Your Questions Answered
WHAT CLIENTS ASK THE MOST
WHAT IS LENDER’S MORTGAGE INSURANCE?
Lender's Mortgage Insurance, as the name states, protects the Lender not you as the borrower. Lender's Mortgage Insurance (LMI) is a once off fee that normally applies to loans where the customer is borrowing more than 80% of the purchase price. LMI is scaled depending on the percentage you need to borrow (between 80 - 100%) and the amount of the loan (ie, $650,000). LMI can start from $800 and range up to nearly 4% of the loan amount. You have two options to pay this fee.
You can pay it upfront on settlement of the loan.
Some lenders allow you to capitalise the cost of your LMI, meaning that they will add this figure to your loan amount. For example, if you are borrowing $650,000, your LMI may work out to be $7000. You would actually increase your loan amount to now borrow $657,000 ($650,000 + $7,000).
HOW MUCH DEPOSIT DO I NEED?
Generally speaking, a deposit of 5% is all that you need to purchase a home. Ideally you should be looking to have 20% of the property value as a deposit, this will save you from incurring additional fees such as Lender's Mortgage Insurance. Some lenders will let you borrow up to 95% of the purchase price and then let you borrow the cost of the Lender's Mortgage Insurance on top of that. Alternatively, if you don't have a deposit, you can borrow up to 100% of the property's purchase price, in two ways:
Family Pledge: which means that a family member offers their property as security for you to purchase your property.
100% House and Land packages: allow you to borrow up to 100% of the price of the brand new home and land.
WHAT IS A COMPARISON RATE?
A Comparison Rate reflects some of the costs of a loan into a single interest rate. The aim of the Comparison Rate is to help you make a more informed decision on the costs associated with a loan, and help you to compare various loans and services offered by financial institutions and mortgage providers.
WHAT IS LVR?
LVR stands for Loan to valuation Ratio. This is the measure of the amount of the loan compared to the value of the property. For example, if you have borrowed $380,000 and your property is valued at $400,000, the LVR would be 80%.