1. Homeloans Narre Warren South is operated by Mark Laaksonen, Authorised Credit Representative (No. 391052) of Synergy Financial Services. Homeloans Limited ABN 55 095 034 003. Australian Credit License Number 247829 Home buyers guide Home buyers guide Home inspection checklist Home inspection checklist includes inside

2. About Homeloans About Homeloans Homeloans has been providing specialised home finance solutions since 1985. We pride ourselves on award-winning service and on making the process quick, simple and convenient. We provide solutions that could save you thousands, with low interest rates and the exclusive benefits that come free when you take out a loan through Homeloans. Our dedication to award-winning service saw us recognised as Australias Best Non-Bank Lender at the 2011 Australian Lending Awards, as well as Mortgage Manager of the Year at the 2012 Mortgage and Finance Association of Australia (MFAA) Excellence Awards. As a benefit of having a Homeloans loan, you are entitled to our customer benefits program which provides a range of sensational offers from discounts on grocery shopping and fuel, to great deals on dining and entertainment. With an Australia-wide presence, we can manage your finance needs via our network of Accredited Mortgage Consultants and satellite offices. Our customer service team will help you through all stages of the loan application process and be there for you throughout the life of the loan. Homeloans is also proud to be Carbon Conscious, whereby a tree is planted for every Homeloans loan settled. 13 38 39 homeloans.com.au 2. 3. About this guide Welcome to Homeloans Home Buyers Guide, an easy to understand booklet designed to help you through the process of buying a property. This guide provides information on: Loan types Application and settlement process First home owners grant Obtaining finance Property buyers guide Top tips for paying off your loan quicker Home loan FAQs Glossary Buying a home can be one of the most exciting and daunting times in your life, and whether youre deciding to buy with your partner, or by yourself, Homeloans will be there to help you every step of the way. For more information, or to talk to one of our consultants, please contact Homeloans on 13 38 39 or visit www.homeloans.com.au. Good luck! The Team at Homeloans 3. 4. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Loan types explained Loan types can help you choose what style of loan is suitable for your needs. Here is a list of home loan options: Variable vs fixed interest rate loans A fixed interest rate will not change during the fixed period. During the fixed period the borrower knows their repayments will remain unchanged. A fixed rate loan is advantageous if variable interest rates rise. When variable interest rates rise, a borrower with a fixed interest rate is relatively better off because their rate will remain unchanged. Conversely if market interest rates fall, a borrower with a fixed interest rate is relatively worse off because they do not benefit from the fall in variable rates, which move up and down with the market. One of the determinants of variable home loan interest rates is the cash rate set by the Reserve Bank of Australia. When the Reserve Bank alters the official cash rate, most variable home loan interest rates change by a similar amount; however it is important to note that there are a number of other factors that affect your interest rate. Variable rate loans A variable home loan interest rate moves up and down with market interest rates. Fixed rate loan If you choose to fix your interest rate, it will not change during the fixed rate period and your repayments will remain the same. Homeloans offers a range of fixed interest rate home loan options. Lines of Credit A line of credit is a flexible transactional mortgage that allows you to access your funds through a variety of methods including credit card, cheque or EFTPOS. A line of credit is a great option for those wishing to access the equity in their existing home for investment or other purposes such as renovations, a holiday or buying a car. Lines of credit can also be great for debt minimisation. If you are responsible with your money you can have your salary directly deposited into the loan and use your credit card for day to day purchases. This card can then be transferred to your line of credit before your interest free days expire. 4. 5. Split loans A split loan is when the total loan amount is split into more than one component, so that different loan features can be applied to different components. For example, you may choose to split a loan so that part of it has a fixed interest rate and the other part has a variable rate. If you need the security of a fixed rate home loan, but want the flexibility of a variable rate, then a split loan may be the answer. The loan can be split in many ways; however a 60% variable and 40% fixed or 50/50 split are most common. Bridging loans If you have found your next home, but have not yet sold your existing property, bridging finance may be the best option. It is not possible to achieve simultaneous settlement, so a bridging loan can be used to cover the finance gap between the purchase of a new property and the sale of an old property. Full Doc vs Lo Doc Full Doc loans are designed for borrowers who can provide full documentation of their income. This can include payslips, tax returns and other financial statements. Full Doc loans offer the customer greater options when it comes to loan choice as well as a lower rate. Lo Doc loans are designed specifically for self-employed borrowers who are not able to disclose their income. Instead of providing tax returns or extensive financial statements, borrowers can sign a form stating their income. Lo doc loans are available as fully featured home loans or lines of credit, but may be at a higher rate than standard loans. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 5. 6. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 100% Offset loans An Offset loan helps reduce interest costs on a loan by linking the loan to a deposit account. The balance in the transaction account offsets the loan principal. Interest is then calculated on the loan principal minus the balance in the account. For example, if the principal on the loan is $180,000 and there is $5,000 in the offset account, then interest is only calculated on $175,000. Principal and Interest vs Interest only A Principal and Interest (P&I) loan is the most traditional type of loan for home buyers. Your repayments each week, fortnight or month go towards paying the interest accrued on the loan as well as paying off some of the original loan - called the principal. Hence the name Principal and Interest. When you first start paying a P&I loan, the majority of your repayments will be going towards covering the interest that is being charged, and the remainder contributes to reducing the principal amount owing. Over time, as the amount owing decreases, the interest charges reduce and so each payment pays more off the principal. When you take out an interest only loan, as the name suggests you only pay the interest on the loan. This means that you are not repaying the principal, so your loan balance does not decrease. An interest only loan improves your cash flow as the repayments are slightly less than a principal and interest loan, but you have to keep in mind that you are not paying the debt off. Typically an interest only loan is taken out by investors who claim the interest on the loan as a tax deduction, as under the Australian tax system you cant claim the interest as a tax deduction on the home you live in. Many seek to pay off their home loan as quickly as possible with a principal and interest loan, and use an interest only loan on their investment property to maximise their tax deductions. Please keep in mind that this information is of a general nature only and youll need to discuss your personal circumstances with an accredited mortgage consultant to help you choose the right loan structure for you. Other loan benefits and attributes Some home loan providers provide other benefits as part of the home loan package. Homeloans, for example, provides a Customer Benefits Program which entitles our customers to a range of sensational benefits, from discounts on grocery shopping and fuel, to great deals on dining and entertainment. Fantastic deals are available with some of Australias leading brands, including Coles, Woolworths, Caltex, Europcar, BWS and many more! 6. 7. Application and settlement process The following is an outline of how the loan application process will work and the basic steps involved in purchasing or refinancing a property. Remember that your accredited mortgage consultant is available at all times to ensure that this process runs smoothly and can answer any questions you may have. Step 1: Interview Step 6: Settlement documentation This initial interview is for you to meet with an accredited mortgage consultant, who will ask you a number of questions about you and your financial situation. This will enable them to find the best solution for you from our wide range of loan options. Solicitors will be instructed to prepare your settlement documentation which will then be sent to you. This is to be signed by you and returned to the solicitors as soon as possible. Step 2: Loan application process Step 7: Discharge existing mortgage Uponreceivingalloftherequireddocumentation, your accredited mortgage consultant will lodge your loan application for approval. This includes the First Home Owners Grant (FHOG) application where applicable*. If you have an existing mortgage, you must contact us immediately and sign a discharge of mortgage authority form. It is important to do this as soon as possible, as discharging an existing mortgage generally causes the greatest delays in settlement. Step 3: Conditional approval Step 8: Apply for home insurance Once the loan has been conditionally approved you will receive a letter detailing any outstanding matters requiring attention prior to unconditional or formal approval. Unless your loan is for vacant land or construction, you must arrange home insurance and provide the certificate of currency. You cannot proceed to settlement without providing this. Step 4: Property valuation Step 9: Congratulations! Settlement! A valuation of the property to be financed will be arranged, ensuring there is adequate security over the funds being lent. Once all of the conditions are met, you will receive notice of unconditional (formal) approval including any other requirements in order for the settlement to take place. You will also receive confirmation of how the funds were distributed.Step 5: Unconditional (Formal) Approval Once all of the conditions are met, you will receive notice of unconditional (formal) approval. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 7. 8. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au First Home Owners Grant (FHOG) When you purchase your first home or property, you may qualify for the First Home Owner Grant (FHOG). Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria. If you qualify for the FHOG, this money can be used towards your purchase costs. Detailed information about the FHOG for each state and territory is available from www.firsthome.gov.au. At Homeloans, we can even apply for the FHOG on your behalf if you include the FHOG application with your loan application. The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 8. 