A 100% home loan allows you to borrow the full purchase price of a property without saving for a deposit. Typically you do not need to demonstrate a savings history, and only require funds to cover the transaction costs such as legal fees and any statutory charges such as stamp duty. Also known as a no deposit home loan.
Australian Bankers' Association. The ABA is the national organization of licensed banks in Australia.
The option to make higher repayments to pay off the loan faster.
To agree to the terms of an offer or contract.
Account keeping fees are charged to cover or partially cover the lender's internal costs of administering the loan.
Interest accounted for but not yet due for payment.
An asset that guarantees the lender their loan until the loan is repaid in full. Usually the property is offered to secure the loan.
The process of allocating expenses (Council, electricity, phone, water rates) on settlement day that the seller has paid for but not used, and which the buyer has not used but will be billed for.
When a property is sold, the vendor (seller)
is normally entitled to all income (eg. rent) and is responsible for all
expenses (eg. council rates, water rates, etc) up until the date of
settlement, which normally takes place four to eight weeks after the
exchange of contracts. Settlement is the day on which you finalise
payment and take possession of the property.
The purchaser, meanwhile, is entitled to all income and is responsible for all expenses from the date of settlement onwards. Therefore, prior to settlement, the balance of the purchase price of the property
needs to be ‘adjusted’ to allow for expenses that have been paid in
advance or will be owing at the date of settlement.
Items for adjustment
Adjustment items typically include council rates, water rates and
strata levies – but may include other charges. Adjustments are
calculated by applying a daily rate to each of the relevant items, with
the balance of the purchase price adjusted depending on whether the
items are paid in advance or are unpaid at the date of settlement.
Let’s consider two examples of adjustments made to the purchase price of a property, based on a settlement date of 1 June.
Example: Council rates paid in advance
The vendor has paid the quarterly council rates of $455.00 for the
April – June quarter (ie. up to 30 June) so the purchaser owes the
vendor for 1 month of the quarterly bill.
To calculate the
adjustment, a daily rate must first be established. From 1 April to 30
June there are 91 days, which is equal to $5 per day ($455 / 91).
Therefore, the purchaser owes the vendor $150 (30 days x $5) for council
rates applicable to the month of June. The purchase price of the
property will therefore need to be increased by that amount.
Adjustments on settlement
If you’re buying a home and would like to know more about
adjustments, contact your legal representative. Your solicitor or
conveyancer is responsible for identifying and making adjustments prior
to settlement.
Fees, conditions, limitations and lending
criteria apply. This information is of a general nature only and is not
to be relied upon as being appropriate or suitable for your particular
circumstances.
A person or body authorised to act on behalf of a client in the sale, purchase or management of property.
A block of land created out of a larger area.
The period of time one has to repay a loan at the arranged terms.
Fees charged to cover or partially cover the lender's costs of processing a loan approval for a home buyer.
The estimate of the value of a property being used as security for a loan.
An overdue amount yet to be paid.
Money, property or goods owned.
Money in a bank account that can be withdrawn immediately.
Automatic Teller Machine.
A public sale of property with ownership going to the highest bidder, subject to a reserve price being reached.
A statement of assets, liabilities and net equity for an enterprise at a point of time.
A large loan repayment, typically towards the end of the loan term, to clear a debt.
A cheque that draws money specifically from funds held in a bank account.
A communication from one bank to another to advise on a customer's reliability or credit worthiness.
When a debtor has his/her estate placed into the hands of a receiver who has the responsibility for its distribution.
A person presenting a cheque to a bank for payment.
A written agreement whereby ownership is transferred but the original owner is allowed to retain possession.
See Owners’ Corporation.
A short-term loan that covers the time gap between the purchase of a new property and the sale of an old property.
Insurance which covers the cost of rebuilding or repairing a property following structural damage, for example by flood, fire, storm and subsidence.
The standards formulated by local councils to control the quality of buildings.
The monetary gain obtained when you sell an asset for more than you paid for it.
A Federal tax on the monetary gain made on the sale of an asset bought and sold after September 1985.
