Frequently asked questions
First Home Loan
First Home Owners Construction Grant (FHOCG)
First Home Owners Construction Grant (FHOCG) is available, subject to State Government approval, to Australian Citizens or Permanent Residents who have not previously owned and lived in a residential property in Australia. It is also available for those who have purchased an investment property after 1 July 2000 but have never lived in it and are now seeking an owner occupied property. Your FHOG is assessed by the relevant Government revenue department in your State. Funds from the grant are normally used towards purchase costs but in some cases it can be used towards your home loan deposit and surplus from the grant (if any) is yours for personal use. Most states also offer stamp duty concessions for first home owners. Your allocated mortgage broker provides assistance in completing your FHOG form and this is submitted with your loan application.
Deposit and Savings for your home loan
Raising your home loan deposit
With the enormous range of home loan products your broker can help you access, it is important to consider how your deposit, if any, has been assembled. Deposit policy does vary from one mortgage lender to another so it is vitally important that in presenting an application to a lender, structure of your deposit is considered carefully. Below is a brief summary of some deposit requirements.
What is genuine savings?
For many mortgage lenders, a genuine savings pattern is no longer required. As long as 5% of your property purchase price is available, there is usually a quality home loan solution available. There are a number of ways your home loan deposit funds can be evidenced including all or part of the first home owners grant, your own savings, shares, gift from family or a combination of sources. Your broker will help you by finding the correct home loan solution to fit your particular savings or deposit pattern. You do not necessarily require a deposit to secure a home loan however having a deposit will increase your home loan options.
Gifted deposit
In most cases, a deposit provided from family or friends etc is acceptable towards your purchase. If not available in cash funds, equity from a second security property may be suitable. A gifted home loan deposit could be of any amount however 5% will allow access to most home loan lenders and if you are fortunate enough to have assistance totalling 20%, the cost of mortgage insurance can usually be avoided.
5% deposit home loans
Most lenders are comfortable with a 5% deposit with many lenders no longer needing to see a home loan deposit savings pattern. A saved home loan deposit traditionally allowed access to more home loan products however, with recent changes to lender policies, a huge range of home loan products are now available with 5% home loan deposit coming from any source.
20%+ deposit loans
Once you have 20% home loan deposit available, most mortgage lenders will not charge an LMI premium for a fully verified home loan. 20%+ home loan deposit is ideal if you would like to keep your home loan costs to a minimum. 20%+ deposit also gives you access to a large range of Lo-documentation home loans.
Using equity for a deposit
You may have equity tied up in an existing property that can be used towards the purchase of another property. There are many ways to access your equity including top up home loans, cross collateralisation or home loan refinancing. Using existing equity can be the most cost effective way of securing the right home loan product… if enough equity is available, you may be able to borrow the full 100% of your next property purchase plus enough for costs without any mortgage insurance charges.
Debt consolidation
This can be an effective way of combining your existing home loan, personal loans, car loans, credit cards etc into 1 manageable repayment. Usually when consolidating debts into a single or split home loan, your overall monthly repayment commitment can be substantially reduced freeing up your hard earned dollars for other uses. Our home loan qualification service can help you by estimating your potential monthly benefit that can be achieved by consolidation of all your loans into a home loan. Normally the process involves refinancing your existing home loan and you will need enough usable equity in a property to do this. Many mortgage lenders will consider a total loan amount of up to 90-95% if your property value when consolidating debts.
Lender’s Mortgage insurance
What is LMI?
Lender’s Mortgage Insurance (LMI) is a premium usually on charged by lenders when less than 20% home loan deposit is available. LMI may often be charged by a home loan lender for lo-doc loans between 60-80% of a property value. It provides insurance for the lender should a situation arise where there is a shortfall in paying out a loan. One of the major benefits of LMI is that it allows a home loan of more than 80% of a property value. Do not confuse LMI with income protection or other personal insurances. LMI does not protect you personally in the event of missed home loan repayments or a shortfall in a home loan payout. Some lenders can add this premium to your home loan amount to minimize costs from your own funds.
Alternatives to LMI
Some home lenders do not use LMI but include costs such as a home Loan Equalization Fee (LEF) to minimize their risks. A family equity loan is another way to avoid the LMI premiums.
Types of home loans
What is a fully verified home loan?
If you have all the required paperwork and fit the home loan lending criteria for a specific lender, your home loan application is known as fully verified. Normally, full verification includes proof of income, assets, liabilities etc and will give you access to the largest range of home loan products.
