Explaining the Jargen...
Thursday, November 23, 2006
This is to cover administration and preparation of the loan, and often valuation. Fees generally range from $0 up to over $700. Some loans are application fee free.
Fixed rate loans have a interest rate that is locked in for fixed period of generally 1-10 years. Regardless of whether the variable rates go up or down, your rate will not during the fixed period.
Fixed loans restrict your ability to pay extra onto the loan. Some lenders allow up to an extra $20 000 per year. If you refinance or sell the property during the fixed rate period, the break fees can be fairly harsh.
Repayments where only interest charges are made. Interest only periods generally range from 1 to 10 years, then the loan is converted to principle and interest.
Lenders Mortgage Insurance (LMI):
LMI protects the banks in the instance that the borrower defaults and the property is sold for less then the remaining debt. It is normally only paid by the customer when the loan is over 80% loan to value ratio
A Line of Credit works similar to a credit card. An amount is approved that is secured by a property. This amount can then be drawn down by the customer as they please.
Some lenders allow the repayments to add onto the loan (capitalise), while some require a minimum repayment. There is generally no ‘term’ with a line of credit, the bank will review it from time to time.
This feature gives you the ability to access the money that you have paid over and beyond the minimum repayments. The money is transferred back into your bank account – normally via internet banking. Depending of the lender, redraw:
- Can cost between $0 to $50 per transaction
- May be restricted to a minimum amount that you can redraw. E.g. Min $1000
- Can be immediate or take up to one week
LVR is the amount your are borrowing, compared with the price of the property, represented as a percentage.
LVR is worked our by dividing the purchase price by the loan amount
E.g. Purchase price = $400 000
Loan amount = $320 000
LVR = 80%
Mortgage Duty is the fee paid to the Government for the registration of the mortgage
An offset account is a bank account that is linked to your home loan.
Each dollar that is in your bank account is offsetting against the amount in your home loan. Interest is calculated daily, therefore each day you have money in your offset account, it is reducing the home loan balance…and also interest.
E.g.
Loan: $200 000
Offset account balance: $5000
Interest charged on only $195 000
Repayments where both the principle loan amount and interest charges are made.
This is the period that starts once the contracts have been exchanged. It is generally a six week period, although is negotiable between vendor and purchaser.
On settlement day the title of the property is moved over into the buyers name and the keys are made available for the purchaser
Stamp Duty is the fee paid to the Government for the transfer of the title of the property from one name to another
The standard variable rate is just that – a variable rate before any discounts are applied.
Most lenders charge an exit fee if a loan is repaid within four years. The amount is usually a sliding scale which reduces as time goes on.
Any change that has been made to your home loan contract.
posted by Daniel Serratore @ 6:43 pm,
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The Author
Daniel Serratore
Daniel is heading up the new generation of Finance Brokers in Sydney. With his fresh approach and "can do" attitude, Daniel has developed relationships with key people within the Sydney lending market which enables him to source great deals for his clients. Daniel is big on customer service and has built his business purely by referrals from clients and other businesses. You can catch him via the email link on the top of this page
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