A loan where the interest rate is not allowed to exceed a set level for a period of time but, unlike fixed rate loans, is allowed to drop.
A warning. An entry made in a land registry or court to prevent a certain step being taken (eg. the transfer of land) without notice to the person who lodged the caveat.
Latin for 'let the buyer beware'.
A document that details the title or ownership details of a property, and whether there are any encumbrances on the title. Not all States and Territories have Certificates of title.
Any property other than freehold land. Personal chattels are movable, tangible articles of property such as clothes and furniture. Real chattels included leasehold interest in land.
A group of houses or villas that share common space.
A fee payable to a real estate agent, by the vendor, for the sale of property, or by a lender or client for arranging a loan.
An area used by many, not an individual. Owned by the Owners’ corporation.
A form of right of occupancy that applies when owners of units in a block form a company and each holds units that entitle them to occupy a defined area of land.
A nominal rate per annum calculated based on certain fees and charges together with the compounding frequency as outlined in the Consumer Credit Code.
A nominal interest rate incorporating certain fees and charges to help consumers identify and compare the true cost of a home loan When shopping for a home loan, people often focus on the advertised interest rate. While this is a useful guide to what you’ll pay, it’s doesn’t reflect the true cost of the loan because it excludes associated fees and charges, which can vary widely between lenders. A comparison rate is a tool that helps consumers identify the true cost of a loan because it includes both the interest rate and fees and charges relating to a loan, reduced to a single percentage figure. It excludes government fees and charges that are standard across all loans. According to the National Credit Code, comparison rates must be provided for any form of fixed term credit. This includes home loans that must be repaid within a specified time period (eg. 25 years). A comparison rate allows you to compare ‘apples with apples’ and make a more informed decision when choosing a home loan. This table summarises what is considered when calculating a comparison rate.
|
Inclusions |
Exclusions |
| The amount and term of the loan |
Government and statutory fees (eg. stamp duty) |
| The repayment frequency |
Event-based fees and charges that may or may not apply (eg. redraw fees) |
| The nominal interest rate |
Fee waivers or discounts that may apply |
| Upfront and ongoing fees and charges |
Fees and charges that are not ascertainable when calculating the comparison rate |
Advertised comparison rates
Because different loan amounts and terms produce different comparison rates, comparison rates in advertisements must be based on a standardised amount and term that is typical of the loan being advertised. For home loans, that’s a loan of $150,000 for 25 years.
Comparison rate schedules
Credit providers including lenders, finance brokers and linked suppliers, must also provide consumers with comparison rate schedules, which detail the various comparison rates for a range of standard loan amounts and terms. Comparison rate schedules can be used to compare the comparison rates across the lender’s home loan range as well as against loans of other lenders.
Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
Interest that is paid on both the accumulated interest as well as on the original principal.
An act of Parliament governing the relationship between borrowers and lenders.
A policy insuring household contents against theft and damage.
A legally enforceable agreement between individuals or entities. In real estate, contracts are exchanged when the deposit is paid.
A written agreement outlining the terms and conditions for the purchase or sale of property.
A person qualified and licensed to handle all documentation for the sale and or purchase of a property.
The legal process for the transferal of ownership of real estate.
Additional signature or signatures to guarantee the validity of a document.
Terms and conditions that specify the usage of a block of land or the buildings on it.
A note of temporary property insurance before the implementation of a formal policy.
Credit Reference Association of Australia. The body which holds credit details on all people who have established a credit history.
Borrowed money to be paid back under an arrangement with a lender. Also, a sum of money paid into an account.
The maximum amount a borrower can use at any one time.
A party to whom money is owed.
A cheque with two parallel vertical lines across it to specify that the cheque must be paid into an account and cannot be cashed.
Interest calculated on a daily basis - therefore varies according to the daily account balance.
An account entry to charge a withdrawal to a specified account.
Someone who owes money to someone else.
A legal document that states an agreement or obligation regarding a property.
The failure to meet a debt payment on a due date.
