FAQs

Ideally, you should save as much as possible before buying a home. The minimum required deposit is 10%, but aim for 20% if possible.  

A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.  Most lenders prefer the guarantor to be a close relative – usually a parent, grandparent or siblings.

However, if the borrower does fall behind on their repayments, the lender might chase the guarantor for payment.   These could even result in the lender seizing guarantor’s property that was used as security for the loan.

Equity is the difference between the value of your home (not what you paid for it) and how much you owe on it. For example: if your home is worth $600,000 and you still owe $350,000, you could have up to $250,000 in equity.

Stamp duty is a government tax on certain transactions. You generally need to pay it when you buy a motor vehicle, insurance policy or real estate.   The amount of stamp duty that applies to a transaction varies depending on where you live, the type of transaction taking place, and its value.

Different stamp duty charges apply depending on where you live in Australia.  Use this link to calculator stamp duty within Victoria.  

State Revenue Office 

Conveyancing is an important step in the home buying process – this is how the property is transferred from one party to another. This is usually done via one of three ways: a solicitor, a conveyancer or some purchasers may choose to DIY.  We would certainly suggest you get a conveyancing expert to assist you.  

Your bank typically calculates the interest on your home loan at the end of each day. At the end of each month, your lender will add your daily interest charges for each day of the month. This is the monthly interest amount normally found on your bank statement.

For example this is how your daily interest charge is calculated. If your loan balance is $400,000 with an interest rate of 3.5% per annum. First, you would multiply the balance of the home loan (300,000) by the interest rate (0.035), and then divide it by the number of days in a year (365).

e.g. ($400,000 x 3.5%)/365 = $38.36

The Cash Rate is set by the Reserve Bank of Australia and is a significant monetary policy tool. The cash rate is the actual interest rate which banks pay to borrow funds from other banks in the money market on an overnight basis. It is also an important financial benchmark in the Australian financial markets.

Bridging loans can help with the transition from one home to another, without you having to sell first.   When moving, most people sell their old home first but there may be times when buying your new home first may suit you better.  A bridging loan provides you with the funds you need to buy your new home before you’ve sold your current property.   

Speak to Finance Right to find out if this is a good option for you.

An offset account is a transaction account linked to your home loan, but otherwise functions as a regular everyday account, often allowing you to withdraw money from ATMs and buy things using a debit card if you need to. The main benefit of an offset account is that the money you put into it is ‘offset’ daily against the balance of your home loan, and interest is charged against this reduced amount, rather than the full outstanding balance of your home loan.

A redraw facility lets you withdraw any additional repayments you’ve already made towards your home loan. A redraw facility generally doesn’t allow you to access any money that was made as a minimum repayment, however, so you’ll only be able to redraw funds that you contributed in excess of your minimum repayments.  Unlike an offset account, a redraw facility may not offer same-day withdrawal and may also have minimum redraw amounts, or limit how often you can make a withdrawal.

Offset accounts are often more accessible (online, debit card, ATM or branch) whereas accessing funds held in a loan with Redraw may require a few more steps. Some lenders may limit the size and number of withdrawals from loans with Redraw. Fees may apply in both cases.

Landlord insurance is a type of insurance policy specifically designed to protect those who own investment properties from the risks that come with renting it out. It generally covers events that cause a loss of rental income, theft or damage to your property.  Landlord insurance is offered by most of the major general insurance providers in Australia, so you’ve got plenty of different products to compare. 

There are generally three components of landlord insurance: 

• The part that covers loss of rental income 

• ‘Building insurance’ which covers damage to the property’s structure

• ‘Contents insurance’ for protection against damage to what’s inside the property (e.g. carpet, appliances)

Landlord insurance can apply to all sorts of investment properties, whether it’s a house, unit, apartment or townhouse. 

Negative gearing is your rental return on an investment property is less than your interest repayments and other property-related expenses.

The benefit of negative gearing is that any net rental loss you incur during the financial year may be offset against other income you earn, such as your salary.  This reduces your taxable income and how much tax you may have to pay.

