Your Resource Centre
This page is designed to assist you in finding answers to all your questions you may have about home loans. If you are unable to find your answer, please reach out to us and we will be more than happy to assist you.
What is an offset account?
An offset account is the same as a normal transactional/savings account except it is linked with your mortgage. The balance of this account reduces the amount of interest you pay on your mortgage. For example, If you have a mortgage of $500,000 and a balance of $50,000 in your offset account you will only pay interest on $450,000 of the mortgage. This means you will reduce the amount of time it will take to pay off your loan as the offset account reduces the amount of interest you have to pay over the duration of the mortgage.
Do I need an offset account?
You do not ‘need’ an offset account however it is recommended if the benefits outweigh the costs. For example, if an offset account costs you $300 per year, however you are saving $350 per year in interest, the benefit is $50 per year. If you plan on having a fair bit of savings, then an offset account would be recommended as you will reduce the amount of interest paid. Whereas, if you don’t have much savings, you may be better off getting a loan without an offset account because fees could be lower (or no fee at all) and the interest rate could also be lower.
Where do I start the home buying process?
The first steps of the home buying process is to establish your objectives; Do you want to build/buy an existing property? Do you want to buy an investment property? What is your budget? Where do you want to purchase? etc. The next step is to assess your options; You can do this by talking to a mortgage broker. A mortgage broker will give you an idea on how much you can borrow for a mortgage, how much your deposit will be, interest rates, repayments and more important information. Applying for a loan through a mortgage broker can really help simplify the home buying process and is a great guide to buying a home. After you know what your options are, you can then step into the market and start looking for the home that’s perfect for you!
APPLICANT: A person or entity who is applying to be a party to the loan.
ARREARS: Your loan repayment that is past due, meaning it is now overdue.
ASSETS: Everything that a person or entity owns, regarded as having value. Net assets is the value of what you own minus any liabilities. Liquid assets is something you own which can be quickly converted to cash. ie Shares or Managed Funds.
AUCTION: A process where a property is sold to the highest bidder. Remember, if you buy under auction conditions, you are unable to include clauses such as ‘Subject to Finance’ or ‘Subject to building and pest inspection’. Noting the sale deemed ‘Unconditional’ once contracts are signed.
BODY CORPORATE: A legal entity when land is subdivided to create common property and residential lots. Every owner of a lot is automatically a member of the body corporate with fee’s payable for the management and upkeep of common areas.
BREAK COSTS: Charged by lenders when you pay off your loan entirely or break out of a fixed term contract.
BUILDING INSPECTION: A purchaser can engage a specialist building inspection service to thoroughly inspect the building to see if it may have any defects prior to proceeding with their purchase.
CERTIFICATE OF CURRENCY : Is an insurance document provided by your insurer stating your lender as an interested party. This shows your lender that you’ve taken out sufficient insurance to cover the replacement of your asset. This is required prior to settlement.
COOLING OFF PERIOD: This is a period of time, which may vary between 24 hours and 14 days from the time a contract is signed. You may decide to proceed or not to proceed with your contract, within the designated time frame. This can vary from state to state.
COMMON AREA: A term generally referencing Strata titled properties these are areas for common use by all tenants and owners. These areas are typically stairwells, driveways and common access areas. They may on occasion include gardens or recreation areas.
CONVEYANCER: Is the legal process for the transfer of ownership of real estate.
DEPOSIT: Is the initial amount of money placed as your intention to purchase. Generally this is 10% of the purchase price, although can be negotiated.
DISBURSMENTS: Are the incidental costs incurred by a solicitor / conveyancer when acting for a client, ie. title office searches, certificates, past records.
DRAWDOWN: Is a transfer of money from a lender to the borrower before or after the loan has settled.
EXTRA REPAYMENTS: If this feature is available on your home loan, you are able to make extra repayments that will reduce your interest.
EQUITY: Is your financial interest in a property ie. your equity in your house is the difference between its value and the amount you owe on the house.
ESTABLISHMENT FEE: The fee that is charged when applying for a new home loan.
FHOG: An abbreviated term for ‘First Home Owners Grant’.
FINANCE CLAUSE: When a purchase is made and you do not have your finances in order, you can make your contract ‘Subject to Finance’. Most people use this clause regardless if finances are in order or not. This is typically for 14 days and allows you time to obtain unconditional finance approval. If finance is refused you are entitled to end the contract without penalty and any deposit paid must be returned to you.
FIXTURES: Items that would cause damage to a property if they are removed. If a seller wishes to remove fixtures this must be stated in the contract of sale and damage made good by the seller.
FIXED RATE: A Fixed rate loan is for a (fixed period) designated time frame.
FUNDS TO COMPLETE: Also known as a shortfall, they are funds required at settlement to complete your purchase. This does not make up a part of your loan.
GENUINE SAVINGS: Your savings that will be looked at by the lending assessor to ensure you can show at least 5% continuous savings.
GIFT: Gifted funds can be passed to you by your parents. This can make up some of your possible shortfall. Gifted funds are non-repayable by the applicant.
GUARANTOR: Is someone who agrees to be responsible for the payment of the loan if the borrower defaults or is unable to pay.
HONEYMOON PERIOD: The honeymoon period is the first year of a loan when the home loan interest rate is reduced.
INTEREST ONLY REPAYMENTS: Covers the only the interest owing on the loan, so none of the principal will be paid off. You can only request interest only repayments for a set period, typically up to 5 years. At the end of this term the loan will automatically switch to principal and interest repayments for the remainder of the loan, and these repayments will be higher.
LMI: Lenders Mortgage Insurance. Is an insurance charged by the lender when a certain LVR (see below) is to be exceeded. It’s a one off payment made by you the borrower at the time of settlement. Typically you can expect to pay this if you borrow more than 80% of your home’s value.
LVR: Loan to Value Ratio. Is the amount of your loan compared to the value of your property.This is calculated by dividing the amount of the loan by the value of the property and expressed as a percentage.
MORTGAGE: Is a legal document between the borrower and lender. This is security for the loan taken over an asset, typically another property.
MORTGAGEE: The lender of funds to the borrower to purchase the property.
MORTGAGOR: The borrower of funds to purchase the property.
OFFSET: An account linked to your home loan, whereby interest calculation is made after first deducting any amount in the offset account. This enables you to reduce the amount of interest charged on your home loan (the greater the amount in your offset, the less interest you will pay.
PRINCIPAL: is the amount borrowed from the bank.
PRINCIPAL AND INTEREST: Principle and interest (P & I) is a repayment type where you pay off the interest accrued while also repaying part of the principal amount at the same time. Note P & I repayments will be higher than interest only repayments.
REDRAW: Allows you to access excess funds that you have paid off your home loan for any purpose at any time. Note there could be fees involved.
SECURITY: Is the property the lender can claim if a borrower defaults on their loan.
SERVICEABILITY: Is your capacity to meet your repayments on your home loan. This is based on your income and expenses.
STAMP DUTY: A state government tax that is levied against sales of property and transfers of land. It can have a significant impact on your home buying budget and varies according to the purchase price.
TITLE SEARCH: A search of registered records from the land titles office. It details property owners, mortgage details, restrictions on the land and other relevant information.
UNENCUMBERED: A property or asset that is free of any borrowings. Also known as a clear title.
VALUATION: A report completed by a registered valuer that identifies specifications of your property and compares it to sales data of similar properties, sold within a similar location in recent months.
VARIABLE: Variable interest is where an interest rate can vary depending on your lender and the current market. This can change a any time.
VENDOR: The vendor is the owner offering a property for sale.