Home owners who fail to pay their scheduled home loan repayments will breach their mortgage contract and be in default of the mortgage. If this occurs the lender is within their rights to take legal action – even to the point of repossessing the home – so it’s important that the situation is rectified as quickly as possible. If you’re having difficulty maintaining your loan repayments then you should contact the lender immediately. This gives you the opportunity to discuss any changes to your circumstances and may even allow you to arrange a variation of your contract or a hardship application. However, it’s important to make contact with your lender as soon as your circumstances change and prior to a default. If you fail to make a home loan repayment, the lender will normally contact you to enquire about your late payment and discuss any issues.
If they’re unable to contact you, or if your issue is unable to be resolved and repayments continue to be missed, they’re likely to issue a formal notice (usually under s80 of the Consumer Credit Code) advising that you are in default of the loan. This notice will specify a date by which you need to rectify the situation and pay the outstanding amount. If you continue to default after the specified timeframe, the lender can commence legal proceedings to take possession of your property and arrange for its sale. The proceeds of the sale would then be used to compensate the lender for their loss.
Causes of mortgage default
Mortgage default is often caused by factors beyond our control, such as redundancy or unemployment, illness or injury, relationship breakdown or family issues. Often these events are temporary in nature and lenders may be willing to negotiate an alternative payment arrangement. If you’re affected by an external event and feel the mortgage commitments are beyond your capacity to pay, remember that you can talk to your lender. The most important step is to contact your lender as soon as possible to discuss your circumstances.
Seeking financial help
Of course, having difficulty meeting your repayment obligations may be a reflection of more deep-seated financial issues. Many home owners feel the strain when faced with unexpected expenses, multiple credit card debts or rising interest rates. The additional pressure on the household budget can become too much to bear and people may have difficulty prioritising their spending. If you’re experiencing financial difficulty, some options that may be available to you include:
- Getting help from a financial adviser or counsellor
- Reducing your expenses and developing a formal budget
- Rearranging your finances, perhaps by reducing other financial commitments; and
- Considering alternative loan arrangements, such as a consolidation loan which replaces multiple debts with a single loan account.
If you need to discuss your current home loan repayment options, please call RAMS on 13 RAMS that's 13 7267. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
The money you pay on exchange of contracts as part of your initial contribution to the purchase of your home. This could be between 5 and 10% of the purchase price. You could also pay your deposit by way of Deposit Bond.
A deposit bond acts as a substitute for the cash deposit in between signing a contract and settlement and can be issued for all or part of the deposit amount required, up to 10% of the purchase price. At settlement, the purchaser is required to pay the full purchase price including the deposit.
The various costs your solicitor or conveyancer has to pay to other organisations and bodies on your behalf, for example, search fees and stamp duty/ land tax. Your solicitor or conveyancer will itemise the disbursements on the invoice they send you.
The cost of winding up a loan early, also known as an early repayment fee.
A right to use a corridor or passage of land which is owned by another.
Electronic Funds Transfer. The electronic transfer of funds from one account to another.
An outstanding liability or charge on a property.
To sign the back of a cheque to confirm or transfer its ownership to someone else.
The difference between the amount you owe on your home loan and the current value of your property.
A loan usually secured by the proportion of the value of your house which you own.
A loan secured by the part of the value of an asset (usually house) which you own.
The lender’s fees which may or may not be charged to set up a loan.
The legal point of time when the vendor and purchaser swap documentation and start enquiries with a view to settlement.
Exchanging contracts is the legal component of buying a property. Two identical copies of the contract of sale (one for the purchaser and one for the seller) are prepared once all inspections are completed and the finance is approved in writing. Each party signs their own copy of the contract of sale then they are swapped or 'exchanged'. The contract then becomes binding on both parties and generally would not be altered. However, in the event of an unforeseen change of circumstances affecting either party between the exchange of contract and settlement, changes to contract terms can be made providing all parties agree. On exchange of contracts a 10% deposit is usually required. This is typically paid via bank cheque, although deposit bonds are becoming increasingly popular. A deposit bond can be purchased to cover the deposit provided that the seller agrees. A deposit bond is a simple, cost-effective way to cover the deposit on a property purchase when you don’t have immediate access to cash but do have the finance approved. The value of the bond is equal to the required deposit.
