Ballarat lending & mortgage FAQ

Our Ballarat business lending and mortgage specialists at Mulcahy & Co get asked a range of common questions by clients and prospective clients. We offer specialised lending and financial solutions for just about any purpose therefore we have a wealth of industry knowledge to guide clients through the finance process.

When it comes to financing a home, business or investment property, there is no such thing as a silly question because every detail is important. Here we have addressed some of the more frequent questions we receive about mortgage and business lending.

Home and investment loans

How much money can I borrow?

The amount you can borrow is commonly known as your borrowing capacity. Your borrowing capacity will differ from lender to lender. To establish your borrowing capacity, call us to arrange an interview for an assessment of your situation.

What is the first home owner’s grant?

The first home owner’s grant scheme offsets the effect of the GST on home ownership by providing a grant to first homeowners. It is a one-off payment to assist eligible first home owners with purchase or construction costs. We lodge the application for the grant on your behalf.

How do I know if I am eligible for the first home owner’s grant?

As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia, with the intention of occupying it as your principle place of residence within 12 months of the settlement. It is important to note that if you are buying the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.

How much do I need to save for a deposit?

Generally, if you are an owner-occupier you will require five per cent of the purchase price as a deposit. If you are an investor, you can access equity in other property as your deposit. The deposit required depends largely on the type of home loan and, of course, the lender you select. If you are a first home buyer and only have a minimal deposit you can get assistance from your immediate family by accessing their equity to eliminate costly Lender’s Mortgage Insurance (LMI).

What other costs are involved?

As a rough guide, it is recommended that you budget five-to-seven per cent of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include, but are not limited to:

  • Government stamp duty
  • Building/pest inspection
  • Valuation fees
  • Lender’s Mortgage Insurance (LMI)
  • Solicitor/conveyancing fees
  • Insurance
  • Connection fees – phone/gas/electricity
  • Rates
  • Removal fees

How long does the whole loan process take?

The whole finance process, from initial appointment to signing the papers can take up to six weeks. However, it generally takes about two weeks to have everything ready. Your Ballarat mortgage broker will follow up with the lenders regularly to keep the whole process on track.

What is lenders mortgage insurance?

Lenders Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. It protects the lender from any losses resulting in the sale of a property due to default by the borrower. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80 per cent of the lender’s valuation of the property. Some lenders will allow you to add the LMI premium to your home loan, others require you to pay it up front.

What documentation will I need to apply for a home loan?

In conjunction with submitting your home loan application, you may need supporting documentation confirming your identity and substantiating your income. Documents can include:

  • Proof of identity such as a driver’s licence, birth certificate or passport
  • Confirmation of any Centrelink monies received
  • Recent pay slips
  • Tax returns and/or group certificates
  • Current bank statements, credit/store card statements, statements on any other loans
  • Contract of sale, receipt for the deposit paid on the house or land. Your broker will be able to provide an accurate overview of what’s required for your individual situation

Refinancing

What is refinancing?

Refinancing lets you change your home loan to suit your new circumstances or get a better deal.

How does refinancing work?

When you take out a new loan, you use some or all of the funds to pay out your existing loan. The new loan often comes from a different lender, but many people refinance with the lender they’ve been using for years. If you move to a new lender, that lender will take care of paying out your existing loan.

What type of things do people refinance for?

By refinancing, you can use your mortgage for home improvements, buying a new car or paying off larger credit card balances. Home loan refinancing may be used for different reasons including:

  • Renovating your home
  • Paying off your debts quicker and cheaper by rolling them into your home loan
  • Obtaining a cheaper rate, even if it means giving up a few loan features
  • To raise cash for a purchase
  • To get a home loan that will apply to money you have earning interest – an ‘all-in-one’ account
  • You are paying a high interest rate – for example, if you arranged a low-start, rising-rate loan from your home builder
  • You want to switch from a fixed rate to a variable rate, perhaps because you can accept the risk of higher repayments

How will refinancing benefit me?

Refinancing is a smart way to manage your money. When you refinance to lower the interest rate you have to pay, you can significantly reduce your monthly mortgage payment as long as you don’t increase your mortgage principal amount (as would occur with a line of credit). Refinancing can save you money and help increase the value of your assets.

Investment loans

Will an investment loan be any different from my existing loan?

There are few differences between what you need to do to borrow for a property you’ll live in and for one you’ll rent out.

Can I use the equity in my home as a deposit?

If you have owned your own home for a few years, you will have built up quite a bit of equity in your property. Instead of finding a cash deposit to buy an investment property, you can use this equity as the deposit. When you buy a property, costs such as establishment fees, solicitor fees and stamp duty add up to a few thousand dollars. Instead of trying to find cash to pay these fees, take them into account in your borrowings.

Why invest in property?

Investment properties have many benefits when building long-term wealth. If you take the time and select your investment properties well – for example, to meet the demands and lifestyle expectations of the changing demographic – property can deliver good returns for long-term investors.