A home loan is an amount of money borrowed from a bank to purchase, refinance, renovate or build a residential property.

When an application is approved, a bank will provide a home loan to help successful applicants buy a property. When it comes to home loans, banks will typically advance 80% of the value of the house, which means that you will need to contribute 20% (plus the stamp duty that is applicable). The bank then advances you the remainder of the funds (known as the principal) to purchase the property.

Your borrowing capacity is how much you are able to borrow for a home loan, after taking into account your total income, existing debts, future debts and living expenses. When you hear the term 'servicing' or 'serviceability', this is what that means.

A bank typically calculates the interest on your home loan at the end of each day and combines this at the end of each month. This is the monthly interest amount generally found on a bank statement. For example, if your loan balance is $400,000 with an interest rate of 6.10% per annum, you would multiply the home loan balance (400,000) by the interest rate (0.061) and then divide it by the number of days in the year:($400,000 x 6.10%)/365 = $66.84)

When buying a home, there are a few costs that you need to be aware of. Some of these include: Bank or Lender Fees: they usually include application fees, package fees, property valuation and administration fees. It's important to note that not all banks charge you for these fees, so please chat with the team at Balcombe for further guidance. Legal and conveyancing fees: this is applicable when purchasing a property or when changing details on a title. We have a network of lawyers and conveyancer which we regularly use, so please ask and we will be happy to recommend their services to you. Building inspection: a qualified expert should inspect the building before you purchase the property. The cost of a building inspection and report will vary depending on the size of the property and the state or territory you live in. Pest inspection: this is needed before you purchase a property to ensure the dwelling has no pest-related issues. Stamp duty: stamp duty is a tax charged on the transfer of a property’s legal title between two parties. This varies by state and territory, however it generally tends to be very expensive.

A home loan is a financial product used by a bank to lend money to a home buyer. A mortgage is the formal agreement you have with your bank which sets out the terms of the home loan and gives the bank the authority to take ownership of your home in the event of default.

A home loan default is when a borrower cannot meet the repayments on their home loan. This is why it is very important to understand that when you take out a loan, you need to ensure that the repayments are made when due. When you default on a mortgage, it will be listed on your credit history and this can have adverse implications for future loan applications. If you get to a position where you continually default on your mortgage, the bank may be forced to sell your property to recoup the borrowed amount.

Principal and Interest loans mean that you are steadily paying off your home loan, whilst you are paying the interest expense. Interest Only loans mean that you are only paying interest, and the loan balance is not reducing. Furthermore, it means that when an Interest Only term expires, the full amount is due, which means you may need to make a lump sum repayment, or seek to refinance the debt to another lender.

A variable rate home loan is a loan with an interest rate that can fluctuate – it can go up or down at any time – depending on the decisions of your bank. In Australia, banks tend to be guided by the cash rate set by the Reserve Bank of Australia (RBA), as well as general market forces and rate movements of competing banks and lenders.

A fixed rate home loan is a home loan where the interest rate is locked in for a certain period of time, usually between 1-4 years for a home loan. This means that not only will your interest rate remain the same, but also your repayments. This therefore provides a great amount of certainty for a borrower.

A split Home Loan is when you have a portion of your loan fixed, with the other portion variable.

Ultimately, there is no right or wrong answer to the question of whether it’s better to have a fixed or a variable rate. The decision as to whether to fix your home loan might ultimately come down to your personal circumstances and finances and your feelings about market conditions.

Generally speaking, your borrowing power is calculated as your net income minus your expenses. Your expenses can be impacted by things like the number of dependents in your family, any current home or personal loan repayments and other financial commitments such as private health insurance and school fees.

A bank will typically lend you 80% of the value of the home, which means that you need to pay the remaining 20% plus any stamp duty, as well as any other fees. Some lenders also offer loans above 80%, however Lenders Mortgage Insurance is usually needed, which is an added cost to getting a loan. But as a general rule of thumb, you will need 20% plus any stamp duty costs.

LMI stands for lenders mortgage insurance. It is insurance taken out by the lender to protect them should the borrower not be able to repay the loan. This is generally required for loans with a LVR greater than 80%. The borrower bears the cost of LMI and can choose to either pay it upfront or capitalise it into their home loan.

