Most frequent questions and answers
A mortgage broker acts as the liaison between the lender and the borrower. They will not only provide you with the most competitive loan rates based on your current financial status, but will also guide you through every step of the loan application process. From beginning to end, a mortgage broker is vital in explaining the commitment to your loan from associated costs, disbursements, and any fees. They also write it all down in a schedule.
Mortgage brokers will also act as your personal agent by following up lenders and answering any questions or concerns you may have when settlement is completed.
ALIC is a specialist mortgage broker. We are independent, which means we have no commitments to any bank and can look for the best loan for you from a range of lenders. Our goal is to provide you with the service you need and advice you can trust to make your property dreams a reality.
You can read more about why so many high net worth clients choose us on our ‘Why ALIC’ page.
Generally, deposits are dependent on the value and type of home loan and the lender you choose. Once you have 5% savings, you’re well underway to achieving your goal and our ALIC brokers will be happy to have a discussion with you.
The appropriateness of either a fixed-rate or variable-rate loan is entirely dependent on your personal financial circumstances.
Fixed-rate loans mean your repayment rates are fixed, which can be helpful if you have budgetary restrictions. If the market changes, it may also mean lower interest rates. Of course, the reverse is also true – changes in the opposite direction mean you may be forced to pay higher interest rates. Refinancing or paying off your fixed-rate loan before the end of the term may also mean paying significant break costs.
Variable-rate loans are typically more flexible, as they have in-built features to accommodate changes in your lifestyle and financial circumstances. They do, however, expose you fluctuating interest rates, which can be both good and bad.
A third option is a split loan, which covers part of your loan under a fixed rate and part under a variable rate. This can help mitigate the detriments associated with either type of loan when taken in isolation.
Lenders mortgage insurance, or LMI, is insurance that a lender takes out to insure itself against the risk of not recovering the full loan balance if the borrower is unable to meet loan repayments. LMI is typically paid as a one-off, non-refundable, non-transferrable premium when you first take out your home loan.
LMI varies depending on the level of risk the lender takes on by loaning you money.
A mortgage offset account is a savings or transaction account that can be linked to your home loan. The balance in this account ‘offsets’ daily against the balance of your home loan before interest is calculated. An offset account can help you cut years off your home loan term and save money on interest.
A redraw facility is a loan feature that is usually available with variable rate home loans and some fixed rate loans. A redraw facility lets you access any extra repayments you’ve made on your home loan.
You can find out more about offset accounts and redraw facilities.
The repayment on your mortgage will always include the interest payable on the amount borrowed, no matter what kind of loan you have. If you have a Principal & Interest loan (P&I), part of your repayment will also be allocated to reducing the balance of the loan.
With an Interest Only loan (IO), your repayments only pay the interest that is due and do not reduce the balance (or the amount you borrowed). As a result, an IO loan can only be obtained for a limited period (usually up to five years). At the end of the IO period, the loan will automatically convert to a P&I loan unless you make an application to extend the IO period.
Saving the deposit for your first home can be difficult and take a number of years. One way to potentially get into your own home sooner is by having a family member act as a guarantor. Many lenders allow parents, or someone who is close to you, to use the equity in their property as security for your home in lieu of you saving the full deposit required. This person is known as a guarantor.
Self-Managed Super Funds (SMSFs) in Australia are allowed to borrow money to purchase certain assets, such as real estate, under certain conditions. This is known as “limited recourse borrowing.” The borrowing must be secured against the specific asset being purchased, and the SMSF trustees are responsible for ensuring that the borrowing arrangement meets certain requirements set out by the Australian Taxation Office (ATO). Additionally, the SMSF must have a strategy in place for diversifying its investments and must not acquire assets from related parties. It’s important to consult a professional financial advisor and accountant before considering an SMSF loan.