Frequently Asked Questions

LVR, or Loan to Valuation Ratio, is a percentage that compares the loan amount to the property’s value. For instance, if you borrow $540,000 and the property is valued at $600,000, the LVR would be 90%.

When taking out a loan, it's crucial to have sufficient funds for additional costs such as stamp duty, registration, insurance, and legal fees. Generally, you should aim to have 5-10% of the property’s value set aside to cover these expenses. If you have access to unused credit or personal loan facilities, you might be able to manage with less than 5% in savings.

To get an accurate estimate based on your specific circumstances, consult with our experts today.

For a Purchase: You can typically borrow up to 95% of either the purchase price or the property's valuation, whichever is lower. Some lenders may include mortgage insurance on top of this 95% limit.

For a Refinance: You can usually borrow up to 90% of the property's valuation. Mortgage insurance might be added to this 90% depending on the lender’s policy.

A pre-approval provides a preliminary confirmation that you can afford a loan based on your current financial situation. However, it comes with conditions, such as verifying income and acceptable security. It’s important to note that a pre-approval is not a binding commitment from the lender and is typically issued before you select a property or receive formal approval.

Be cautious of lenders who offer instant pre-approvals—often generated by automated systems that don’t verify your details. At Home Loans Fast, we ensure that our pre-approvals are reviewed by a credit assessor to prevent any unexpected issues when you’re ready to make a purchase.

Typically, Money Source Pty Ltd can provide pre-approval within 24 hours once your application is submitted. However, processing times may vary depending on the bank, especially if there’s a high volume of applications due to a current promotion, which might extend the timeframe slightly.

A pre-approval typically remains valid for three months from the date it's issued. Some lenders offer extended pre-approval periods of up to 180 days. If your pre-approval is nearing expiration, you can easily renew it by providing updated financial information and confirming that there have been no significant changes to your circumstances.

Lenders Mortgage Insurance (LMI) protects the lender if a borrower defaults on their loan. Should the property be sold and the sale proceeds fall short of covering the full loan amount, LMI compensates the lender for the difference. While LMI is typically provided by external insurance companies, some large lenders offer their own in-house insurance.

Stamp Duty is a tax imposed by state governments on property purchases or transfers. It is calculated based on the property's purchase price and is the responsibility of the buyer. Rates vary across different States and Territories.

The Comparison Rate is designed to give you a clearer picture of the total costs associated with a loan, making it easier to compare different mortgage options. It combines the interest rate with various standard fees into a single percentage rate.

Regulated by the Consumer Credit Code, the Comparison Rate calculation formula is standardized across all Australian financial institutions and mortgage providers. This helps prevent confusion by showing the true cost of a loan, including any additional fees that might offset a seemingly low interest rate.

Fixed Rate Home Loan offers predictable repayments by locking in a set interest rate for a specified period. Once this fixed term ends, the loan typically switches to a variable rate.

In contrast, a Variable Rate Home Loan has an interest rate that can fluctuate with market conditions, causing your repayments to vary accordingly.

Choosing a fixed rate can provide stability and assist with budgeting, as it guarantees consistent repayments throughout the fixed period. However, attempting to break out of a fixed-rate loan early can result in substantial penalties, so it’s important to consider this if you’re not aiming to "beat the market."

Most home loans are structured over a 30-year term. With a Principal and Interest (P&I) repayment, both the principal and interest are paid off together throughout the loan's duration. In contrast, an Interest-Only (I/O) loan allows you to pay just the interest for a specified period.

For tax benefits, I/O repayments are often preferred for investment loans, while P&I is commonly used for owner-occupied properties. However, both repayment options are available for either type of loan. If you choose an I/O term of 5 years, your P&I repayments will be higher starting in the 6th year compared to if you had chosen P&I from the beginning, as you will then have only 25 years left to repay the principal.

Yes, variable rate loans typically incur only an approximate discharge fee of $350. In contrast, if you repay a fixed rate loan before the end of the fixed period, you may face a break cost. This fee, which can be substantial, depends on the bank's economic position related to its hedging on the money market and cannot be predicted in advance. It’s not unusual for this cost to reach thousands of dollars, depending on the loan amount, the remaining fixed term, and current variable rates.

An offset account is a linked transaction account that reduces the amount of interest you pay on your home loan. The balance in this account is deducted from your loan principal when calculating interest. Although your monthly repayment remains the same, an offset account shifts more of your payment toward the loan principal rather than interest.

For example, assuming you have a loan size of $200,000. If your monthly repayment is $2,500, and without an offset account, $1,800 would go toward interest and $700 toward the principal. If you have $10,000 in your offset account, interest is calculated only on $190,000 instead of $200,000. As a result, your interest charge reduces, and more of your $2,500 repayment goes toward the principal—$1,600 toward interest and $900 toward the principal in this case.

If you withdraw the $10,000 from your offset account, the interest savings will be lost. Banks typically charge a fee for an offset account, which can range from $10 per month to $395 annually. This feature is most beneficial for larger loans and those with extra income to maintain a significant offset balance.

A redraw facility enables you to access any extra payments you've made on your home loan. For instance, if your annual minimum repayment is $24,000 but you pay $30,000, you’ll have $6,000 available to withdraw whenever needed.

Both redraw facilities and offset accounts can be valuable tools for managing your mortgage effectively and potentially paying it off sooner, provided they are used strategically.

Equity refers to the portion of your home’s value that you truly own, separate from the debt owed to your lender. It represents how much you’d have left after selling the house and settling your mortgage. For example, if your home is valued at $850,000 and you owe $250,000 on your loan, your equity is $600,000. Should the market increase your home's value to $900,000, your equity rises to $650,000 while the loan amount remains unchanged. Essentially, your equity combined with your debt equals the total value of your home.