Lenders Mortgage Insurance (LMI) is one of the most popular ways to achieve the dream of home ownership sooner for borrowers that do not have a large deposit. Most lending institutions require borrowers to contribute a 20% deposit before they will agree to provide a loan. This is largely to protect against the risk associated with providing the borrower with the loan in the event that they default.

This is a loan where the borrower is only required to pay the interest on the loan rather than principal. These loans tend to be popular mainly with investors who wish to make minimum repayments whilst the property hopefully grows in value or for negative gearing purposes. Repayment savings do lessen the financial pressure in the short term however there are risks in taking a loan that does not pay off any principal. One major disadvantage is that even though you are making repayments every month you are not reducing your mortgage. So if the property does not increase in value, it means you are not accumulating equity.

This home loan feature is operated in concurrence with your home loan account. They function the same way as a regular savings or transaction account meaning you have immediate access to your funds and on many you can earn interest comparable to a standard savings account. The interest earned is then deposited into your home loan account which reduces the account balance and in effect then reduces the interest you pay. In addition the interest earned is not taxable. Example: Loan Amount: $ 200,000 Interest Rate: 4 % Offset Balance: $ 30,000 Offset Interest Rate: 2 % Interest Saving $ 600 (assuming the $30k remains in the offset account for a full year) 100% OFFSET ACCOUNTS however are a little different and are often a far more popular option. These accounts earn interest equal to your home loan interest rate. Using the same example as above except this time with a 100 % Offset Interest Rate of 4 %, the Interest Saving is $ 1,200 (assuming $ 30k remains in the offset account for a full year)

A redraw facility allows you to deposit extra money (above your regular repayments) directly into your home loan account. You can then redraw those extra funds if and when you want to. In respect to saving interest, a redraw facility has a very similar effect to a 100 % offset account. If you consider the example used earlier, it means that with a redraw you would be paying 4 % interest on $ 170,000 instead of on $ 200,000 (because of $ 30,000 in redraw) OFFSET vs REDRAW So if redraw facilities and 100 % offset accounts have very similar savings, which one is best for your needs?

Interview - Initial Finance Assessment understanding objective and goals. Loan Application - Your Mortgage Professional will work with you through a number of documents including a Needs Analysis Credit Quote & Proposal and the lenders application. They will also explain what is required in relation to the necessary supporting documentation required so your home loan application can be lodged. Lender Assessing Application - The Lender will assess your application to determine whether you meet their credit requirements. This process includes confirmation of your income, employment and a credit reference check. Your supporting documentation is also assessed at this time. If the credit assessor requires any additional information they will send through a request to the Mortgage Professional. Timeframe: Depending on the Lender - between 24 hours and 14 days. Conditional Approval - Your Mortgage Professional will receive a communication on your behalf, from the Lender in the form of a conditional approval. Within the approval, the Lender will outline any matters that need to be addressed before they can issue an unconditional approval. Your Mortgage Professional will advise you when they receive this approval. Valuation - The most common condition of an approval is valuation of the security being provided. The lender will order the valuation which could take up to 3-4 days to complete. The valuation is often included in an application fee if there is one applicable. Formal Approval - When a home loan application is formally approved (also known as unconditionally approved) it means that all conditions and criteria required to assess the application have been supplied, assessed and approved. It is only when formally approved that the borrower can feel comfortable they can obtain a home loan. If you are buying a property it is advisable NOT to exchange contracts until your loan has been formally approved. Your Mortgage Professional will be notified of formal approval and will then notify you. A formal Letter of Offer will be issued by the Lender. Mortgage documents will be prepared and sent directly to the applicant/s or their solicitor, depending on what was requested. Mortgage Documents - Documentation provided to you by the Lender includes the letter of offer; transfer document; terms and conditions of the loan and any other documents that are pertinent to the Lender’s own guidelines. If a purchase is involved then it is highly recommended that you go through the paperwork with your conveyancer and for the conveyancer to liaise with the Lender to schedule a settlement date. If the loan is just a refinance or a ‘top up’ it is recommended you sit down and go through these documents with your Mortgage Professional if you have opted not to use a conveyancer. Settlement After the mortgage documents are signed, witnessed and sent back to the lender, then settlement is arranged via your solicitor/conveyancer or if there is not a necessity for a conveyancer then the Mortgage Professional will be involved to ensure settlement is completed.