Find answers to some of the most common questions from our members
A split loan is a home loan that offers a loan to be split over a variety of product types, including variable, fixed and line of credit products. You can define which amount of your loan is split into each product type.
This is professional who is legally qualified to assist in preparing all of the legal documents that are part of any real estate transaction. They will act for you and with you when it comes time to purchase, sell or transfer property. They can also be known as a Settlement Agent.
A valuation is the assessment of the property value as determined by the lender or external valuer, often based on the property purchase price.
Stamp Duty is a tax each state or territory government charges on the sale of your property. Stamp Duty is designed to offset the costs of the legal documents for the purchase transaction and varies depending on which state or territory you purchase in.
The settlement is the final step when buying a home. Settlement is the date the property ownership is legally transferred from the seller to the buyer. At settlement, often known as closing, all parties involved in the loan transaction sign the necessary legal documents, then they are lodged and funds transferred to your new loan account, this is when your mortgage loan responsibilities start.
Property share means you co-own a property with family or friends, while retaining control over your own mortgage.
A pre-approval is a conditional approval for a loan. Obtaining a pre-approval before looking for a property means getting most of the paperwork for a home loan out of the way, so you know your price range and are ready to proceed when you find the right home for you.
A redraw facility allows you to access extra repayments you have made on your loan. Your extra repayments are funds paid into the loan above your contracted minimum repayment. Availability of redraw facilities and redraw limits differ across product types.
Property Value, often called valuation, is the assessment of the value of your property as determined by the lender or external valuer.
As opposed to fixed interest rate, a variable interest rate changes when the market interest rate changes. This means your repayments will also vary.
The cost of LMI generally depends on the borrower's LVR (Loan to Value Ratio) and amount of money they need to borrow. The cost can vary depending on the lender. For more information on LMI when taking out a Home Loan at People’s Choice please speak to one of our Home Loan Advisers or call 13 11 82.
LMI is a once-off payment made by the borrower at the time of loan settlement, which protects the lender should the borrower no longer be able to meet their loan repayments.
Lenders' Mortgage Insurance (LMI) is an insurance that protects the lender in the event of default by the borrower.
LMI may be required if the borrower doesn't have a minimum of 20% deposit to take out a home hoan.
To avoid Lenders’ Mortgage Insurance it is generally recommended the borrower keep their LVR (Loan to Value Ratio) below >80% plus any fees (conveyancer, stamp duty, building inspection, etc). If the borrower has a deposit of 20% or more of the property value, then they may not be required to pay LMI. For more information on whether you’ll need LMI please speak to one of our Home Loan Advisers or call 13 11 82.
A loan in which, for a set term, the borrower is required to pay only the interest on the principal balance.
A loan that is subject to principal and interest repayments from the commencement to the conclusion of the loan term.
Means that you can make additional repayments above the contracted repayment amount. These can be adhoc, regular, large or small additional payments. Extra Repayments assist in repaying your loan back faster and saves on interest.
The Loan Offset account is a transaction account that is linked to a variable home loan. The balance of the offset account effectively offsets the balance of the home loan, helping you to pay the loan off faster.
An owner occupied home loan is a loan for personal purposes, available to home buyers who intend to live in the property the loan is taken out for. Owner occupancy applies to loans where the borrower is buying an existing home, building a new home or renovating and improving an established property they live in.
The deposit is a portion of the price of a property that you need to pay upfront when exchanging the purchase contracts. Ideally you should have at least 20% of the property price saved up for a deposit when applying for a home loan, otherwise you might have to pay Lender’s Mortgage Insurance (refer definition for LMI) on top of your loan.
Credit rating is an assessment of your credit-worthiness. The credit rating is used to determine the risk you present to a lender, based on your borrowing and repayment history.
The establishment fee, often referred to as ‘Application Fee’ or ‘Up Front Fee’, are the fees a lender might charge to cover their internal costs of processing your loan application.
The equity of your property is the market value of the property less the outstanding loan amount. This means the value of your home equity increases as you pay off your mortgage.
A comparison rate combines the interest rate and any fees and charges that relate to a loan into a single percentage, based on repayment frequency and terms of the loan. This way the comparison rate helps you understand the true cost of a loan and allows you to compare loans between lenders more easily.
Some loans have annual fees to cover costs or additional services available on the loan. Annual fees are generally charged on the date of disbursement and then annually on this anniversary date. The value of the annual fee and the charge date are outlined in the loan conditions and your contract.
An additional payment is any extra repayment you contribute to your loan above the minimum loan repayments. Some loan products (in particular fixed) may have limitations on the amount of extra repayments you are able to make. Ensure you check the terms and conditions of your product to confirm how much you can pay into your loan each year.
Next to your income and credit history, lenders determine the amount you can borrow by looking at your assets. Assets are the valuables you own, such as your savings accounts, any cars, existing home contents, your superannuation, investment shares and such.
Application fees are the charges you may have to pay to the lender to cover their internal costs of processing your loan application. This fee may also be referred to as an ‘Establishment Fee’ or ‘Up Front Fee’.
When you don’t have enough money saved up for a deposit, your family can act as a guarantor if they hold equity in their own property. The family guarantee can only cover the deposit and related fees and charges involved in the purchase of your home.
The loan term is the duration of your loan. Most loan products offer terms of up to 30 years. People’s Choice Credit Union offers loan terms of up to 40 years for eligible first home buyers.
Lender’s Mortgage Insurance (known as LMI) is an insurance that protects the lender in the event of default by the borrower. LMI is a one-off payment that usually occurs when more than 80% of the property value is borrowed by a home buyer. You can pay the cost for LMI upfront at settlement of your loan or it can be capitalised into your home loan.
Some loans have monthly fees to cover costs or additional services available on the loan. Monthly fees are generally charged on the last day of each month. The value of the monthly fee and the charge date, are outlined in the loan conditions and your contract.
The loan to value ratio (LVR) is a calculation using the amount of your loan compared to the appraised value of your property. To calculate the LVR, simply divide the loan amount by the property value.
As an example, if you need to borrow $350,000 and your property is appraised at $420,000 the LVR is 83%.
Investment loans are funds borrowed with the intended use of creating wealth or an income source. An investment loan is mostly used for the purpose of a purchase, construction or refinance of a home that will not be owner-occupied.
A fixed interest rate is a locked-in rate that won’t change during a set period of the loan, so you know exactly what your repayments will be.
The First Home Owner Grant (or FHOG) is a scheme funded by some states and territories to assist first home owners buy, or build, a home. Eligible first home buyers get paid a one-off grant and the amount is determined by the date of the eligible purchase. Eligibility criteria and grant amounts vary, so check with your state or territory via this website http://www.firsthome.gov.au/
A home loan, or mortgage, is a loan you borrow from a financial institution to buy a home. Home loans usually require repayments weekly, fortnightly or monthly and will generally run for a term of up to 30 years. The lender secures the mortgage against your property, so in case you are unable to repay the loan you might be required to sell your home to settle any outstanding debt.
A Home Loan Package from People’s Choice Credit Union offers interest rate and fee discounts for an annual fee for our members, not only on their home loan but on a wide range of our products and services.
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