If you’re shopping around for a home loan, you’ll get bombarded with home loan jargon. It’s important to understand that jargon, so here’s our guide to the most common terms you’ll come across.
An introductory low interest rate on a home loan that reverts to the standard interest rate at the end of the honeymoon period (which is usually 6 or 12 months).
The cost of interest plus any lender fees and charges. Lenders in Australia must advertise the comparison rate on their products to comply with the provisions of the National Credit Code.
A loan that has a fixed interest rate applied to a part of the loan and a variable rate to the remainder.
The amount you borrow.
An optional loan feature where the amount you have deposited in the account is subtracted from your home loan balance for interest calculation purposes.
An optional loan feature that allows you to withdraw any additional repayments you make if you need to at a later date.
Loan-to-value ratio (LVR)
The amount of your loan expressed as a percentage of the value of your home. For example, if you want to borrow $400,000 and the home you want to buy is valued at $500,000, your LVR is 80% ($400,000 divided by $500,000).
Different lenders will have different maximum LVRs that they are prepared to accept.
Lenders’ mortgage insurance (LMI)
LMI protects a lender if you don’t make your home loan repayments. If you have an LVR (see above) higher than 80%, most lenders will require you to take out LMI.
A calculation done by a lender when assessing your home loan application. It reflects your ability to make your repayments based on your existing income and expenses.
First Home Owner Grant
A grant available to first home buyers in all Australian States and Territories except the ACT. ACT first home buyers get a stamp duty exemption instead.
First Home Loan Deposit Scheme
A government scheme to help first home buyers to avoid the cost of lenders mortgage insurance.
The HomeBuilder Scheme
A temporary government scheme to help eligible new home builders and renovators until the end of March, 2021.
A government tax that is levied on property purchases. The amount varies between Australian States and Territories.
The legal costs associated with buying a property.
The day the ownership of the property transfers to you in exchange for the purchase price.
The level of ownership you build up in your property over time. For example, if your property is worth $500,000 and you owe $350,000, you have 30% equity ($150,000 worth of ownership) in your home.
Taking out a new home loan to replace your existing one. The refinanced loan should be on better terms and conditions to suit your current situation.
How we can help you understand home loan jargon
At Wisebuy Investment Group in Newcastle, our experienced and licensed brokers can help you to get a home loan.
We’ll take the time to understand your individual situation before providing you with advice. We understand the lending criteria of different lenders, so we’ll recommend an appropriate lender for your situation. We’ll also help you with your loan application. And best of all, our service is free!
Contact us today for an obligation-free chat to find out more. We’d love to hear from you!