FAQs For Home Loans In Australia
When you’re looking to obtain a new home, you’re most likely going to be looking for home loans in Australia. Most individuals are unable to fund the purchase of a home with their own private money. Home loans come in many different varieties and terms which you should be aware of before you go out shopping for one.
Fixed and variable interest rates are going to be the first factor that you should be aware of when searching for home loans in Australia. Each mortgage lender is going to ask you whether you want fixed, variable, or a hybrid of the two. Before you can absolutely answer this question, you need to understand what each type of interest entails.
A fixed rate mortgage is where you have the same interest rate over the life of the loan. This means that you have the same mortgage premium due each month and there will be no fluctuations in that price for the entirety of the loan. A variable rate mortgage is when the rate changes, which can be up or down, are affected by factors such as the cash rate set by the Reserve Bank. Hybrid home loans in Australia typically combine both variable and fixed rates. Most will have a fixed introductory period of two to five years and then change to a variable rate after that and this can be determined through an online estimator https://www.loans.com.au/calculators/home-loan.
LMI, also known as Lenders Mortgage Insurance, is a common term you’ll likely see when applying for home loans in Australia. This type of insurance is typically required by any lender who you borrow 80 percent or more of the value of a home from. So, let’s say you are purchasing a home that costs 400,000 dollars and you decide to borrow 320,000 dollars from your lender. The amount you borrowed from the lender is 80 percent of the value, which means you’re lender will likely require you to have LMI so that they can recoup the value of their loan if you ever default on your mortgage payment.
Redraws are another factor you need to understand about home loans in Australia as there are some restrictions placed on this with various types of loans. When you pay extra money on top of your regular mortgage payment, it goes into the redraw balance. At any point during the loan when you need some extra money, you can withdraw the redraw balance. For example, let’s say your regular mortgage premium is 300 dollars. If you were to submit a payment of 400 dollars, you would have 100 dollars available for redraw at any point in the future you desire.
As you can see, there are some key terms you need to be aware of when searching for Home Loans https://www.loans.com.au/ in Australia. Understanding what these are will help you to better determine the type of loan you want to receive. When you get the deal for your home structured right, you can save yourself a lot of financial heartache in the future.