Frequently Asked Questions

-How much can I borrow?
-What is lenders mortgage insurance?
-How does the lender assess my loan?
-What things will I need to have my loan assessed?
-What costs should I expect to have to meet?
-Which Mortgage Loan is right for me?

Q. How much can I borrow?
A. You can generally borrow up to 95% of the value or purchase price of a property, although this is dependent upon factors such as the location, size, and condition of the property, and your credit, savings, or loan repayment history. Your income, and level of existing loan repayments or commitments, will also impact on the amount you can borrow as may the phenomenon known as the 'Global Financial Crisis' or GFC as it's become known. The involvement of lenders mortgage insurance can also influence the likelihood or otherwise of approval.

The above items all have their part to play in achieving a satisfactory loan amount outcome along with factors emulating from the Global Financial Crisis. View our How Much Can I Borrow form.
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Q. What is lenders mortgage insurance?
A. LMI is a policy that most lenders will take out on your behalf when you seek to borrow more than 80% of a purchase price or property value. This percentage is commonly known as the loan to value ratio (LVR). 

The benefit to you is that it generally allows you to borrow more, i.e. up to 95%. 
The benefit to the lender is that if your property is sold under mortgagee sale (if you default on your loan) the insurer covers any shortfall in funds required to clear your loan. Put another way, it reduces the risk that the lender takes in providing you a larger loan in relation to the property value.

The once-off premium for the insurance is generally paid by the borrower, and in most cases, can be included in the loan amount. There are some instances where the lender will pay the premium, lessening the amount you need to have available for your deposit.
Some lenders are choosing not to mortgage insure their loans. Such lenders often work outside the traditional assessment criteria and choose to carry the risk themselves. This obviously benefits borrowers who may not have been able to gain approval from a mainstream institution under normal lending guidelines and policy. Nevertheless, there may be a price to pay such as a higher interest rate, so as always 'buyer beware'.
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Q. How does the lender assess my loan?
A. A potential lender will consider things such as: 

• Length of employment and the basis thereof, i.e. permanent full-time, part-time, casual or self-employed etc.
• Your savings history if you are buying a home for the first time, and your current repayment history if you are refinancing or looking to upgrade to another property.
• Credit reports.
• Your capacity or ability to repay the proposed loan.
• The amount you wish to borrow against the value of the property.
• The location, size, and condition of the property.
• Your level of asset accumulation.

It is desirable that first home buyers contribute a minimum of 5% savings as a deposit towards their purchase. However, if genuine savings are not available, options for approval may still exist, though the criteria used to assess your loan maybe more stringent. You can find out what documentation is required by you with our document checklist (PDF).
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Q. What things will I need to have my loan assessed?
A. With so many lenders and options available in the market today, the documentation necessary for your real estate loan application can also be varied. However, our document checklist (PDF) provides a great reference tool. While the lender you select to place your business with may seek some additional information, the majority of what you will need is included.
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Q. What costs should I expect to have to meet?

Solicitor 
A. Expenses for real estate conveyancing work vary from one solicitor to the next. Accordingly, it pays to shop around and seek quotes, which should include their fees for service and all disbursements. They will also advise whether you will incur costs such as rates and land tax.

Stamp Duty
Stamp duty is payable at levels related to the purchase price of the real estate property and the amount of your real estate loan and varies from state-to-state. Your solicitor or The Home Loan Shop can detail these costs for you.

Bank Fees
Your home loan provider will pass on fees for items such as mortgage registration, mortgage discharge (where your loan is a refinance from another institution), stamp duty, and title searches. These fees are universally known as statutory costs and they vary from state to state.

Where the real estate loan to value ratio (LVR) is greater than 80%, a lenders mortgage insurance (LMI) premium will be payable. Other fees usually charged include establishment or application fees and where a valuation report is required, this cost may also be passed on. Ongoing charges may apply to some loans and they are commonly known as service or administration fees. All fees and charges should be shown in your mortgage loan contract. 

It should be noted that outside of the statutory costs, all other expenses vary from lender to lender, with some not charging any upfront fees other than LMI.
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Q. Which Mortgage Loan is right for me?
A. 'How long is a piece of string' could be a reasonable response! The answer to this question can depend on a great number of factors, some individual circumstances and others more general. You can research general information on home loan types but you really need to talk to an expert. Prepare for a home loan interview with an Accredited Mortgage Loan Consultant by considering your current circumstances, future needs and getting a feel for your 'risk-profile', e.g. 'how would it be if loan interest rates increased drastically - would that bother you?', or 'can you just afford to cover the interest only on your loan at this point in time?'
There maybe many other issues surrounding your circumstances that you would like to discuss, so jot them down and talk to your Accredited Mortgage Loan Consultant.
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