9. Obtaining finance Obtaining finance for a home purchase can be a complicated process, and there are certain criteria that lenders require borrowers to meet before they will agree to lend you money. This section provides some information on how applications for credit are assessed, giving you a greater understanding of how you can get into a position to have your next application approved. Credit criteria There are a number of criteria that lenders assess each application against. The main criteria are explained below. Serviceability One of the factors used to assess an application, is the lenders judgement on the ability of the applicant(s) to make the loan repayments without experiencing financial hardship. The lender will consider a range of factors including income, expenses and other liabilities in order to determine whether or not the applicant will be able to comfortably make the loan repayments, even in the event of interest rate increases. Loan to value ratio (LVR) Another factor to consider is the Loan to Value Ratio, or LVR. This is the amount you are planning to borrow as a percentage of the value of the property. Any savings the borrower has can be used to reduce the amount being borrowed which will in turn reduce the LVR. The LVR is important because if the borrower is unable to repay the loan and the lender is required to repossess the security property, the lender will want to ensure that the value of the property provides sufficient equity to repay outstanding debt(s) and interest. In many cases lenders will lend up to 95% of the value of the property, however if the LVR is higher than 80% mortgage insurance will usually be required. Mortgage insurance serves to protect the lender against the borrower being unable to repay the loan. The mortgage insurance premium is normally paid by the borrower. When mortgage insurance is involved, the application must satisfy the lending criteria of the mortgage insurer as well as the lender. Credit history The credit history of the applicant(s) is also considered. If an applicant has previously defaulted on a loan, has missed a credit card payment, or has been declared bankrupt, this will reflect on their credit history and will be accounted for when the lender is assessing the application. It is recommended that you talk to an accredited mortgage consultant or broker about how your credit history affects your ability to obtain finance. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 9. 10. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Verification of financial information Upon applying for a loan, borrowers will be required to provide verification of their financial information including proof of income from their employer, bank statements demonstrating savings, and details on other assets and liabilities. The lending institution will require such information to ensure that the applicant meets the appropriate lending criteria. Some applicants however, may not be in a position to provide such information. For example those who are self-employed may not have the ability to provide proof of income. For these applicants a different type of loan exists a low documentation or Lo Doc loan. On a Lo Doc loan the lender does not require the same level of evidentiary documentation as with a fully verified loan. As the loan is considered a higher risk to the lender a higher interest rate may apply and maximum LVR limits are lower than those applied to fully verified loans. How much can I borrow? Most home loan providers allow you to borrow up to 95% of the value of your property but you may have to pay lenders mortgage insurance if your loan amount is more than 80% of the value of your property. Visit www.homeloans.com.au/calculator to measure your approximate borrowing potential. What will my repayments be? This depends on a number of factors, including the loan size, the term of the loan (i.e. how many years), and whether it is principal and interest (P&I) or interest only. The below table provides an idication of various loan scenarios based on a P&I structure. Home loan monthly repayments Loan size 5.00%pa 5.50%pa 6.00%pa 6.50%pa 7.00%pa 7.50%pa $250K $1342 $1419 $1499 $1580 $1663 $1748 $300K $1610 $1703 $1799 $1896 $1996 $2097 $350K $1879 $1987 $2098 $2212 $2329 $2447 $400K $2147 $2271 $2398 $2528 $2661 $2797 $500K $2684 $2839 $2998 $3160 $3327 $3496 $600K $3221 $3407 $3597 $3792 $3992 $4195 Visit www.homeloans.com.au/calculator to see what your repayments would be on more precise loan scenarios. The figures quoted in the table above are rounded to the nearest dollar and should be used as an indication only. They do not represent quotes or pre-qualifications for a loan. Monthly repayment amounts for individual loan contracts may vary. The repayment amount is based on a 30 year loan term making principal & interest repayments. Interest rates quoted are not comparison rates and do not include allowances for fees and charges over the life of the loan amounts quoted. It is advised that you consult your financial adviser before taking out a home loan. 10. 11. What to do if youve had a finance application declined While a lender may decline an application, this doesnt necessarily mean the customer can never borrow money from that lender at some stage in the future. It simply means that based on the applicants current financial situation, the proposed purpose of the loan and/or the borrowers credit history, the lender is not prepared to lend at that time. It may be that a prospective borrower needs to save more, borrow less or wait for a pay rise. If you are in a situation that you have had finance declined, talk to an accredited mortgage consultant or broker about your options. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 11. 