Lenders’ Mortgage Insurance (LMI) is insurance that protects the lender in case a borrower defaults on their home loan. It’s a one-off fee made at the time of loan settlement and normally applies if you borrow more the 80% of the purchase price.  It’s possible to save on LMI by saving a bigger deposit.

A deposit bond, sometimes referred to as a deposit guarantee, is an insurance policy that acts as a guarantee to the vendor that the purchaser will pay the deposit at settlement.  Deposit bonds are often used for purchases where a buyer is awaiting funds from an existing sale.  They can help avoid costly bridging finance but fees & charges do apply.

Moving to a new house doesn’t necessarily mean you need a new loan.  Loan portability is usually standard on all home loans, which means that if you choose to move house and you’re happy with your current home loan, you can take it with you.  Basically, portability allows you to swap one property with another as the security for the loan. This only works if you do not need to borrow any further money to fund the transaction.  Loan portability can be convenient and can save you money, as it means you don't have to apply for a new loan, saving you application and establishment fees.  There may be a portability fee though, so speak to the team at Finance Right to see if this option might be suitable for you.

A variable interest rate (sometimes also called an “adjustable” or a “floating” rate) is an interest rate on a loan that fluctuates (up or down) over time because it is based on an underlying cost of funds to the lender  that changes periodically.

A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments. Fixed rates may be available for a term of 1 to 5 years. 

After a fixed rate term the loan usually converts to a variable rate unless the borrower elects to fix their rate for a further term.

Generally speaking, if interest rates are relatively low, but are about to increase, then it will be better to lock in your loan at that fixed rate. On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan.

Often there is greatly flexibility on a variable rate loan with access to offset or redraw features.

Often banks are able to raise long-term funding at a lower cost than short-term funding. 

Adjustable-rate loans are generally considered riskier than fixed-rate loans because they are unpredictable. You might start out with a low rate on an adjustable-rate loan, but a rise in interest rates over time could greatly increase the cost of your loan.

Borrowers can usually switch from a variable interest rate to a fixed rate with their existing lender, which avoids any penalties. Some costs may apply. 

Yes, it may be possible to leave your fixed rate mortgage early but (and it's a big but) most lenders will apply an early repayment charge. If you're still in the Early Repayment Charge period on your mortgage, a lender might charge fees even if you only want to change the amount you are borrowing.

If you a looking at investing in a property, you will have heard the team ‘rental yield’

Rental yield is the difference between the income you receive from renting out your property minus the overall costs of your investment. It’s often expressed as a percentage and the higher the percentage generally means greater cash flow and higher return on investment.

Knowing the rental yield will help you figure out the returns you might expect from your investment, helping you work out which properties and suburbs might be worth investing in. 

Fortunately, many lenders accept the disability pension as an accepted form of income and it must be verified as part of your home loan application. This can be done by providing bank statements and a letter from the relevant government department confirming your pension benefit payments and frequency amount. 

Your eligibility will be dependent on the amount of income you receive and expenses you have. To further understand what your borrowing power could be speak to the team at Finance Right.  You can also access our Borrowing Power Calculator via the link here. 

A Line of Credit is a loan that the borrower can draw and repay funds up to a set limit. Interest is only charged on the loan balance owing at any time.

A Line of Credit is often chosen as it allows funds to be drawn progressively as needed (and repaid) with interest charged only on the balance owing. Funds can also be repaid and available again at a later time. This suits borrowers transacting on an occasional basis such as investing in the stock market, providing working capital or undertaking home improvements over a period of time

Joint tenancy is the most common ownership structure in Australia, as it is how most family homes would be owned. Joint tenants own the property jointly and equally. 

Tenants in Common can nominate to own different proportions of the property. Under this model, each person owns a specified share of the property’s value. These shares may be equal but needn’t be. So, if you are willing to contribute $500,000 to the price of a property, but your two friends are not quite at that stage and only comfortable contributing $250,000 each, you could own a 50% stake, while they each own a 25% stake. Keep in mind that each stake is in the property’s value, not control of the property. Legally, under this model, each owner has the right to full access to the entire property.