Frequently Asked Questions
Have a question? Below is a list of answers to the questions most commonly asked by our clients and past visitors to our site.
Simply click on a question below to see the answer.
If you have a question that is not answered below, please submit your question or enquiry and we will get back to you.
- What costs are involved when purchasing a property?
- How much money can I borrow?
- What affects my borrowing capacity?
- How can I improve my chances of obtaining finance?
- I am self-employed and have not prepared my tax returns. Am I still eligible for a home loan?
- I have credit impairment. Am I still eligible for a home loan?
- What are some ways to reduce a mortgage quicker than 30 years?
- Why would I take out an interest only loan?
- How often can I make mortgage payments?
- How much do I need to save for a deposit?
- What is the First Home Owner Grant?
- How do I know if I am eligible for a First Home Owner Grant?
- What is lenders mortgage insurance?
- What documentation will I need to supply for a home loan application?
- What is your Complaints Procedure?
Q: What costs are involved when purchasing a property?
A: As a rough guide, it is recommended that you budget 5 – 7% of the purchase price to cover fees and charges. These fees and charges may include (but are not limited to):
- Stamp duty.
- Transfer of land.
- Building/pest inspection.
- Valuation fees.
- Lender’s mortgage insurance (LMI).
- Solicitor fees.
- Insurances.
- Connection fees – phone/gas/electricity.
- Rates.
- Removal fees.
Q: How much money can I borrow?
A: The amount you can borrow, commonly known as your borrowing capacity, will differ from lender to lender. You should contact us to get a complete individual assessment of your situation.
Q: What affects my borrowing capacity?
A: Your borrowing capacity will be affected by how many dependent children you have, your current income and your total current debt commitments. These variables play a major part in how much a lender will lend you. Mind you, there is a large range with borrowing capacity between lenders.
Q: How can I improve my chances of obtaining finance?
A: To improve your chances of obtaining finance through a mainstream lender, reduce the number of credit cards or card limits you have. Lenders look at your maximum limit, not what you owe – the bigger the limits the less you can borrow.
Secondly, review your credit history. If you are suspicious of any defaults or mistakes, you can order your own credit file for free. Access our range of helpful credit links for more information.
Finally, if you have fallen behind in repaying existing debts, make sure you pay the arrears immediately.
Q: I am self-employed and have not prepared my tax returns, am I still eligible for a home loan?
A: Self employed people have access to ‘low-document’ loans where you do not need to provide your lender as many documents to prove your income, assets and liabilities.
Q: I have credit impairment. Am I still eligible for a home loan?
A: People with poor credit histories now have access to non-conforming loans. They begin with slightly higher interest rates yet with a good repayment record you can move on to a conforming or regular loan, with a lower interest rate.
Q: What are some ways to reduce a mortgage quicker than 30 years?
A: There are a number of ways to do this such as:
- Pay more frequently than monthly – with fortnightly repayments you will actually be making one additional repayment a year. However, for this to be effective it is important that you ask your lender to halve your monthly repayments rather than recalculating them.
- Make extra repayments above the minimum – even $80 a month on a $200,000 loan at 7.32% will save you 3 years and 3 months off your loan term.
- Extra money like inheritance, a good tax return, a bonus from work should be credited into your home loan. If you have a redraw facility you still have access to this extra repayment when needed.
- Make your first repayment at settlement.
- Consider a 100% offset feature.
- Salary crediting: you can use a credit card with a good interest free period to pay for your regular living expenses and at the end of the month have the card ‘swiped’ (or paid off) against the home loan.
- If interest rates fall ask your lender to leave your repayments as is.
- Do a regular stocktake on your home loan. A loan may start off as good but have its competitiveness eroded by increased fees or rates, or by the introduction of better priced products on the market.
- Interest repayments on an owner occupied home loan are non tax-deductible, which means it makes good sense to give priority to paying off your home loan quickly instead of directing funds towards paying off investment loans or having them sit in low interest-bearing deposit accounts (where any interest received will also be taxed).
Q: Why would I take out an interest only loan?
A: This is a loan used mainly by property investors. It allows the borrower to pay only interest for an agreed period instead of principal and interest (i.e. the principal balance remains the same during the interest only period). This maximizes the investor’s tax deductions whilst also freeing up cash flow for other investing opportunities.
Q: How often can I make mortgage payments?
A: Most lenders these days offer flexible regular repayment plans. You can choose to pay weekly, fortnightly or monthly. Your repayments can therefore be matched to your pay cycle.
Q: How much do I need to save for a deposit?
A: The deposit required depends largely on the type of the home loan and, of course, the lender you select. As a general rule, you will require a total of 5 – 7% of the purchase price as a deposit.
Q: What is the First Home Owner Grant?
A: The First Home Owner Grant is a lump sum benefit provided to first home owners. You may be eligible for the ‘First Home Owner’s Grant’ – a one off payment when you buy or build a home.
Find out more about the First Home Owner Grant for eligibility criteria and to download the application form.
In addition, you may also be eligible for the Victorian State Government’s ‘First Home Bonus’.
Find out more about the First Home Bonus scheme.
Q: How do I know if I am eligible for the First Home Owner Grant?
A: As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia, with the intention of occupying it as your principal place of residence within 12 months of the settlement. It is important to note that if you are buying the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.
Q: What is Lender’s Mortgage Insurance?
A: Lender’s Mortgage Insurance (LMI) covers your lender in the event of you defaulting on your loan. You are not protected by LMI.
If your property is subsequently sold and the amount from the sale is not enough to pay off the loan in full, this insurance will cover the lender for the shortfall. However, you will then be liable to pay for the shortfall to the mortgage insurer.
LMI is obtained by your lender. This insurance should not be confused with Mortgage Protection Insurance which covers your mortgage instalment in the event of such things as death, disablement, unemployment etc.
LMI premiums are a once only fee payable by the borrower at loan settlement when the amount borrowed is above a certain percentage, usually 80%, of the lender’s valuation of the property, or for low doc loans usually more than 60% of the property’s value. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front.
Q: What documentation will I need to supply for a home loan application?
A: Each lender is slightly different, but this checklist is pretty much what you will need to have ready when you are applying for most standard home loans.
We will be able to provide an accurate overview of what is required for your individual situation.
Q: What is your Complaints Procedure?
A: If you have a complaint about a credit related product or service that has been provided to you, the Credit Ombudsman Service can help. Should you have a dispute with us then we will work with you to resolve the matter. If an agreement cannot be reached, you can refer the matter to COSL who can resolve the issue at no cost to you. Refer also to our full Complaint Policy.