12. Home Inspection Checklist Property Details Address: Price estimate: $ Selling agent: Contact name: Phn: Email address: Property Information Land size: Dwelling size: No. bedrooms: No. living rooms: No. bathrooms: Water pressure: Roof condition: Structural condition: Property Exterior Poor Avg Good Poor Avg Good Landscaping / garden Walls Fencing Gutters / downpipes Garage / undercover Footings / timber stumps Security Exterior doors Privacy Termite damage Roof Sub-floor ventilation Comments Property Interior Poor Avg Good Poor Avg Good Floors / floor covering Heating: Central / fireplace Ceiling: Cracks / leaks Cooling Walls: Cracks / leaks Storage / cupboards Paint / wallpaper Windows: Ease of use etc. Doors: Ease of use etc. Light fitting / switches Comments Bedrooms Main 3 3 4 Comments Adequate size Y / N Y / N Y / N Y / N Powerpoints sufficient Y / N Y / N Y / N Y / N Robe built-in/walk-in Y / N Y / N Y / N Y / N Overall rating We have compiled the following checklist to assist you with your property search. 12. 13. Bathrooms Main 3 3 4 Comments Number of bathrooms Y / N Y / N Y / N Y / N Tiles: Cracks / grout Y / N Y / N Y / N Y / N Walls: Water damage / mould Y / N Y / N Y / N Y / N Plumbing / water pressue Y / N Y / N Y / N Y / N Overall rating Kitchen Poor Avg Good Poor Avg Good Tiles: Cracked / grout Cupboards Plumbing / water pressure Bench space Dishwasher / oven / cook top / rangehood Comments Laundry Poor Avg Good Poor Avg Good Bench space Taps / basins Plumbing / water pressure Comments Location Poor Avg Good Poor Avg Good Traffic: Light / heavy Public transport Distance to shops Distance to schools Distance to medical Recreation (parks, beach, gym) Comments Floor Plan Sketch Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 13. 14. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Tips on property buying There are several important things to consider when youre buying a house. It will be one of your biggest investments, so make sure there are no surprises when you move in. See our Home Inspection Checklist on page 12, to make sure you dont miss anything important when inspecting prospective properties. Checking the title A title is the short name for Certificate of Title. The title gives details about the registered owner and details of any easements, mortgages, caveats or covenants. Check: Whether there are any easements an easement is something that restricts the ability to use the land, for instance a driveway through your property to a neighbours property. Details about any mortgages that currently exist on the property. Whether there is a caveat this is a warning sign that alerts you that someone else claims an interest in the property. Whether there is a covenant that imposes restrictions on homes that can be built on the lot, such as quality of home, maximum height or location of dwelling If there is a mortgage or a caveat, it does not mean the property cannot be sold, but to give you a good title they must be removed by the seller before, or at, settlement. Remember, most properties have a mortgage that the seller will pay off with the money from the settlement. Types of titles There are a number of different types of titles used throughout Australia. For example: Torrens title - this is the most common title and gives the buyer a guarantee of good title because the title is registered. Strata title - this is used for many flats, units and multiple living areas such as retirement villages. You usually get a title for your individual unit as well as one for your parking space (if you get one). You also have responsibilities for the common area through a structure called a body corporate. Company title - under this structure you dont own a title; you are allocated shares in a company that owns the title. When you sell your unit, you transfer your shares in the company. General law or old system title - this was the original type of title used. There are not many general titles left. 14. 15. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Buying off the plan Buying off the plan refers to buying a property before it is completed. This is common in todays property market, especially for inner city apartments and large developments. The deposit that is paid secures the property and the contract, and the balance is paid when the property is completed. Make sure you know: What the property will look like when it is completed. That you have somewhere to live during the construction of the building. Whether the developer has a track record or their work is available for inspection. The local council Check whether: There is a vacant block of land next to or near the property and if there are any plans for a block of flats or apartments to be built next door. This might affect your privacy and re-sale value. There are any zoning or building restrictions on the property. The property is properly zoned for your use. There are any buildings or other structures that were built without a permit. Wiring and plumbing have been legally connected. The statutory authorities Make sure you check with the statutory authority who can tell you: Whether they have any interest in the property you want to buy. Whether there is something that is going to happen in the area that might affect your use of the property. You should always get these certificates, even if it seems to be a waste of your time. You will want to know: The adjustments on the purchase price resulting from unpaid or unused rates and taxes. If there is some reason you will not be able to use the property in the way you intend, for example, if you want to renovate. Whether there are any major works, like freeways, to be built in the area. Whether there are services, like gas and electricity available. Potential costs Property and pest checks Legal / conveyancing services Stamp duty (you may be exempt, contact your State Revenue Office). Title searches and rate certificates Mortgage costs Land titles office - registration fees. 15. 16. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Top tips for paying off your home loan sooner! A mortgage doesnt have to dominate your life forever. With some smart and simple strategies, you can shave years off your home loan and own your home debt-free, sooner! For those who are serious about chipping away at their home loan, here are some top tips: 1. Overpayment makes a big difference Did you know that by paying just a few dollars extra off your home loan each month you can make a huge difference? If you have a $300,000 loan over a 30 year loan term, paying an extra $50 per month could slash two years off the life of your loan not to mention reduce your total interest charges by over $20,000!* Surely thats an incentive to reduce the number of takeaway coffees! And if you can manage to pay an extra $50 per week, you could save over $105,000 and more than seven years!^. 2. Adjust your spending to enable overpayments Most loans will allow you to make extra payments, so where possible its a good idea to consider paying more than the minimum amount. Not only does this enable you to pay off your loan faster, but it will enable you to get ahead on your repayments. It means that if at some point you are unable to make one of your repayments, you may have paid off enough previously to cover it (however, be sure to advise your lender in advance; you may need to redraw the repayment amount from your loan and deposit it into your bank account so that the direct debit loan repayment can still occur). 3. Make a lump sum (or mini lump sum) repayment If you receive a lump sum such as a tax return, a bonus from your employer, or any other payments, put them into your loan account. Even if you plan to spend this money, similar to the above point, start with them on your loan and redraw them as appropriate (provided your loan has redraw or an offset account). 4. If your loan has redraw or offset, dont use a savings account as well Even if you plan to use the savings, many would recommend that you keep them in your loan account as redraw, or in your loan offset account. By doing this, you are reducing the interest liability on your loan, which is likely to be at a higher interest rate than you would get on a savings account. Thus it is effectively earning you a higher interest rate. Further, interest on a savings account may be taxable, meaning you could be liable for a tax debt come tax-return time, or could reduce your tax refund. Examples quoted above should be used as an indication only and as such should not be relied upon without first seeking independent financial advice based on borrowers individual circumstances. *Based on repayments of $ 1,946 per month at 6.50% pa on a loan of $300,000 over an original loan term of 30 years (original repayments $1,896 per month). ^Based on repayments of $ 2,111 per month at 6.50% pa on a loan of $300,000 over an original loan term of 30 years (original repayments $1,896 per month). 16. 17. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 5. Remember: There are more than four weeks in a month Many people work their finances on the misconception that there are four weeks in a month. Those who are paid fortnightly might set aside every second pay to go towards their monthly loan repayments. However, on average there are, in fact, 4.3 weeks in a month. This is good news, as it means that if you are paid fortnightly and set aside every second pay, you will, in fact be setting aside 13 pays not 12 per year to cover monthly mortgage repayments. (52 weeks = 26 pays, therefore 13 are allocated to repayments). Put the extra pay onto your loan! 6. Have your wages paid into your offset Say you get paid $5,000 a month and those funds sit in your offset account for a few extra days a month you could save a few hundred dollars in interest every year. Whilst it might not sound like much, it all adds up! The interest is debited at the end of each month and usually calculated daily, so you can greatly reduce the interest that you pay. 7. Align your mortgage repayments with your income For example, if you are paid fortnightly, then make your mortgage payments fortnightly. By doing this, you can cut down on interest payable and save a lot of money over the course of your home loan. 17. 18. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Frequently Asked Questions How do my loan repayments work? You repay your home loan through weekly, fortnightly or monthly repayments for the life of the loan. Your repayments will essentially take into account the annual interest rate, loan term, repayment frequency and loan amount. Loan repayments can be organised through BPAY, direct debit or in the case of offset accounts, electronic funds transfer. Please refer to our repayments calculator at www.homeloans.com.au/calculator to get an idea of your repayments. What is redraw, and how do I access redraw? Redraw is a feature which allows you to withdraw the extra money youve paid into your home loan, in addition to your scheduled repayments. On most loans you can redraw as often as you like, as long as you have made additional repayments over and above your scheduled repayments. Why would I need an ATM card for a home loan? If you have the option of a redraw facility on your home loan, you may be provided with an ATM card. You can use your ATM card to make withdrawals from your redraw account as long as you have made additional repayments over and above your scheduled repayments. Can I have a credit card linked to my loan? Yes, some loans offer a credit card as part of the home loan package. They work much like a normal credit card and are paid back monthly from your line of credit. Credit card packages vary depending on the home loan product. What if Im self-employed? Loans for self-employed borrowers require little or no documentation or financial paperwork and include all the features of a standard home loan. Instead of providing tax returns and financial statements to verify your income, you simply sign an income declaration stating how much you earn. As a general rule, you may borrow up to 80% of the propertys value. 