The most important home loan FAQs answered

Rates and fees last updated on

Frequently asked questions on home loans

Home loans can be complicated products and here at finder.com.au we’re often flooded with questions. Take a look at our answers to the most common home loan questions.

There’s no shortage of questions about home loans. When it comes to providers, refinancing, stamp duty and taxes, consumers can be overwhelmed by complicated jargon and confusing rules. Take a look at the common home loan questions we receive here at finder.com.au and the answers to them.

A home loan is a loan provided for the purpose of purchasing a property, either as an owner-occupier or an investor. The lender provides the loan for a fixed time period, usually 25 or 30 years, and the borrower pays the loan back with interest.

Home loan products are generally divided into either variable or fixed interest rate options. A variable rate can change from month to month, depending on the Reserve Bank of Australia’s official cash rate and other market conditions. This means your monthly repayment could change from one month to the next.

A fixed rate will not change for a set period of time, generally from one to five years. While variable rate loans often provide more options and added features, fixed rate loans provide stability and certainty.

A split rate, or split facility, gives borrowers the option to split their loan into two portions, with one portion variable and one fixed. This is good for borrowers who want the options and features provided by a variable rate loan, but also want some certainty around their repayments.

Your home loan repayments will be based on the amount of money you borrow, the loan term and the interest rate. To figure out your home loan repayments, you can use our repayment calculator.

Home loans often carry administrative fees. The advertised interest rate on a home loan is the base rate of interest you pay each month, but does not always give a good indication of the true cost of a home loan.

A comparison rate, however, takes into account the loan’s base interest rate and any other fees and charges and expresses this cost as a percentage. To work out a home loan’s true value, always make sure to look at the comparison rate.

To qualify for a home loan, you’ll need to have a deposit. This means you will need cash on hand to cover a portion of the purchase price of the property you wish to buy. The amount you need can vary from one lender to another.

In general, most lenders and loan products require at least a 20% deposit. However, some lenders offer loans with deposits as low as 10% or 5%. The size of deposit required by a loan is indicated by the loan’s loan-to-value ratio, or LVR. For instance, a loan at 80% LVR would require you to pay a 20% deposit.

There are options for borrowers with no deposit; however, these require a family member to provide their property as a security for the loan. This is known as a guarantor loan, and you can find out more about how guarantor loans work in our guide.

When assessing home loan applications, lenders look at several criteria. They will examine your credit history to ensure you have a good track record of paying your bills on time. They will also look at your income and expenses to make sure you can afford your monthly repayments.

In looking at your income, a lender will assess all sources of income. This means if you generate income from a rental property, shares or other investments, these can be considered on your home loan application. Some Centrelink benefits are also considered eligible income.

Each lender has different criteria by which they assess applicants. However, nearly all lenders will want to see that you have good credit, a suitable income and good work history. There are options for borrowers with bad credit, but these loans often carry much higher interest rates and fees.

How much you can borrow will depend on your income and expenses. Lenders want to ensure that you’re capable of making monthly repayments on your loan without undue financial hardship. In assessing your borrowing power, lenders also take into account the possibility that interest rates might rise in the future. They’ll want to make sure you can still afford your monthly repayments, even if rates increase.

While all lenders have different criteria, you can get a good estimate of your borrowing power by using our calculator.

While many lenders require you to provide PAYG summaries to prove your income and employment, there are specific loans for self employed borrowers. These are known as low doc or alt doc loans.

Low doc loans allow self employed borrowers to provide alternative forms of documentation to prove their income. These can include BAS statements, notices of assessment or accountant’s letters.

In general, lenders will want you to provide proof of your identity, your income, your employment, your assets and your liabilities. You’ll need documentation for each of these.

For a full rundown of the documents you’ll need to have in order when you apply, read our comprehensive home loan documents guide.

There are a number of ways to apply for a home loan. If you have a specific lender in mind, you can apply directly at a bank branch. Alternatively, you can compare lenders and loans using finder.com.au’s comparison tables. Once you’ve chosen the option that’s right for you, you can head to that lender’s provider page for detailed instructions on how to apply.

Some borrowers also choose to use mortgage brokers. Mortgage brokers receive a commission from lenders for introducing borrowers. Brokers can help guide you through the home loan process if you need extra help.

Lenders mortgage insurance, or LMI, is an insurance policy that covers your lender against loan defaults. This means if you cannot pay your home loan, your lender is compensated by an insurer to protect them from financial loss.

It’s important to note that, while you pay the cost of LMI, the policy covers your lender, not you. LMI is generally only payable on loans above 80% LVR.

Stamp duty is a tax imposed by state and territory governments on the purchase of assets such as homes and cars. The tax varies from state to state, and the amount you pay will depend upon the value of the property you’re purchasing. You can estimate the amount of stamp duty you’ll pay by using our calculator.

Some states and territories offer exemptions from stamp duty for first home buyers. These exemptions often require buyers to purchase a newly constructed property, and can vary based upon the value of the property being purchased. You can find a full rundown of exemptions in our stamp duty guide.

An offset account is a transaction account linked to a home loans. Offset accounts reduce the amount of interest payable on your home loan. They do this by offsetting the interest calculated on your loan by the amount in the account. For instance, if you have a home loan balance of $450,000, but have $25,000 in an offset account, you’ll only be charged interest on $425,000.