Cooling-off
A 'cooling-off period' may also apply after contracts are exchanged. This refers to the period of time during which the purchaser may cancel the contract, although they will lose a portion of their deposit. The cooling-off period is not available for properties purchased at auction and is not available in all states, so check with your legal adviser.
The legal process
When you exchange contracts you need to commence the process of transferring legal ownership from the previous owner to you. This process is called conveyancing and, while you can do it yourself, it’s wise to seek professional legal advice to ensure that the contract is fully examined and any issues are identified. A conveyancer or a solicitor can identify whether the property has any caveats, easements, restrictions or conditions that may affect your purchase decision. Your conveyancer will look after all the transaction and contract details for you and guide you through the settlement process, loan documentation and formal searches. Be mindful that regulations and conditions associated with the purchase of property vary from state to state, and between private treaty and auction. You’ll need to check with your conveyancer or solicitor that the contract of sale details all of the home fittings and inclusions that you agreed would be included in the purchase. Inclusions can include ovens, dishwashers, curtains, light fittings, etc.
Proceed to settlement
Your conveyancer or solicitor will also handle the entire settlement process, including liaising with your lender and the agent/vendor. Settlement generally occurs 4 to 8 weeks after exchange of contracts depending on the state you are purchasing the property in. However, the parties can negotiate a longer settlement period. If you’re buying at auction, you’ll need to negotiate any extension prior to the auction. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
Items that can be removed from a property without causing damage to it. Fittings which will remain in the property must be specified in the contract for sale.
An interest rate set for an agreed term.
Where the interest rate for a home loan is set for an agreed term Fixed interest rate loans offer more certainty than variable interest rate loans because the interest rate does not change for a specified period of time (usually between 1-5 years but even up to 10 years or more). At the expiry of the fixed rate period the interest rate generally reverts to a variable interest rate unless a further fixed rate period is selected. Fixed rate home loans have traditionally been less popular than standard variable rate loans because they were less flexible in terms of access to your money and the ability to make extra repayments. However, that’s recently changed and many fixed rate home loan products now permit extra repayments and may even include redraw facilities. These are some of the pros and cons of fixed interest rate loans.
Repayments are set during the fixed term
- This provides greater certainty over your home loan repayments.
- Fixed interest rates are not affected by changing economic conditions and do not move up and down like variable interest rate loans.
Provides more certainty for people on a strict budget
- As payments are known, you can plan your lifestyle accordingly.
- You have a greater ability to prepare an accurate monthly budget.
- First home buyers and investors, in particular, may appreciate the increased certainty and security.
Repayments don’t fall if rates fall
- Where the interest rate is fixed, while the interest rate can be lower during periods of high interest rates and it can be higher during low interest rate periods.
- To come out ahead, you need the average variable interest rate over the term to be higher than the fixed interest rate you’re paying for that period. You should also take into account any applicable fees and charges.
Less flexibility to make additional payments
- Lenders may charge you a fee for making early repayments where you have a fixed interest rate loan, so if your lender charges such a fee and you wish to make additional repayments you either need to wear this additional fee or wait until the expiry of the fixed rate term.
- If your circumstances change or you feel another loan option is more suitable, you may still have the option to switch to an alternative loan, although fees and charges may apply. These can be significant so it is important to check with your lender.
To find out whether the additional security and certainty of a fixed interest rate is right for you, or learn about the RAMS Fixed Rate home loan. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
Items that would cause damage to a property if removed. Their removal must be stipulated in the contract of sale and any damage made good by the seller.
Freehold gives the purchaser complete and indefinite ownership of a property and the land on which it stands.
An account in which all transactions have been suspended.
To legally divert a part or whole of someone's money or property to someone else by order of a Court.
The ratio of your own money and borrowed funds in an investment.
Goods and Services Tax which is a Federal tax levied as a percentage added to the price charged on specified goods and services.
A promise made as bound by the terms of a contract.
