Frequently Asked Questions (FAQ)
Question: What is LVR?
Answer: LVR stands for Loan to Valuation Ratio. It is formulated by dividing the loan amount by the purchase price or valuation of the property. Most lenders will lend owner occupiers up to 95% LVR.
Question: What is a split facility?
Answer: This is a feature commonly used with Lines of Credit and fixed rate mortgages. It allows the borrower to split the loan into a number of sub-accounts. The usual reason for doing this is to split fixed and variable rate portions of the loan. Another common use is to split the personal and investment portions of a mortgage in order to keep track of tax deductible and non tax deductible interest expense.
Question: What is AAPR?
Answer: The AAPR is the “Average Annual Percentage Rate”. It is a rate that allows borrowers to compare loans offered by different lenders. It formulates a “real rate” based on the interest rate, upfront fees, ongoing fees and exit fees. From July 2003 it will be compulsory for all lenders to display this rate in advertising.
Question: What is Lender’s Mortgage Insurance?
Answer: This insures the lender against any loss incurred in the event they are forced to sell a property for less than the balance of the loan (i.e. if they lose money in a foreclosure). The insurance premium is paid by the borrower at settlement generally only on loans where the Loan to Valuation Ratio (LVR) is greater than 80%. The amount of the premium varies between banks but is based on the amount of the mortgage and the LVR.
Question: I have a bad credit record. Can I still get a home loan?
Answer: In a lot of cases yes. We deal with a number of lenders who will lend to people with defaults in their credit history and even to bankrupts.
Question: What is the purpose of an interest only loan?
Answer: This is a loan used mainly by property investors. It allows the borrower to pay only interest instead of principal and interest (i.e. the principal balance remains the same during the interest only period). This maximises the investors tax deductions whilst also freeing up cash flow for other investing opportunities.
Question: What is the purpose of having a portable loan?
Answer: This feature allows you to take your mortgage across to your next property purchase. This feature saves you the cost of paying a new establishment fee and other costs associated with setting up a new home loan.
Question: What is a redraw facility?
Answer: It allows you to redraw from the mortgage any extra funds you have paid back over and above the scheduled repayments. Many people use this facility to buy a new car or for a holiday as the funds are cheaper than taking out a personal loan.
Question: How can the banks afford to pay mortgage broker’s commission whilst keeping the interest rates on their products the same?
Answer: If brokers weren’t writing loans for the banks then they would have to spend more money on advertising and on increasing their sales force, in order to attract customers. Individual mortgage brokers now incur the cost of finding clients and the banks pay us for doing so. So basically it all evens out.
Question: If the loans offered by the banks are the same as those you offer what is the benefit of me getting my mortgage from you?
Answer: If you come to us to get your home loan you will receive a complete service. Firstly we can give you an idea of which lenders you will qualify for and then we can help you find the best mortgage offered by those lenders. This prevents you from tarnishing your credit record by applying at many lenders who subsequently reject your application. Once you decide on a loan we help you complete the application and compile the supporting paperwork required. We then send it to the bank and deal with them right up to settlement. This means you won’t have to wait on any bank telephone queues because we will do it for you.
Question: Are the loans you offer the same as those offered by the banks?
Answer: Yes they are exactly the same. The features, interest rates and fees are identical.