A pre-approval is what a bank is willing to lend you, based on your current income, debts and expenditures. This allows you to go out and purchase a property, in accordance with that value and after factoring in any costs such as stamp duty. Please note, however, that this is not a formal approval and the bank may still not honour this approval. To ensure that things run smoothly once you find a property, we recommend that you purchase the property 'subject to finance', which allows for all the necessary checks to be undertaken. For example, the bank will need updated bank statements and pay slips to ensure that your financial circumstances have not changed, as well ensuring that the subject property is acceptable to the bank.

Pre-Approvals typically last for 90 days, however this may vary from lender to lender.

Redraw is the amount of money available to you, if you have made additional repayments on your home loan. Once you have your home loan, you are required to make minimum repayments each week, fortnight or month. If you make additional repayments above what is required, then these additional funds become part of your available redraw, meaning you can withdraw these funds to use as you need.

An offset account is an everyday transaction account linked to your home loan. Any amount in that account offsets the interest payable on your home loan. For example, let’s say you have a home loan balance worth $600,000, and $40,000 is in the linked offset account. Interest is calculated on $560,000 ($600,000 loan less $40,000 offset account).Therefore, even though your repayments remain the same, you will end up paying more off the principal given the reduction in interest.

Equity is the amount of the property that you own outright after deducting the home loan. For example, if your property is worth $800,000 and you have a home loan with an outstanding balance of $400,000, you would have $400,000 of equity in the property.

A comparison rate includes the interest rate plus all of the costs of the home loan into one rate. If you’re comparing different loans from multiple lenders, the comparison rate will help you in finding out how much a given home loan will cost you in addition to the standard interest rate.

A valuation is a report completed by a certified valuer, appointed by the bank, to determine what the current market value is for a property, and to confirm whether it is acceptable for first registered mortgage purposes.

LVR stands for loan to value ratio, which is the size of the home loan relative to the value of the property, expressed as a percentage. For example, if your home is worth $1,000,000 and the loan amount is $800,000, the loan’s LVR would be 80%.

Typically, you will need to provide the following: minimum 3 years address history; minimum 3 years employment history; copies of identification documents; dependents (if applicable); details on your existing assets and liabilities, including loans, credit cards and any personal loans; a complete listing of your monthly expenditure.

Typically, the application process with Balcombe is relatively quick - usually around one week if all information is available. Once we submit the application to the chosen bank, we usually receive a response within 1-2 weeks, depending on how busy the lender is. Therefore, as a guide, please allow approximately 3-4 weeks for the decision-making process, and then an extra 2 weeks for settlement to take place.

Quite simply, leave that to us. After we have had our pre-application discussions and then received your application records, we will undertake a comprehensive search of the whole market to ensure that you are getting the most competitive rate.

This all depends on your ability to service a new loan, in addition to your existing one(s). For example, when you apply to a bank for a new home loan, the bank will complete their serviceability assessment based on your current income, existing debt(s) and living expenses. This may result in you not being able to afford a loan if your income is not sufficient.

Your credit card limit can be the deciding factor in mortgage approval. For example, if you have a credit card with a limit of $10,000, and you owe nothing on this credit card, the bank will assume that you owe $10,000 and they will factor in these monthly repayments accordingly. Therefore, when it comes to applying for a home loan, we recommend you taking the time to confirm if the credit card(s) is needed, and if it is, then how much limit will you need.

Each bank is different with their requirements. Based on our experience, it is always best to have at least 3 months of employment history.

Each bank has their own policies which can be very different. It is therefore our job as your Mortgage Broker to know what they are, and to direct you accordingly. For example, if you are self-employed, some banks are more lenient with their policies than others. The same applies for casual and part-time employment, to give another example.

A conveyancer facilitates the process of transferring property ownership from one person to another or one entity to another. This process involves preparing and lodging legal documents, liaising with banks, calculating adjustments of taxes, rates and finalising settlement.

Buying a property can be a very complicated process, so you want to ensure that all documentation is correct and that the process has been followed diligently. Therefore, we highly recommend that you engage a conveyancer when buying a property.

Refinancing is the process of moving to a new bank who will pay out your current loan with a new loan. There are a number of reasons to consider refinancing, such as: reduced interest rates; reduced monthly repayments; repaying other loans; accessing home equity for renovations and other purchases, or simply; moving to a more appropriate Lender.