A person or company that endorses an agreement to guarantee that promises made by the first party (the borrower) to the second party (lender) will be fulfilled, and assumes liability if the borrower fails to fulfill them (defaults). In case of a default, the guarantor must compensate the lender, and usually acquires an immediate right of action against the borrower for payments made under the guarantee.
A refundable deposit demonstrating the goodwill of the buyer to proceed with the purchase.
A way of referring to both buildings and contents insurance.
Honeymoon rate, or introductory rate, home loans offer a low interest rate for an introductory period, usually the first 1-3 years of the loan. Once the honeymoon or introductory period ends, the interest rate usually reverts to a higher rate. This is often, but not always, the lender’s standard variable rate.
Items included with a property e.g. light fittings, stove, etc which must be specified in the contract of sale.
A statement of income and expenditure for a period, usually a year.
The lender's charge for the use of funds, or the return on deposited funds. See also daily interest.
A loan where the borrower elects to make monthly repayments of interest and no principal reductions. The interest only period is limited to between 5 to 10 years depending on the product option selected by the customer. At the end of the interest only period repayments will change to principal and interest for the remainder of the loan term.
A measure of the return on an investment (or loan) which takes into account the time value of money by showing the rate of interest at which the present value of future cash flows is equal to the cost of the investment or loan.
A list of items included with a property eg. furniture, moveable items etc.
The equal holding of property between two or more persons. If one party dies, their share passes to the survivor(s). Property held under joint tenancy cannot be bequeathed under a will.
A State Government tax charged to the owners of any property based on a stipulated value of the land, other than a principal place of residence. Land Tax is not applicable in the Northern Territory.
An agreement between two parties under which one is granted the right to use the property of another for a specified period under specific terms and conditions.
A person's debts or obligations.
The right to hold property as security against a debt or loan.
A form of insurance by which someone's life is insured. Life assurance policies can run parallel with a principal and interest home loan, so the loan will be repaid if you die before the end of the term.
The option to defer up to half of the regular repayments, in the event of loss of income due to certain stipulated events.
A flexible loan arrangement with a specified ceiling (the credit limit) to be used at a customer's discretion.
The loan is approved before the borrower bids on or offers for the property and is dependant on the borrowers satisfying the Lender’s lending criteria in principle.
Stamp duty on loan security documentation.
Period over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term. See also loan terms.
The ratio of the amount lent to the valuation of the security (usually the house).
The ratio of the amount lent to the valuation of the home being purchased The loan to valuation ratio (LVR) measures the amount of the loan compared to the value of the property being used as security for the loan, expressed as a percentage figure. From a lender’s perspective, the higher the LVR, the higher the risk to the lender.
Calculating the LVR
The LVR is calculated by dividing the loan amount by the value of the property, then multiplying it by 100. The value of the property is determined by the lender’s valuer, and it may be different to the price actually paid for the property. As an example, if your property is valued at $250,000 and you borrow $200,000, the LVR would be 80% (200000 / 250000 x 100 = 80).
LVR and borrowing
The maximum LVR that you can borrow up to depends on several factors including the type of loan, the loan amount that you’re applying for and your capacity to make repayments. Generally, full doc loan applicants may be able to borrow up to 90% or 95% of the property’s value (ie. 90% or 95% LVR). Low doc loan applicants, typically self employed people can usually only borrow up to 80% of the property’s value. Lenders consider loans with an LVR over 80% to be of higher risk and borrowers will generally need to pay for Lender’s Mortgage Insurance. This protects the lender against any loss incurred if you default on the loan and the proceeds of an enforced sale are insufficient to clear the debt. For low doc home loans, Lender’s Mortgage Insurance is usually required at a lower LVR (typically 60%).
Borrowing with higher LVR
Some people are keen to buy a home but do not have a 20% deposit. If you do not have a 20% deposit, you will generally have to pay Lender’s Mortgage Insurance. It may be possible to avoid paying lender’s mortgage insurance, providing you can find an eligible guarantor who is prepared to provide a secured limited guarantee on the mortgage. A guarantor is typically a family member or friend who offers their own property as security for the new loan. Eventually, if the LVR reduces due to rising property values or extra repayments, and the borrower meets credit guidelines, the guarantor may apply to be released. For more information on this home loan option, check out RAMS Fast Track. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
An interest rate that includes both the headline interest rate and the fees and charges relating to a loan. It is designed to help consumers identify the true cost of a loan and compare it with other loans.