Offset accounts can help you pay down your home loan faster, and pay less in interest. However, home loans with offset accounts can sometimes carry additional fees.

A redraw facility allows you to draw out any extra money you’ve already paid on your home loan. In other words, if you make extra repayments to get ahead on your home loan, a redraw facility allows you to access those additional funds.

Redraw facilities can useful tools to help in case of emergency or to fund things like renovations or improvements, but home loans with redraw facilities often carry additional fees.

The difference between a loan for investors and one for owner-occupiers is generally only the loan’s purpose, and perhaps its cost.

Your lender will want to know if you’re borrowing to purchase a property to live in, or as an investment. They may assess the applications by different sets of criteria depending upon the purpose of the loan.

While most loan products are available to either investors or owner-occupiers, loans to investors often carry higher interest rates.

Negative gearing is a tax minimisation strategy used by property investors. This tax concession allows investors to offset any losses they make on an investment property against their personal income. In other words, if the home loan interest, maintenance and ongoing costs of maintaining an investment property cost more money than the property generates, a property investor can deduct this amount from their personal income at tax time.

Capital gains tax, or CGT, is tax paid on profit made from selling an asset. This profit is calculated by deducting the expenses associated with the asset from the final sale price of the asset. Capital gains tax is levied on the sale of property, but property owners can be eligible for a full or partial exemption from CGT depending on their circumstances.

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Refinancing Home Loans Comparison

Rates last updated October 24th, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.64%
3.66%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.65%
3.66%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.49%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.88%
4.89%
$0
$395 p.a.
95%
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.74%
3.74%
$0
$0 p.a.
80%
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.69%
3.72%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.73%
3.73%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.86%
3.87%
$0
$0 p.a.
80%
Pay no ongoing fees on a competitive variable rate home loan.
3.99%
4.02%
$600
$0 p.a.
90%
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.84%
3.84%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.64%
3.64%
$0
$0 p.a.
70%
A basic low-rate home loan that still offers some useful features.
3.77%
3.81%
$200
$0 p.a.
95%
A basic home loan with a low interest rate and a redraw facility available.
3.65%
4.10%
$500
$0 p.a.
95%
Get a discounted fixed interest rate for the first 12 months while you settle into your new loan.
3.74%
3.75%
$0
$0 p.a.
80%
A special variable rate home loan with no application or ongoing fees.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
3.97%
3.99%
$0
$0 p.a.
90%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.96%
3.98%
$0
$0 p.a.
90%
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.97%
3.97%
$0
$0 p.a.
80%
A competitive variable rate home loan with no ongoing fees.
3.84%
4.83%
$0
$0 p.a.
95%
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.72%
4.19%
$0
$0 p.a.
80%
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.64%
4.03%
$0
$395 p.a.
95%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
4.09%
4.12%
$0
$0 p.a.
80%
Access the equity in your home with a competitive interest-only rate and no application fee.
3.99%
4.02%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.69%
4.45%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.83%
3.83%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.89%
3.91%
$0
$0 p.a.
80%
Package your owner-occupied loan with your investment loan and enjoy low rates for both.
3.79%
3.92%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
4.19%
4.19%
$0
$0 p.a.
90%
100% offset account, unrestricted additional repayments and no monthly account keeping fees
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.99%
4.77%
$0
$0 p.a.
95%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.94%
4.88%
$0
$0 p.a.
95%
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
4.33%
4.33%
$363
$0 p.a.
70%
A variable home loan with $0 annual or monthly fees.
3.78%
3.79%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.69%
3.69%
$0
$0 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
4.03%
4.07%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.88%
4.47%
$0
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$600
$0 p.a.
90%
Get a low variable rate along with some important basic features.
3.79%
3.79%
$0
$0 p.a.
80%
Minimum loan amount for this basic home loan is $750001.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Lock in a fixed interest rate term for repayment certainty.
3.69%
4.03%
$0
$299 p.a.
80%
Enjoy a low variable rate with no application fee.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.88%
4.88%
$0
$395 p.a.
95%
Lock in a discounted fixed rate with a low service fee.

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A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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2 Responses

  1. Default Gravatar
    SummerJune 15, 2017

    I’m buying a trailer for $100,000 and I’m using my land that it’s appraised at $25,000 as my down payment/collateral. Would it be deducted from $100,0000 or will I still be borrowing the same amount from the bank and they keep my title until I pay it off?

    • Staff
      JonathanJune 15, 2017Staff

      Hi Summer!

      Thanks for the comment.

      Whenever you apply for a home loan, usually the lender would ask for a deposit, which is usually paid upfront. If the borrower cannot provide the agreed deposit, the lender will then ask for a collateral which should be equal or higher than the deposit amount. Now, if you use your title as a collateral for this loan, it is only a “guarantee” for the lender in case you go on default on your repayments.

      Hence, if you’re applying for a loan worth $100,000 and wants to use your land title as a collateral or a guarantee (worth $25,000), you would still need to loan for the full amount $100,000 because the expectation is for you to repay your loans as agreed and only use the collateral in extreme need.

      You can read more about guarantor home loans on this page.

      Hope this helps.

      Cheers,
      Jonathan

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