Frequently Asked Questions

Your maximum borrowing capacity and the amount you should borrow are often different. Just because a bank or lender is willing to lend you a certain amount, doesn’t mean that amount is right for your individual needs. Determining your maximum borrowing capacity should be carefully assessed by looking at a number of factors including your income and individual spending habits. When looking at borrowing capacity, the two limiting factors are your savings/deposit and your available cashflow.

Example 1 – If Jenny is looking to by a $600,000 home, has no savings/deposit but has sufficient income to make loan repayments, Jenny would be unable to purchase a property as she is unable to pay for the upfront costs (deposit, stamp duty and other purchase costs).

Example 2 – If Jenny has $200,000 saved but has insufficient income, she would be unable to purchase the property. Although Jenny has enough money to pay for the upfront costs, she would be unable to make the ongoing loan repayments. In some instances, a family/equity guarantor can be used in place of genuine savings.

Stamp duty is a tax charged by the state government when purchasing a property (also known as transfer duty). The amount of tax charged can differ depending on a number of factors, including; property value, property location and available grants and/or schemes the state government offer. In NSW, first home buyers have access to the First Home Buyers Assistance Scheme (FHBAS) which provides a stamp duty exemption for first homes valued up to $650,000 and a partial stamp duty exemption for first homes of up to $800,000. To find out more above the ‘First Home Buyers Assistance Scheme (FHBAS)’, check out the latest information on the on the NSW Government Revenue – Grants and Schemes website.

A guarantor home loan allows parents to assist their children in purchasing a home by using the equity in their home or investment property in place of savings. This can assist first home buyers to get into the market sooner as the first home buyer doesn’t have to save the full 20% deposit. When a guarantor uses their equity in place of a deposit, they are essentially putting up a portion of their home as collateral so the lender will accept the loan application. As this is the case, guarantor loans need to be handled with care and all parties need to ensure they fully understand the risks involved.

Guarantor loans can be a great way for young people to buy their first home but it’s important to speak with your mortgage broker and obtain legal advice before applying for a loan.

Lenders Mortgage Insurance (LMI) is a premium charged by the lender when borrowing more than 80% of the property value (having less than a 20% deposit). LMI is not a set dollar amount and will fluctuate depending on the loan balance and the amount of deposit available.

Example – Matt wants to purchase a $700,000 home and has $70,000 saved for a deposit. A lender may accept the 10% deposit but will charge Matt an LMI fee of $15,000 due to the increased risk the lender is taking on. Many lenders capitalise the LMI fee into the loan so in Matt’s case, the total loan amount would be $630,000 + 15,000 LMI fee ($645,000)

LMI increases the loan balance which increases the interest charged by the lender so before taking out a loan with LMI, it’s important to obtain professional advice to ensure LMI is right for your individual needs.

The Principle & Interest repayments structure means that you’re paying down the loan over the Loan Term, whereas Interest Only means you’re only paying back the interest to the bank.

If you make P&I repayments, your loan balance will slowly reduce until the loan is fully repaid. If you make Interest Only repayments the loan balance will not reduce until The repayment structure is changed to include principal Repayments.

There is no one correct Loan Repayment structure so it’s important to discuss your options to ensure your Loan is tailored to your individual needs.
A fixed rate loan means that the interest rate is fixed for the fixed rate term. Usually, fixed rate loans can be set for between 1 and 5 years. In that time, your monthly repayment will be the same each month until the term comes to an end. A variable rate loan means that the interest rate can move up or down depending on the market and the lenders decision. This means that your repayments can fluctuate up or down throughout the life of the loan. There is no one right answer when it comes to fixed or variable repayments and determining what’s right for your individual needs will depend on your personal outlook, your financial goals, and the financial market.

Fixed rate loan

Fixed rate home loan means you can lock in an interest rate for a set period of time. You can choose to fix your loan between one to five years. The benefits of locking in your rate for a fixed term include:

  • The piece of mind knowing that your interest rate will not change for the entire fixed term.
  • Ability to budget better as there won’t be any surprises when it comes to your repayment amount, you’ll be able to better plan and budget for the money you’ll need (for the fixed term).

The downside of locking in your rate for a fixed term include:

  •  You can’t benefit from any variable interest rate reductions if they occur within the fixed term.
  •  You won’t be able to create an offset account to help reduce your interest rate.
  •  Break costs may be charged on a fixed rate loan when you make additional repayments above a certain amount (depending on the lender), switch to a different product, repay the loan in part or in full before the end of the fixed rate term.

Variable rate loan

Variable rate home loans will vary as lender adjusts its interest rates from time to time. The benefits of a variable rate include: You’re able to take advantage of rate reductions that the lender passes on. 100% offset is available to lower the interest payable on your loan. Ability to make additional repayments to help you save on interest and pay down your loan faster. The downside of a variable rate include:

  •  If the lender increases the interest rate, your rate will also increase.

The below table provides examples of the deposit required to purchase a property. In most instances, if you’d like to avoid paying Lenders Mortgage Insurance (LMI), you’ll need a deposit of 20% or more of the property value.

You may be able to purchase a home with as little as a 5% deposit with the assistance of LMI.

Purchase price of property
Minimum deposit required
Without Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) required
20% deposit
5% deposit
SFP Purchase price of property table

Home Buyers

Looking to upgrade or downsize?

Looking to upgrade the family home or downsize for retirement?

There’s often a lot to think about.

We’re here to help

SFP have been assisting clients with strategic debt advice for over 20 years. Our unique difference is in our wealth of knowledge from both a mortgage broking and financial advice perspective. We’re able to assist with obtaining finance and ensure you receive the correct financial advice to make the right financial decisions in your next big move.

Choosing the right loan

With 1000’s of home loan products available in Australia, it can be difficult to find the right lender and loan for your needs. Our specialist finance team works with a panel of over 30 different lenders including big banks, credit unions and non-branch lenders to ensure we find the right home loan for your individual needs.

Don’t forget the buying & selling costs

There’s a lot to think about when moving home and it’s easy to forget the costs involved in the selling and buying process. Before putting your home up for sale or placing a deposit on a new home, it’s important to assess all the costs to ensure a smooth transition into your new home. Below are some of the costs to consider;

Buying An Investment Property

Looking to buy your first, second or third investment property?

Property investment in Australian continues to be a popular way to build wealth over the long term but care needs to be taken when investing in property and obtaining finance for your investment property purchased.

Lenders treat investment property loan differently to standard home loans which means a different approach needs to be taken. When looking to finance an investment property, the below points need to be considered;

Working with the right people

Investing in property can help building wealth and generate income but property investment isn’t without its risks. It’s important to work with professionals to ensure you’re receive the right advice for your individual needs.

Our specialist finance team works with a panel of professionals such as accountants, solicitors and in-house financial advisers to ensure you receive the right advice. If you’re already working with one or all of the above, we’ll work with them to get the best outcomes for your needs.

We offer an obligation free appointment where we can openly discuss what you’re looking to achieve. We’ll be able to provide you with investment property loan options and answer any questions along the way. We look forward to meeting you soon.

Refinancing Your Home Loan

Is refinancing right for you?

If you haven’t reviewed your current home loan lately, chances are you might be paying too much. Interest rates are at an all-time low in Australian, so there’s never been a better time to compare the market and ensure you’re getting the best deal.

Reasons for refinancing

SFP’s home loan specialists can assist with all your refinance needs, including;

Making the first step

We offer an obligation free appointment where we can openly discuss what you’re looking to achieve and put your mind at easy. We’ll be able to provide you with refinance options and answer any questions along the way.

We look forward to meeting you soon.