FAQ

The Top 10 Property Loan FAQ

Frequently Asked questions

Can I pay out my loan early?

The simple answer is yes!

The longer answer is that yes, you can, but you might have penalty fees for early payout of your loan. Don’t think of refinancing until you’ve spoken to us about the terms and conditions of your current loan and the implication of early payout.

Why do I have to pay stamp duty – and can I get around it?

Stamp duty is a Government fee for processing the sale of your home. The paperwork is registered and “stamped” at the Land’s Titles Office and they charge you for the privilege.

To be fair, the reason for doing this is so that we can Indefeasibility of Title. This essentially means that, if you buy a property you can be guaranteed that no-one else will challenge you over the ownership of the property.
Not something we like paying for but an essential part of the Australian property system.

How do I access the equity in my home?

If you’ve owned your home for a while, it’s quite likely that it has increased in value since you’ve bought it. It is possible to access some of that increased value in the form of a loan increase or new loan.

If you’re focussed on building wealth for the future, the clever way to use your available equity is to look at an investment property. That way, you’ll have two (or more) properties going up in value and adding to your wealth. What’s not to love about that!

How can I minimise the deposit I need to pay?

It’s possible to pay less than 20% deposit if you don’t have that saved up.

The general rule of thumb is that you need a 20% deposit to avoid Lenders Mortgage Insurance (LMI). 

If, however, there is a shortfall, you are still liable to make up any shortfall. The LMI amount varies depending on the size of the loan and how much over 80% you are looking to borrow. If you’re only looking to borrow say, 82% on a $400,000 loan the LMI fee might only be a few thousand dollars – which can be added to your loan.

Some people say to avoid LMI at all costs but, if you’re sensible, you can increase your borrowing capacity by using LMI as a tool.
We can advise in more detail once we begin to analyse your situation.

What is Lender’s Mortgage Insurance?

LMI is an insurance that covers the lender against you defaulting on the loan. If, for some reason, you stop paying back your loan, the bank can step in and sell the property to retrieve the money they lent you. If there is anything leftover, you will get the balance.

How much is the mortgage registration fee?

Banks often have an internal fee for setting up and registering mortgages. They often waive this fee for new clients as a tool to win new business so be sure to check this out.

Normally the fee can range from zero to a few hundred dollars so not a deal breaker when it comes to buying a new property.

How long do pre-approvals last for?

Usually 6 months but it can vary so be sure you’ve still got a valid approval before going to bid at an auction!

The changes in property prices this decade means that any pre-approval is probably outdated within a few months of it being issued anyway so be sure to contact us for an update regularly.

What documents do I need to gather to apply for a loan?

The list of documents varies by lender but, normally, you’ll need to provide:
⦁ Proof of Identity (Driver’s License, Passport, etc)
⦁ Proof of income
⦁ Among other things
It can be a pain to gather these documents but we use electronic document gathering to make it easy for you.

How is Loan to Valuation Ratio Calculated?

The Loan to Valuation Ratio (LVR) is simply the amount of the loan divided by the value of the property.

For example:
Loan amount: $360,000
Property Value: $400,000

Banks want the LVR to be no more than 80%.

Remember though, fees and charges have to be included in the calculations as well. As a rough rule of thumb you should add about 6% of fees to the amount to be borrowed which can throw some people’s calculations out!

Should I get an offset or redraw facility?

There are pros and cons with offset accounts and redraw facilities. The best way to find out more about the options here is to let us shout you a coffee and go through it with you.

I don’t have 20% deposit. What else can I use for my home loan deposit?

Firstly, the 20% deposit is not a golden rule. You can pay either more deposit (greater than 20%) or less deposit.

However, if the lender is insisting that you increase the deposit that you have, you can always look in the following places for additional deposit.

  • Selling other assets
  • Getting equity in your parent’s home
  • Gifted Funds
  • Lender’s Mortgage Insurance

Talk to one of our brokers to find out your options.

Next steps:

We love answering questions about property. Give us a call with your question and go in the running for a monthly $100 gift voucher to one of Adelaide’s top restaurants if your question makes it on to this page.