The difference between the lender's interest indicator rate (or other reference rate) and the rate actually charged to borrowers.
The date a debt or investment must be paid in full.
The maximum loan to valuation ratio. This means the amount you can borrow expressed as a percentage of the valuation of the security (usually the property you are buying). For example, 90% LVR means you can borrow up to 90% of the valuation of the property.
The maximum length of a home loan or a specific portion within that loan.
The maximum amount that can be borrowed.
The minimum amount that can borrowed at a fixed rate of interest.
The minimum amount that can be repaid as a lump sum.
The minimum amount that can redrawn from a loan at any one time.
The fees charged to cover or partially cover the lender's internal costs of administering the loan each month.
A form of security for a loan usually taken over real estate. The lender, the mortgagee, has the right to take the real estate if the borrower, the mortgagor, defaults on the loan repayments. A mortgage over land is registered or noted on the Certificate of Title to that land.
State government tax calculated on the borrower's loan amount.
The length of time over which you agree to pay back your mortgage, usually up to a maximum of 30 years.
The lender of funds.
The person borrowing money under the terms of a mortgage.
Where the income from an investment property is insufficient to meet the interest costs of the loan used to fund the investment property.
The term ‘gearing’ refers to borrowing money for investment purposes, using existing assets as security for the loan. Gearing can be positive, neutral or negative, and it’s this last one that is most common when it comes to property investment. Negative gearing occurs when the costs of borrowing to purchase an investment property exceed the income you receive from your investment. So if your interest costs on the investment loan amounted to $25,000 p.a. and the rental return was $20,000 p.a. you would be negatively geared to the tune of $5,000 p.a.
Read our article 'Negative gearing and its positive results' in the Resource Centre.
A no deposit home loan allows you to borrow the full purchase price of a property without saving for a deposit. Typically you do not need to demonstrate a savings history, and only require funds to cover the transaction costs such as legal fees and any statutory charges such as stamp duty. Also known as a 100% deposit home loan.
When you buy a property from the plans only and not the finished building. The purchaser will not be able to inspect the property or see the standard of finishes, the practical layout, the size and dimensions or the outlook. However the purchaser may be able to view a display unit and sample finishes.
Usually a written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.
A non-interest earning account where the balance is offset against the home loan to reduce the total interest payable.
A system of land where a purchaser receives a title that is only as good as that which a seller can sell. Old System transactions require examination of a series of deeds and documents relating to all dealings in the land back to what is recognised in law as 'good root of title' (for example, a conveyance for value more than 30 years ago).
A legally binding document which gives a person, for a fee, the right to buy something, usually within a specific time frame at a specific price and subject to specific conditions.
An arrangement on a cheque or savings account under which a bank extends credit up to a maximum amount (the overdraft limit) and against which the customer can make withdrawals. Interest is charged on the fluctuating daily balance.
A representative body for and on behalf of the owners, to administer, control, maintain and manage all areas of the common property for the strata scheme.
A property is 'passed in' at auction if the highest bid fails to meet the reserve price set by the vendor.
The person or entity to which a cheque is payable.
The detailed illustration of a house that shows the internal layout and dimensions and the position of the house on the land.
A feature that enables a home loan to be transferred from one property to another, without refinancing. It can be of benefit by savings on loan set-up fees and government loan security duty.
A feature that enables a home loan to be transferred from one property to another, without the need to pay out your home loan and take out a new home loan While many home loans are established with loan terms of 25 or 30 years, homeowners’ needs can change well before the end of the loan term. For example, they may decide to move house. Whether the objective is to move to a new location, upgrade to a bigger or more expensive home, or even downsize to a smaller home or apartment, the costs involved in such a move can be substantial. Some lenders offer a “portability” feature on their home loans. Portability is designed to minimise the mortgage-related costs involved in selling an existing home and buying a new home. A portability feature allows you to transfer your current home loan from one house to another, without the need to cancel and apply for a new loan.
