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Mortgages Facts

LVR: Is the loan to value ratio of the loan against the value of your property. For example if you have a $400,000 property when they say you can borrow a maximum LVR of 80% means that you can borrow $320,000.

Mortgage Insurance (LMI): Mortgage insurance is payable when you do not have a 20% deposit and is made to protect the bank and not you personally in the unfortunate event that you can not make repayments and the house is repossessed for sale. If there is a short fall between the sale of the house and the loan the insurer will pay the difference to the bank. GE and PMI are the main mortgage insurance companies in Australia and when the LVR is over 80% the amount of LMI payable increments substantially.

100% Home loans: Some banks will lend 100% of what the property you wish to purchase is worth, but you still have to have enough funds to cover costs like solicitors fees, mortgage insurance, stamp duties etc..

FHOG (First Home Owners Grant). The government will provide eligible applicants a $14,000 deposit that can be used for expenses or as part of the deposit for established dwellings and $21,000 for newly constructed properties.

Variable Home loan: Variable home loan rates fluctuate with the market and can go up or down. They are usually the most flexible type of loan.

Fixed rate Home loans: The rate is fixed for a pre determined time that can vary from 1 to 10 years. These rates will not fluctuate with the market. They are usually less flexible and can restrict you from redrawing money or making extra repayments. They also can have exit fees associated if you wish to terminate the loan early usually will depend on what the rate has done since you fixed it. Once the fixed rate period has expired you can role it into a new fixed period or any other products that the bank has to offer at the time of application.

Equity:The difference between what your property is worth and the loan that exists over the property is the equity,

Unconditional Finance Date: The date in which the finance clause expires on the contract of sale, by this date you must have a letter from your lender or proof that finance has been approved with no conditions to be satisfied.

Settlement date:The date in which the lender funds the purchase, the seller receives the money from the bank on your behalf and the buyer receives the keys to their new property.