How much can I borrow for my home loan
Your capacity may differ greatly from one mortgage lender to the next as policies vary as much as there are home loan products on offer. Your home loan borrowing capacity is impacted by variables such as source of income and amount, type and amount of deposit, type of loan, other financial commitments, location of property, credit history etc. Calculators on this website will provide you with a guide to home loan repayments however all variables must be considered carefully when calculating your home loan borrowing capacity especially the amount you are comfortable repaying, not just the loan amount a mortgage lender says you can access.
Types of employment
This is one topic where policy varies massively from one mortgage lender to the next. For example, where casual or contract positions may be prohibitive with one mortgage lender, the next may not have an issue. Correct presentation of your home loan application to the right mortgage lender for your situation is a major key to securing your home loan. This is one of the many areas your broker will assist with prior to presenting your home loan application to a mortgage lender.
Credit issues
Credit report – Veda Advantage
With your permission, a copy of your credit file can be obtained prior to lodging your home loan application with a mortgage lender. Most mortgage lenders will also carry out this same check. Your credit report contains information relating to past finance applications, payment defaults, judgments etc. It is important to understand the content of your credit file as even the smallest credit problem can effect your ability to secure a home loan with some mortgage lenders. If you have any doubt regarding what is on your credit file you may request us to obtain this for you prior to submitting your application to a home loan lender.
Can I still access a home loan if I have a credit problem?
Yes you can. Policy varies substantially from one mortgage lender to another so it is important that the nature of any credit problem on your file is understood and explained to the chosen mortgage lender. In some cases, a small credit problem has little impact on your home loan application. Where multiple credit problems are listed, careful consideration needs to be given as to which mortgage lender is likely to approve your home loan application. The good news is, with the 1000’s of products your broker has access to, there is usually a way to secure the home loan you need even with a credit problem.
The bank have said “NO” and I need to find another home loan
Just because your home loan application has been declined by one mortgage lender it doesn’t mean the show is over. Your home loan application may be declined for any number of reasons as policies vary so much from one mortgage lender to the next. Some typical decline reasons include borrowing capacity, savings history, employment history, previous credit problem, residency status, employment status, valuation issues… the list goes on. Often a home loan is declined where an application simply has not contained the required information. If you have been told NO to your home loan from another mortgage lender, we recommend you complete our home loan qualification form. This way your broker can identify any potential issues prior to submitting your home loan application to a new mortgage lender.
Home equity loans or line of credit home loans
What can I use my equity for?
Equity in your property can be used for any worthwhile purpose such as renovations, purchasing another property, a holiday, a new car, consolidating debts, funds for investment, business purposes. Policy regarding use of equity does vary substantially from one mortgage lender to another so it is important that you identify what you require the funds for prior to submitting an application to the right mortgage lender. Like to know more about this topic? Click here and have your home loan question answered in detail.
Costs associated with your home loan
Lenders fees associated with your home loan
Lenders fees can include costs for home loan application and assessment, valuations, legal fees, ongoing fees, deferred establishment fees to name a few. Your broker will help you by identifying these fees to minimise unneeded surprises. Horizon Financial does not charge you a fee for our home loan service.
Government fees
These vary between states and purpose of your funds. If purchasing, it is wise to have your solicitor or conveyancing service verify government stamp duty and registration fees. If refinancing, often a solicitor is not used so it is recommended you carry out your own checks with the relevant government department in your state. In either case, your broker can help you by providing estimates of these costs. In most states, First Home Buyers will receive concessions on their stamp duties.
Conveyancing fees
Where there is conveyancing involved, you should always request a quotation in writing from your solicitor or conveyancing service. Costs will vary depending on the complexity of works requested.
Horizon Financial don't charge you a fee for your home loan
We figure everyone wants a piece of you when it comes to securing your home loan finance. That is why Horizon Financial don't charge a fee for our home loan service. We receive commission payment from your chosen mortgage lender that will vary depending on the lender and type of home loan. This works to your advantage as our commissions are not received until after your home loan is funded. This means your broker will always work with you until you have the keys to the door, debts consolidated or for whatever the purpose of your home loan is for. Your broker will be happy to disclose the commission received upon request.
Topic not covered here?
Our Q&A section is designed to give you a basic but accurate overview of our most commonly asked home loan questions. However, as our home loan service is focused on finding a suitable home loan solution based on your needs, we encourage you to contact us to elaborate on any questions you may have. NOTE: there are no unreasonable questions when dealing with your home loan finances so don’t hold back with anything you may need to know!