Cost savings
Moving your home loan from one property to another – by using your new home as security in place of your existing home – can save you a lot of money. While you may be liable for additional fees, including where the value of your new home is higher than your old one, depending on the circumstances, it can still be cheaper than the alternative. Paying out your existing home loan and establishing a brand new loan can be expensive. There are establishment fees to consider, such as application and valuation fees, government charges and potential exit fees. Early repayment fees (if applicable), can be significant.
Time savings
Keeping the same loan can also save you time and trouble, as the paperwork involved in setting up a new loan (application forms, etc) may not be required.
Other Considerations
Bear in mind that simultaneous settlement of the sale of your old home and the purchase of you new home may be required. In addition, generally you can't change the actual loan structure when moving the loan, such as the borrowers’ names or the number of borrowers on the loan.
If you’re applying for your first home loan, portability is an important option to consider, particularly if you’re considering a fixed rate loan. If portability is not available, it could be difficult and expensive exercise to change your home if you’re still within the fixed rate term.
If your home loan has a portability feature then this option remains open to you.
RAMS portability
All RAMS home loans are portable when simultaneous settlement of sale and purchase occurs. To find out more, contact a RAMS Home Loan Specialist. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
A home loan pre-approval confirms how much you can borrow from your lender. It is conditional upon the property you wish to purchase being acceptable security, and your lender confirming your income and other information provided in your application.
The capital sum borrowed on which interest is paid.
A loan in which both the principal and the interest are repaid over the term of the loan.
The sale of a property without enlisting the services of a real estate agent.
A private treaty sale is where a house is offered for sale at a negotiated price. The normal practice is for the vendor to set a price, and the buyer negotiates with the seller until a mutually agreeable price is reached. Unlike an auction, the potential buyers do not know what others may be offering for the property.
A redraw facility allows you to make additional repayments into your loan account and then access these extra funds when necessary. It has two key advantages: it encourages borrowers to make extra repayments, thereby saving on interest costs; and it provides flexible access to funds when they are most needed. A redraw facility is available on most variable rate loans but is not available on fixed rate loans.
A redraw fee is charged to cover or partially cover the lender's internal costs of allowing the borrower to redraw funds.
To replace or extend an existing loan with funds from either the same or another lender.
A repayment holiday is when you’ve built up enough buffer with your funds (available redraw)from making extra repayments on your home loan. This buffer allows you to stop or reduce the amount of loan repayments as available redraw covers your scheduled home loan payments. You should contact your lender to check that your available redraw will cover the payment you wish to miss or reduce.
Requisitions are questions asked by the buyer of the seller about the title and statutory obligations and controls affecting the property. The right to make requisitions is created by the contract and the seller must answer the requisitions accurately and in a reasonable time.
The specified minimum price acceptable to a seller at auction and which commits the seller to sell the property if the reserve is reached. If bidding falls short of the reserve price it is usual for the seller to negotiate with the highest bidder to arrive at a mutually agreeable price.
A right of way is a particular type of easement ie. a right to travel over land belonging to another person in a particular manner. It does not give a right to take any produce or soil from that other person’s land.
A building contract clause that allows the final pricing to move up or down according to the fluctuations of material prices or wages or variations to building work.
An examination of records or documents at a Land Titles Office or Government Department to confirm ownership of property, registered easements and other encumbrances or current or future proposals in respect of the land.
A right of a lender against the real property or other assets of a borrower to guarantee or secure the repayment of a loan.
Also called a Duplex. This is a type of construction where two buildings are attached together by a common wall or walls.
The date on which documentation for the transfer of ownership of property from the seller to the buyer takes place upon finalisation of the purchase price. It is also usually the date on which the buyer assumes possession.
A person authorised to access an account or who has authority to sign and be bound by documents.
The loan is split into two (or more) accounts. Customers sometimes use this option to take part of their loan at a fixed interest rate and part of their loan at a variable interest rate giving them rate certainty on the fixed rate portion and flexibility on the variable rate portion.
