Amortisation is the process of decreasing the principal amount over a period of time. It is often calculated in each home loan repayment with interest calculated daily. Refer to P&I.

A comparison rate is a true rate that is calculated by including interest and all other fees and charges into a single percentage rate. It is a tool to help borrowers to identify the true cost of a loan. It normally uses an amount of $250,000 over a period of 25 years.

An early repayment fee, which is also known as an Exit Fee, or a deferred establishment fee(DEF), early termination fee, etc, is a fee charged by a lender to cover the costs the lender incurs in establishing a home loan. This fee is usually charged if your loan is paid out early, typically within the first 5 years. However, this fee has been abolished for all loans settled after 1 July 2011 for all residential properties.

First Home Owner Grant. It is a national scheme, funded by the states and territories and administered under their own legislation. While the basic $7,000 grant applies across all states, some states and territories also provide their own additional grants and stamp duty subsidies, including additional benefits for new construction and new homes in regional areas.

Interest capitalisation is a condition normally applies in a construction loan where the borrower is not required to make any interest or principal repayment during the construction period, and the interest is calculated and added onto the principal, i.e., to be capitalised. When the construction is completed, the whole balance is repaid at the end of term of the construction, or to be converted into a standard home loan.

I/O stands for Interest Only. Normally, an interest only loan is best suitable for property investors, in order to have a maximum tax deduction. It’s very common to have an I/O loan for 5 years when the loan is setting up, and most lenders are happy to extend the loan to another agreed term after the expiry of the first 5 years.

LMI stands for Lenders’ Mortgage Insurance. It’s a one-off payment for a premium of insurance that a borrower needs to pay in order to protect the lender in the event the borrower is in default. In most cases, a borrower is only required to pay a LMI when the LVR is more than 80%. Refer LVR below.

LMI Capitalisation is also known as capitalised LMI. When a borrower borrows 90% of a property value, the premium can be as high as 2.5% of the loan amount. A capitalised LMI is a feature some lenders are offering when the premium of the insurance is added on top of the total loan amount. Therefore the borrower will be paying off for premium over the life of the loan, instead of paying it up front.

LVR stands for Loan To Value Ratio. It is a measurement that indicates the ratio between a loan amount over the value of the property. E.g. if property value is $500,000, the loan amount is $400,000, the LVR is 80%. It is perceived by lenders that the higher the ratio, the higher the risk, and therefore more expensive in getting a loan by a borrower.

An offset account is a separate savings account where the balance is offset daily against the loan amount. For example, if you have $5000 in your offset account, ‘notional’ interest is earnt on these funds, at the same interest rate as your linked loan. This ‘notional’ interest is offset against the interest payable on the loan.

O/O stands for owner occupied. It refers to the purpose of the loan for an owner occupied property as your primary residence, as opposed to the purpose of a loan for an investment property.

Pay As You Go. It refers to a means of incomes as an employee in the employment system, rather than self-employed.

Principal and Interest. This is a method in repaying the loan over an agreed term, normally, in 10, 15, 20, or 30 years’ time. Each repayment consists of an interest component calculated daily, plus an amortised portion of the principal amount. Refer to Amortisation.

When a repayment is set for P&I, Principal and Interest, the monthly repayment amount remains the same, even after some additional repayments are made. However the interest component in the regular repayment is reduced because of the lower loan balance, but the principal components is increased. Therefore the loan principal is paid off faster.

The main difference between the 2 products is the LVR.  With the lower LVR and lower security risk, this means that we can pass on a cheaper interest rate to our clients. In order to qualify for True Saver Home Loan, the LVR must be 75% or less. The other requirement for True Saver Home Loan is the location of the property. The properties in metropolitan areas of NSW, VIC and ACT are regarded as lower risk in an event of a quick sale.
However, The First Choice Home Loan, which is at 6.00%(comparison rate of 6.00%), one of the lowest home loans in the market,  can lend up to 90% of LVR and for most residential properties in Australia.
Please contact the office for accurate assessment.