Frequently Asked Questions
What is Loan Mortgage Insurance?
Whenever you have less than 20% deposit, you will almost always have to pay mortgage insurance or Lenders Mortgage Insurance (LMI). As the name suggests, this insurance is a one-off payment by the borrower to the lender (or lenders’ insurer) to ‘insure’ the loan.
It insures the lender for any short fall 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 different between what your property was sold for, and any loan amount still owing after the sale.
On 100% loans, dependent on the lender and the risk, mortgage insurance can cost up to 3% of the amount you 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 Pack?
A professional package offers you interest rate discounts depending on the loan size. Fee free transaction accounts and credits 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.
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 building, and then become principal and interest once building is completed. A construction loan allows you to draw money as is required while building.
What is a 100% Interest Offset Loan?
You place all your salary and other income into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interst you have to repay, making your money work harder for you.
What is a Reverse Mortgage?
This loan facility is accessed by persons who generally have retired or in the process of retiring, with a limited income position and they wish to utilise the equity in their home to assist in their personal circumstances.
These loans have a variety of repayment methods: Interest Only repayments, partial repayment assistance by family, as well as a no repayments option.
A no repayment option means that the interest on the loan is added back onto the outstanding loan balance (capitalisation) with ultimately the Lender recovering the outstanding loan from the estate.
The loan can generally be drawn down as a lump sum and/or in installments. The majority of lenders also have a no negative equity guarantee.