Q. What information do I need to provide when I apply for a loan?

A. The supporting information required when you are applying for a loan will vary depending on who you are and your individual circumstances, but there are some typical documents that lenders will need when you are applying for a loan:

Q. Is all of my information kept private?

A. Yes. We do not share any of your nonpublic personal information with anyone, except as permitted by law. Examples of permitted disclosures include providing information to our employees and to third parties who need to know that information to assist us in providing services to you, such as insurance companies, underwriting companies and lenders who purchase loans from us.

Q. What do lenders look at to determine loan approval?

A. Credit - Usually the first thing a loan application processor will do is obtain your credit report. Your credit report will be a good indication of how much risk is involved in lending money to you. Late payment history and other credit problems may affect the qualification results.

B. Income and Job Stability - Your loan processor will contact your employer to obtain information such as your income and how long you've been employed there. You will be asked to provide pay stubs and past W2's as proof of income. Past employers may even be contacted to make sure you've had a good history of uninterrupted income.

C. Property Appraisal - Since your property will be used to secure the loan, lenders must know the value of your property by getting a written report by an appraiser. This appraisal report provides the estimate of the fair market value of your property.

D. Loan to Value Ratio - This is a formula used by lenders to determine how risky a mortgage might be. The loan amount is divided by your property's appraised value. Obviously, the more you can put in as a down payment, the lower will be the loan to value ratio -- and the better your chances are to get the loan approved.

Q. What is LVR?

A. LVR is an abbreviation for Loan to Valuation Ratio. This ratio is expressed as a percentage and is the size of the required mortgage in dollars compared to the property value.

Eg if your property is valued at $500,000; and your loan is $400,000, the LVR is (400,000/$500,000)*100 = 80%
To a lender, a higher LVR is a riskier proposition than a lower LVR.

Q. How can I pay my mortgage sooner?

A. There are a few strategies that you can employ to pay off your home loan faster than the specified term, and unfortunately they all reply on one thing – you putting more of your disposable income into the loan:

Q. What is LMI?

A. LMI is Lenders Mortgage Insurance. Mortgage Insurance generally applies to a loan if you borrow above 80% of the value of your security property. It is an additional cost to the borrower if you wish to borrow above 80%; and it does not protect the borrower in any way; it protects the lender against any losses.

Q. I already have a valuation against my security property – can I use it?

A. No, the lender will always perform their own valuation with their own lender. The lender will arrange for their valuer to inspect the security property and will pass the charge on to you.

Q. Do I get a copy of my valuation?

A. No. The valuation remains the property of the lender.

Q. What is amortisation?

A. This is the schedule of payments over the life of your loan to get the loan from the original dollar amount to zero. An Amortisation Schedule will show the scheduled repayments of a loan through regular instalments over a period of time (eg weekly, fortnightly or monthly repayments over a 30 yr term). Each repayment is made up partly of interest and partly of principle.

Q. What is arrears?

A. Your loan is in arrears when you have overdue loan repayments.

Q. What is Bridging Finance?

A. A Bridging Loan offers you an easy way to purchase or build a new home before you sell your existing one. You essentially have a short term loan that covers the financial gap between the purchase/construction of a property and the sale of a current property. Rather than needing to make two sets of loan repayments while you are selling your existing home, no repayments are required on the new home loan for the Bridging period. The length of your Bridging period depends on whether you are buying or building your new home.

Q. What is a Certificate of Title?

A. A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.

Q. What is Community Title?

A. A property title where several dwellings are erected on an estate, where the owners have access to a community club house, swimming pool, barbecue area, tennis court etc. The owners have to pay levies for upkeep on the community facilities.

Q. What is Company Title?

A. A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser of a unit/flat/apartment buys particular shares in the company which gives the purchaser the right to occupy the unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.

Q. What is Strata Title?

A. Similar to Torrens Title, but usually over units. With Torrens title, the land is owned plus everything thereon. With Strata Title, only a particular unit is owned.

Q. What is Torrens Title?

A. Torrens Title is the most common form of property title in Australia. All previous and current owners are listed on the one deed, as are all previous mortgagees etc. Also know as "RPA" standing for "Real Property Act", the legislation that governs the operation of Torrens Title.

