Common questions about Home Loans
Common questions about Refinancing
Common questions about Investment Loans
Common questions about Home Loans
The amount you can borrow is most commonly known as your borrowing capacity. Your borrowing capacity will differ from lender to lender. To establish your borrowing capacity, call us to arrange an interview for an assessment of your situation.
The First Home Owner Grant scheme provides a grant to first homeowners. It is a one-off payment to assist eligible first home owners with purchase or construction costs. In Queensland the grant is $15,000.00 for new homes.
As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying a new home or building your first home in Australia, with the intention of occupying it as your principle 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.
Generally, if you are an owner-occupier you will require 5% of the purchase price as a deposit. If you are an investor, you will require on average 5-10% of the purchase price. The deposit required depends largely on the type of home loan and the lender you select.
As a rough guide, it is recommended that you budget 5% of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include (but are not limited to):
- Building/pest inspection
- Valuation fees
- Lenders mortgage insurance (LMI)
- Solicitor fees
- Connection fees – phone/gas/electricity
- Moving costs
Lenders Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. It protects the lender from any losses resulting in the sale of a property due to default by the borrower. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80%, of the lender's valuation of the property. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front (from your savings).
In conjunction with submitting your home loan application, you may need supporting documentation confirming your identity and substantiating your income. Documents can include:
- Proof of Identity (i.e.: Driver’s licence, Passport)
- Two most recent pay slips.
- Latest tax returns and/or group certificates.
- Confirmation of any Centrelink monies received.
- Self-employed: 2 years company and personal tax returns.
- Current bank statements, credit/store cards statements, statements on any other loans.
- Copy of the Contract of Sale.
Cooee Home Loans does not generally charge a fee for service, as we receive payment from the bank / lender.
Pre-approved finance is when you apply through Cooee Home Loans to a lender to obtain their approval to purchase a property.
A pre-approval is generally valid for 3 months. Having a pre-approval could be the difference between getting your offer on a home accepted or not accepted.
Should you go with a fixed or a variable rate?
Normally the fixed rate is higher on a 4-5 year option than some of the low variable rates available, but it remains unchanged for the term of the fixed rate that your lender has set, so your budget won’t be affected. This is what attracts some people to a fixed rate.
But Fixed rate loans are considerably less flexible than a variable rate option.
Variable interest rate loans have more features that allow you more flexibility. For example; you can make lump sum payments or pay out early without a costly penalty. You can also utilise the handy redraw facility on your loan, which can reduce your loan significantly if used correctly.
The main disadvantage of a variable rate loan is that you have to adjust your budget whenever there is a rate movement.
There are a couple different options you can also consider…
Option 1: Each Way Bet!
For peace of mind and to help you budget for the future; consider splitting your loan now; say half on a fixed rate and the other half remaining on the variable rate, this could give you flexibility with peace of mind just in case rates do head North.
Option 2: Make Believe Fixed
Choose a variable rate and then set your payments as though you were on the fixed rate being offered or higher.
This enables you to be paying your loan off quicker and save a heap of money in interest before any future rate rises and if rates don't rise you will be miles in front.
Common questions about Refinancing
Refinancing lets you change your home loan to suit your new circumstances.
When you take out a new loan, you use some or all of the funds to pay out your existing home loan. The new loan often comes from a different lender, but many people refinance with the lender they've been using for years. If you move to a new lender, that lender will take care of paying out your existing loan.
By refinancing, you can use your mortgage for home improvements, buying a new car or paying off larger credit card balances. Home loan refinancing may be used for different reasons including:
- Renovating your home.
- Obtaining a cheaper rate, even if it means giving up a few loan features.
- Paying off your debts quicker and cheaper by rolling them into your home loan.
- You want to switch from a fixed rate to a variable rate, perhaps because you can accept the risk of higher repayments.
- To raise cash for a purchase.
Refinancing is a smart way to manage your money. When you refinance to a lower interest rate, you can significantly reduce your monthly mortgage payments as long as you don't increase your mortgage principal amount.
Refinance Mortgage and debt consolidation home loan
How do you know if it’s time to refinance your mortgage or consolidate your loans? Let me ask you another question. When is it a good time to put money back in your pocket? EVERY YEAR you should take a home loan health check to find out if the mortgage you have is still saving you money. A lot can happen in a year, life circumstances can change, you may have taken on extra debts and rates may have moved, so you owe it to yourself and your cash flow to check your home loan and debt situation every year.
Let me give you an example
Many clients who come to Cooee Home Loans are currently in this type of situation;
|Loan Type||Loan Amount||Current Interest Rate||Approx. Monthly
|Home Loan / Mortgage||$300,000||4.8%||$1574|
|Total Debt||$326,000||Total Repayments||$2195|
If this mortgage and loans were to be consolidated and refinanced to a lower rate (say: 4.5% variable), the repayments could be reduced down to around $1,652 freeing up a massive $543 per month!
Please note; this loan would now be set over a term of 30 years, however for people who are struggling with repayments this could be a great option.
Alternatively you could also consolidate your mortgage and refinance to a better rate and keep your payments as they were and your total debt would be paid off in full in just 11 years. That’s right, house mortgage and every other debt paid off.*
*Please note; these calculations may vary depending on interest rates charged and should be used an example only.
Common questions about investment loans
There are few differences between what you need to do to borrow for a property you'll live in and for one you'll rent out. Most lenders charge a higher interest rate for investment property loans.
If you have owned your own home for a few years, you may have built up quite a bit of equity in your property (Equity: difference in the current value of your property against current outstanding home loan balance). Instead of finding a cash deposit to buy an investment property, you can borrow against the equity in your home. When you buy a property, costs such as Bank fees, solicitor fees and Government fees (i.e. stamp duty) add up to thousands of dollars. Instead of trying to find cash to pay these fees, take them into account in your borrowings.
Investment properties have many benefits when building long-term wealth. If you take the time and select your investment properties well – for example, to meet the demands and lifestyle expectations of the changing demographic – property can deliver good returns for long-term investors.
The amount you can borrow is commonly known as your borrowing capacity. Your borrowing capacity will differ from lender to lender. To establish your borrowing capacity, call us to arrange an interview for an assessment of your situation.