Failure to meet your mortgage commitments by the due date Home owners who fail to pay their scheduled home loan repayments will breach their mortgage contract and be in default of the mortgage. If this occurs the lender is within their rights to take legal action – even to the point of repossessing the home – so it’s important that the situation is rectified as quickly as possible. If you’re having difficulty maintaining your loan repayments then you should contact the lender immediately. This gives you the opportunity to discuss any changes to your circumstances and may even allow you to arrange a variation of your contract or a hardship application. However, it’s important to make contact with your lender as soon as your circumstances change and prior to a default. If you fail to make a home loan repayment, the lender will normally contact you to enquire about your late payment and discuss any issues. If they’re unable to contact you, or if your issue is unable to be resolved and repayments continue to be missed, they’re likely to issue a formal notice (usually under s80 of the Consumer Credit Code) advising that you are in default of the loan. This notice will specify a date by which you need to rectify the situation and pay the outstanding amount. If you continue to default after the specified timeframe, the lender can commence legal proceedings to take possession of your property and arrange for its sale. The proceeds of the sale would then be used to compensate the lender for their loss.
Causes of mortgage default
Mortgage default is often caused by factors beyond our control, such as redundancy or unemployment, illness or injury, relationship breakdown or family issues. Often these events are temporary in nature and lenders may be willing to negotiate an alternative payment arrangement. If you’re affected by an external event and feel the mortgage commitments are beyond your capacity to pay, remember that you can talk to your lender. The most important step is to contact your lender as soon as possible to discuss your circumstances.
Seeking financial help
Of course, having difficulty meeting your repayment obligations may be a reflection of more deep-seated financial issues. Many home owners feel the strain when faced with unexpected expenses, multiple credit card debts or rising interest rates. The additional pressure on the household budget can become too much to bear and people may have difficulty prioritising their spending. If you’re experiencing financial difficulty, some options that may be available to you include:
- Getting help from a financial adviser or counsellor
- Reducing your expenses and developing a formal budget
- Rearranging your finances, perhaps by reducing other financial commitments; and
- Considering alternative loan arrangements, such as a consolidation loan which replaces multiple debts with a single loan account.
If you need to discuss your current home loan repayment options, please call RAMS on 13 RAMS that's 13 7267. Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.
A State Government tax based on the value or purchase price of the property.
A form of title to a unit or lot on a plan of subdivision associated with townhouses, units and blocks of flats and based on the horizontal and vertical subdivision of air space. Owners have a certificate of title, are absolute owners of a freehold flat and have an undivided share of the common property.
Also called Company Title. As the owner you become a shareholder in the company that manages the common area, not just a member as in Strata title. Stratum units are regarded as unattractive because of difficulties and complexities involving the operation of the company, Corporations Law obligations and a reluctance on the part of lenders to accept them as security.
A plan that shows the boundaries, and the position, of any buildings within a block of land and confirmation whether the building complies with Local Government legislation.
A report that shows the likelihood of future pest infestations.
A fee charged to cover or partially cover the lender's internal costs of changing the loan from a variable rate to a fixed rate.
Joint ownership of property which may be in equal or unequal shares. Each joint owner may dispose of their share in the property independently and unlike Joint Tenancy, the shares do not automatically pass to the other owners in the event of death but form part of that person’s estate.
Torrens Title is the name given to the system of registration of ownership and dealing with property. Under this system, title to a property is established by a statutory title issued by the Registrar General. It is the most common form of residential property ownership. You are lawfully entitled to lease, sell or dispose of the property as you desire.
A type of dwelling which shares at least one common wall with neighbouring dwellings - usually a two storey dwelling registered under a strata title.
A document registered with the Land Titles Office that confirms a change of ownership. The change of ownership is noted on the Certificate of Title.
A property free of mortgages, encumbrances, covenants or restrictions.
A report required by the lender detailing a professional opinion of a property's value.
A rate that varies in accordance with rates in the marketplace.
A party who offers a property for sale.
A statement by the seller to the buyer detailing material particulars regarding the property in question.
A single storey, attached dwelling.
Local authority guidelines regarding the permitted uses of land and buildings on that land.