as a credit card, but generally with a lower interest rate. A line-of-credit allows you to borrow up to a specified amount against the equity in your property, repay that amount and then borrow to the limit again – numerous times. You only pay interest on the amount you use. The interest rate on this type of loan can be higher than for other standard variable home loans.

 

What is a reverse mortgage?

Reverse mortgages allow retirees to borrow money using the equity in their loan as security. Borrowers have the option to draw down a lump sum or regular part-payments but are not required to make any repayments during the term of the loan. Instead, interest accrues and the entire loan, plus interest, is repaid on the death of the retiree, or when the home is sold. There are a number of significant risks that you should consider before selecting this type of loan.

 

What is bridging finance?

Bridging finance is a short-term loan to help cover costs between selling one property and buying another.

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