Depending on the lender, the amount required for a house deposit varies. Many lenders will allow you to borrow up to 95% of the property value if you take out lender’s mortgage insurance. As far as deposits go, the bigger your deposit, the better. It’s painful and not always possible, but saving a larger deposit will save you thousands in the long run.
It’s a good idea to organise the finance for your home loan before your find your dream house. Not only will this give you peace of mind that you are in a position to afford paying for your dream house, you’ll also have an idea of what you can afford to offer a seller if you do fall in love with a property. Remember, a home loan that will work with your lifestyle is as important as how low the home loan rate is. Paying a bargain basement rate will lose its appeal quickly if you have to constantly chase your lender for answers or support.
This sounds obvious, but is easy to overlook. Consider your reason for purchasing the house. Is it an investment property? A house where your children will be raised? The house you will retire in? Your motivation for purchasing a property will greatly influence what you pay and what kind of property you will buy.
Government grants are designed to help those moving into the property market for the first time. The grants vary from state to state; particularly in relation to eligibility and grant values. Read more about First Home Owner grants in each of Australia’s states and territories here.
Establishment fees usually refer to the fees associated with setting your home loan with the financial institution you’ve chosen to help you finance your home. It can often include the application fee (the cost to process your application) and the legal fees associated with transferring the title of the property into your name and checking for any secured interest over the property.
Many financial institutions charge a switching fee when you move from one home loan product to another; particularly when you are moving from or to a fixed home loan. The charge usually covers any time or paperwork associated with the change.
The number of fees payable vary from lender to lender. The most common ones are valuation fees, legal fees, application fees and administration fees. The value of these fees also vary between lenders but generally legal fees are around $250 - $300; with application and property valuation fees varying from state to state.
A split loan is when you allocate a portion of your home loan to a fixed home loan, with the other half of your home loan on a variable home loan. Splitting your loan can provide you with flexibility and peace of mind at the same time.
LMI stands for Lenders Mortgage Insurance. LMI is usually payable when you need to borrow above the lender’s percentage of allowable borrowed funds. For example, if you want to borrow 95% of the property value with The Mac, you will be required to pay LMI on any funds above 80% of the purchase value. It’s essentially an insurance policy on your ability to repay your loan.
LVR stands for Loan to Valuation Ratio. Basically the LVR represents the value of the property you wish to buy compared to the total amount of funds you want to borrow. It takes into account any money you have saved for a deposit and if it’s too high, you will likely be required to pay LMI.
Loan redraw is a facility that many lenders offer as an additional option on your home loan. Many lenders charge you for funds drawn from your redraw but not all do, so it’s worth looking further into any home loan products you’re interested in. Redraw funds are any funds that you’ve paid above your minimum loan repayment.
A break cost fee is a fee lenders charge on fixed home loan products when you ‘break’ the fixed term of your loan. The charge usually takes into account the time taken to process the change to your loan and any interest lost by paying out your loan early.
Loan security refers to an asset that will be held by your lender in the event that you’re unable to repay your home loan. It can also refer to the equity another person contributes to your home loan if they are acting as a guarantor for your home loan.
Stamp duty is a tax payable to state governments in the event of a property or land sale (otherwise known as a transfer). The amount payable changes with the nature of the sale and varies from state to state. You can try our Stamp Duty Calculator and see how much you’ll be expected to pay when you purchase your next home.