18. 19. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Lo doc loans are typically available for borrowers with a good credit history and a current ABN. Options are usually available for borrowers who wish to borrow more than 80%, who may be credit impaired or do not fit within traditional lending requirements. How do I know which loan is best for my needs? It depends on your individual circumstances. There are a myriad of loans to choose from and the best way to figure out the most suitable loan for you is to speak to an accredited mortgage consultant. It is important to deal with a trusted professional organisation as it is one of the biggest decisions youll ever make. What is lenders mortgage insurance (LMI)? Lenders Mortgage Insurance (LMI) covers the lender in the event of the borrower defaulting on their loan. If the property is subsequently sold, and the amount from the sale is insufficient to pay off the loan in full, this insurance will cover the lender for the shortfall. As a rule of thumb, this insurance is required if you are borrowing 80% or more of the valuation of the property. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 19. 20. Glossary A Acceptable referee Includes accountants, solicitors, magistrate, doctor & justice of the peace Acceptance To agree to the terms and conditions of an offer or contract Additional repayment Extra funds paid into the loan over and above the minimum prescribed payments Allotment The area of land that is subdivided into smaller portions of land Amortisation To pay off principal and interest under a loan over a period of time, usually by instalments Application fee The fee that is charged by a lender when you lodge a loan application Appreciation When the value of the property increases from its original value B Body corporate levy The fee paid to a body corporate to cover various administrative costs relating to the common property Bridging finance A shorter term loan that is taken out to purchase a new property before selling your existing property Break cost Relates to fixed rate loans where the borrower terminates the loan contract before the expiry of the fixed rate period C Capital gain The amount by which proceeds from the sale of property exceeds the original purchase price Certificate of title This document details the land dimensions and ownership details, and whether there are any encumbrances Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 20. 21. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Certificate of currency A certificate issued by an insurance company showing that a building is insured Company title The title where the unit holders are shareholders in a private company Comparison rates A comparison rate is a tool to help consumers identify the true cost of a loan. It is a rate which includes both the interest rate and the ascertainable fees and charges relating to a loan, reduced to a single percentage figure Contract of sale A written agreement outlining the terms and conditions for the purchase or sale of property Cooling off period 5 day period after exchange of contracts during which time the contracts may be cancelled D Default Failure to meet debt payment on due date Deposit A portion of the purchase price, usually 10%, is paid by the buyer at the time of exchanging contracts on the purchase of a property Depreciation The value of the property decreases Debt service ratio Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage most lenders set a maximum DSR between 30% to 33% Deferred establishment fee Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the loan Drawdown Debiting of loan funds at settlement Discharge fee Fee charged when a loan is discharged 21. 22. E Economic cost A fee which may be payable if, during a fixed rate period, the borrower makes certain changes such as switching the loan from a fixed to variable rate or fully prepaying the loan prior to the expiry of the fixed rate period. Economic cost is the lenders estimate of its loss resulting from the change Equity The difference between what you owe and what your property is currently worth Exchange of contracts An exchange of contracts is when the buyer and seller enter into a binding contract that commits them to the purchase/sale of the property F Financial institutions Duty FID is state duty on the receipts of financial institutions Fixed interest rate An interest rate that allows you to lock it in for a set time period Formal approval When the lender formally approves your loan application and offers you unconditional approval Full Doc loan Full Doc loans are designed for borrowers who can provide full documentation of their income. This can include payslips, tax returns and other financial statements. Full Doc loans offer the customer greater options when it comes to loan choice as well as a lower rate G Gross income Total income before tax GiroPost A facility allowing you to conduct banking transactions through the post office H Home equity loan A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, or shares or other investments. The interest rate is generally higher than a standard variable rate and these accounts are not suitable for everyone Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au 22. 23. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Honeymoon rate Term applied to introductory loans. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term the loan reverts to the standard variable rate I Interest only loan Usually a short term arrangement whereby payments are made on the interest only, not the principal J Joint tenants The holding of property by two or more people in equal shares L Lenders Mortgage Insurance (LMI) Some lenders may provide up to 95% of funds for a loan if you agree to take out mortgage insurance (LMI). This figure is a one off payment usually made at the time of settlement. The figure is calculated based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrowers debt is transferred to the mortgage insurer Line of credit A line of credit is a flexible transactional mortgage that allows you to access your funds through a variety of methods including credit card, cheque or EFTPOS. A line of credit is a great option for those wishing to access the equity in their existing home for investment or other purposes such as renovations, a holiday or buying a car. Lo Doc Loans Designed for borrowers who are unable to disclose regular income. Instead of providing tax returns or extensive financial statements, borrowers can sign a form stating their income. Loan to value ratio (LVR) This is the measure of the amount of the loan compared to the value of the property. For example, if you have borrowed $160,000 and your property is valued at $200,000, the LVR would be 80% M Mortgage offset Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage Mortgagee The institution who lends the money 23. 24. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Mortgagor The person who borrows the funds N Negative gearing Where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assessable income for taxation purposes Net income Gross income less tax O Ombudsman The Australia banking industry ombudsman provides an avenue through which customers can make complaints about their bank and have them dealt with independently Offset loan Helps reduce interest costs on a loan by linking the loan to a deposit account. The balance in the transaction account offsets the loan principal. Interest is then calculated on the loan principal minus the balance in the account. For example, if the principal on the loan is $180,000 and there is $5000 in the transaction account, then interest is only calculated on $175,000 P Portable loans A portable loan allows you to sell your house and move to a new one without having to refinance. The main benefits of portability apart from not having to refinance is utilisation of stamp duty and not having to pay break costs if you are on a fixed rate Pre-approval When a lender advises you in writing how much they will lend you, subject to lending terms and conditions Principal The amount owing on your loan. Principal & interest loans A loan in which both the principal and interest are paid during the term of the loan R Redraw facility Allows you to access any additional repayments you have made on your loan 24. 25. Contact Homeloans today for an obligation free consultation 13 38 39 Homeloans.com.au Refinancing To move your loan from one lending institution to another S Security The property that the lender has at its security over the funds lent, to ensure its debt can be recovered. Settlement The completion of the sale transaction. Final payments are made at settlement in exchange for the relevant documents. The purchaser can then take ownership of the property Servicability The applicants ability to re pay (or service) the loan. Service fee Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware Split Loan A split loan is when the total loan amount is split into more than one component, so that different loan features can be applied to different components. For example, you may choose to split a loan so that part of it has a fixed interest rate and the other part has a variable rate. Stamp duty Stamp duty is a state government tax which is calculated on the sale price of the property. Stamp duty is also payable on mortgage documents and is calculated on the amount borrowed Standard variable rate (SVR) The rate which lenders apply to their premium home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset Strata title Title that is commonly used for units, which forms part of the owners corporation Switching fee A fee charged where an existing borrower wishes to change from one loan type to another e.g. variable rate loan to fixed rate loan T Tenants in common The holding of property by two or more people in equal or unequal shares Torrens title Title that grants ownership of land 25. 26. Transfer A document registered in the Land Titles Office recording the change of ownership U UCCC The uniform consumer credit code. A federal act of parliament to ensure uniformity amongst all credit providers. E.g. all loan contracts must now adhere to a uniform format as specified by the act. It must set out all fees / charges that the borrower (and, if required, guarantor) are liable for under the loan contract V Valuation A report as required by the lender detailing a professional opinion of the property's value Valuation fee Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan Variable Interest Rate Variable home loan interest rates move up and down with market interest rates. 26. 27. Notes 27. 28. Low interest rates Award winning service Generous customer benefits Quick, simple and convenient Homeloans Limited. ABN 55 095 034 003. Australian Credit Licence Number 247829. Contact Homeloans today to find out how we can get you into the home youve always wanted 13 38 39 homeloans.com.au