Refinancing your home loan means that you need to apply for a new home loan at a new bank. At Balcombe, we can help fascilitate this process for you to ensure that you are getting the cheapest and best offer to suit your individual circumstances.

Yes, this may be possible if you have available equity in your home loan. As long as serviceability is evident, the bank will typically lend you up to 80% of the value of your house.

The costs involved with refinancing are typically low, but they do vary from lender to lender. The fixed costs generally involve: a Discharge Fee paid to the outgoing bank, as well as government fees such as mortgage registration fees. Other fees such as Package Fees, Establishment Fees and Valuation Fees are at the discretion of each lender, so please speak to the team at Balcombe for further guidance.

The simple answer is no; you don’t need conveyancing services for refinancing your loan unless you’re changing titles. For example, if you want to include another name on the home title, then you will need to engage or conveyancer or a solicitor.

An investment property is real estate purchased to generate income through rental income or appreciation.

An Investment Property is purchased for the purpose of generating rental income, therefore it is not "owner-occupied". As a result, interest rates on investment properties tend to be slightly higher than for normal owner-occupied home loans, because of the perceived risk being higher. A Home Loan is occupied by the owner (you), therefore the chances of you defaulting on your home loan, compared to an investment loan, is smaller. For this reason, home loan interest rates tend to be slightly cheaper compared to investment loans.

Interest Only loans mean that you are only making interest repayments, and the loan balance is not reducing. Furthermore, it means that when an Interest Only term expires, your loan will typically revert to Principal and Interest repayments (usually at a much higher rate), so it is best to engage with us prior so we can arrange the best outcome for you.

A typical residential home loan term is 30 years. The Interest Only portion, which is built into that 30 year loan term, is typically provided for a maximum of 5 years, however this varies from lender to lender.

When you buy an investment property, there are a few fees and costs that you need to be aware of, including but not limited to: landlord insurance; property management fees; land tax; maintenance costs; council rates; water charges; body corporate fees.

Negative gearing is when the annual cost of owning your investment property – interest repayments, fees and maintenance – is more than the income you make from that property. This loss can typically offset your taxable income for the year.

If you have available equity in your home loan and assuming you can meet the increased repayments, you can potentially access this equity to use as a contribution towards a new investment property purchase.

Yes, if you have available equity in your home and assuming that you can meet the increased repayments, you can borrow additional money to pay for renovations on your home. Each bank has different policies when it comes to renovating, so please ask the team at Balcombe for guidance.

When it comes to a simple renovation (non-structural), the bank may like to see some detailed quotes and/or invoices on the improvements to be made. Some banks may provide the additional money without needing to witness any documents.

Generally speaking, a bank will lend you 80% of the value of the home, based on a bank valuation. If you have equity in your home and wish to borrow money for a renovation, the bank may give you up to 80% of the value, assuming you can afford the repayments.

Yes, these two things are quite different. Renovating tends to be non-structural where a registered builder is not required. These are generally improvements that one can make to their home themselves, or by coordinating some simple trades. Building a new home, however, requires a registered builder to perform the work, and a fixed price building contract for the bank to review. A building is funded on a cost to complete basis, where the builder is reimbursed by the bank as they complete each stage of the house development. At no stage do you, the owner of the house, control the money towards the builder; it is always controlled and paid by the bank.

Generally speaking, you will need to provide the following: a copy of any town planning permits and plans (if applicable); a copy of the building permit; a copy of the fixed price building contract plus the specifications.

During construction, you will only pay the interest on your loan. If you've selected a direct debit repayment option, this will be debited monthly. The interest amount is calculated based on your loan’s interest rate and the owing balance on your loan. Remember that your owing balance will increase every time the lender releases funds to pay one of your builder’s invoices, which means your interest payments will increase throughout construction.

No, the builder is paid in progress payments by the bank, who essentially 'controls' the money throughout the construction.

It does matter which builder you use. Obviously, you or the bank will not want to engage with a builder who has any adverse information, or who is experiencing any financial difficulty. This may be hard to ascertain during your initial dealings with a builder, however it is imperative that you do as much due diligence as possible on the background of the builder before you proceed.

A fixed price building contract is nearly always needed by a bank. Other contracts such a Cost-Plus contracts are sometimes used, however it is rare to see these accepted by a bank.

An "As If Complete" valuation is the market value adopted by the bank, which states what your completed home will likely be worth upon completion.