Q. What is Equity in my property?

A. The amount of an asset not subject to any Lender's interest e.g. property worth $300,000, with a mortgage loan of $150,000 - equity is $150,000.

Q. Who is the Mortgagee?

A. The party taking a mortgage over land, usually to secure a loan. (eg a Bank)

Q. Who is the Mortgagor?

A. The party granting a mortgage over land, usually to enable borrowing from a Lender. (eg the borrower)

Q. What is a guarantee?

A. A form of security for a loan where someone else promises/guarantees to repay the loan if the borrower defaults. Most Lenders will consider Guarantees in very limited circumstances only.

Q. What is Joint Tenants?

A. Where more than one person is the owner of the property. If one person dies, then the title reverts to the survivor(s), irrespective of the deceased's will. Refer also to "Tenants in Common".

Q. What is Loan Stamp Duty?

A. The State Government's stamp duty on the mortgage taken to secure a loan. Also referred to as "Mortgage Stamp Duty". Some States offer exemptions on this for first home buyers.

Q. What is a Title Search?

A. A request to the Lands Title Office to ascertain who owns a specified land and what encumbrances are on the title.

Q. What is a Comparison Rate Schedule?

A. The Comparison Rate takes into account the interest rate AND all ascertainable fees and charges for a particular loan product and gives you an “Average Annualised Percentage Rate”, This AAPR allows you to compare loans based on their “real” cost. The schedule displayed by a lender gives the annual percentage rate and the respective Comparison Rate, for the lender's loan products for specific amounts over specific terms.

Q. What is the Consumer Credit Code?

A. Legislation designed to protect the rights of the individual (personal consumer) by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.

Q. What is Depreciation?

A. The accounting practice where the cost of a fixed asset of a business is spread over the life of the asset. Depreciation is a non-cash expense which allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.

Q. What is a Direct Debit?

A. A Direct Debit is where the Lender debits (deducts) a payment directly from a client’s nominated bank account. The client must have nominated this account in writing. Most lenders accept loan repayments in this way.

Q. What is a Draw Down?

A. This is the act of transferring money from the lending institution to the borrower at the time of settling the loan. The money that is drawn down can be disbursed direct to the borrower or to any number of parties, as per the instructions of the borrower and lender.

Q. What is Joint and Several Liability?

A. Essentially, ALL parties to a loan (ie all borrowers and guarantors) are liable for the entire amount of the loan, not just a portion of it. This means that if one borrower defaults, the other borrowers are responsible for that person’s share of the loan. The Bank's joint account authorities, guarantee forms, etc are framed to ensure that joint account holders with debts due to the Bank of joint guarantors liable to the Bank shall be SEVERALLY liable, (i.e. individually), as well as JOINTLY. With Joint and Several Liability a creditor has as many rights of action as there are debtors; he can sue them jointly or severally until he has obtained payment, and an unsatisfied judgment against one debtor will not be a bar to an action against the others.

Q. What are my costs when I refinance out of a loan?

A. These costs can vary from bank to bank; but generally they include:

Q. What is a redraw facility?

A. A redraw facility allows you to redraw from your mortgage any extra funds that you have paid back over and above the scheduled repayments. Some banks charge for each redraw or have rules about the size of each redraw allowed, while others allow redraws for free and allow the available funds to be redrawn in any amount.

Q. What is a Portable loan?

A. Loan portability allows you to keep your current mortgage across to a new property. So if you are selling your home and buying a new one, you can keep your current mortgage and avoid the cost and hassles of establishing a new loan.

Q. What is a split facility?

A. A split facility allows the borrower to split the overall mortgage into a number of sub-accounts; each of which can be different amounts and even different types of loans (eg one could be fixed for 2 years, another a line of credit and the third a regular variable term loan). This can be a great way to “hedge your bets” if you don’t know which way interest rates are going to go; and also a great way to divide your debts into personal (eg your home) and investment debts, to help you and your accountant keep track of what is deductible and non-deductible debts.