Frequently Asked Questions

Some of the questions we are frequently asked.

1. Q. What does LVR mean and how is it calculated?
2. Q. What is LMI and when do I have to pay it?
3. Q. What is a Fixed Rate loan and a Variable Rate loan and what is difference?
4. Q. What is an Introductory rate loan?
5. Q. When is the best time to refinance my loan?
6. Q. What is a Line of Credit equity loan?

1. Q. What does LVR mean and how is it calculated?
A. LVR stands for Loan to Value Ratio. This is value of the loan in relation to the value of the property being financed. For example, if there was a loan of $80,000 on a property with a value of $100,000, the LVR would be 80%.

2. Q. What is LMI and when do I have to pay it?
A. This is a form of insurance, which protects the lender, but if applicable, is charged as a cost to the borrower. The mortgage insurance guarantees that the lender can recover certain losses that may be sustained as a result of lending to the borrower. This is why it is called Lenders Mortgage Insurance (LMI). It is usually charged when the LVR of a loan exceeds 80% for a Full Doc Loan, and 60% for a Low Doc loan. Some lenders may charge a higher rate of interest where this fee is built into the rate and not as an extra charge to the borrower.

3. Q. What is a Fixed Rate loan and a Variable Rate loan and what is difference?
A. A Fixed Rate is loan is loan that has the same interest rate over the number of years it is fixed. For example a 7.55 3-year Fixed Rate loan will have the same interest rate throughout the 3-year period. The repayments for that period will not change. You will know exactly what your repayments will be and can set a budget accordingly. A Variable Rate loan is a loan whose interest rate may change over time depending on market conditions. If the market rates go up, there is likely outcome of your interest rate increasing as well, which will make your monthly payments higher. On the flip side, if market rates go down, there is the same likely outcome of your interest rate decreasing, which will make your monthly payments less, thus saving you money.

4. Q. What is an Introductory rate loan?
A. Introductory rates sometimes referred to as Honeymoon rates are variable rate loans that offer a discount for a certain period of time starting when you take out the loan, usually 6 months or one year. After that period of time, the loan will revert back to a variable rate loan.

5. Q. When is the best time to refinance my loan?
A. This depends on a number of different factors, including your outstanding balance, your current interest rate and any outstanding debt that you may have. Even if you currently have a low rate on your mortgage, it may save you money to refinance and pay off your high interest credit cards and home equity loans. Contact our professional consultants for the best options & savings that may be available to you.

6. Q. What is a Line of Credit equity loan?
A. This type of loan is an 'all in one' type of loan facility where the one account operates as both a loan and transaction account. A line of credit facility usually comes complete with transactional options such as a chequebook, eftpos card and credit card. They are also usually referred to as 'evergreen' type of loan. This means that instead of having a set term of 25-30 years like other mortgage loans, they have no set term and can also be interest only. A scenario where they are often utilised is for an investor who wishes to borrow against the equity in a property they already own, for future investment use, and they do not want to pay interest on the loan (a line of credit facility can have a nil balance and no interest is charged whereas a traditional mortgage will close when the balance is reduced to nil) until such time as they actually make their investment.

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