The Loan to Value Ratio is a calculation that financial lending institutions use to assess the risk of approving a loan to a borrower. All lenders use the LVR to assess whether the borrower may face financial hardship if the loan is approved, and to also protect themselves from default. The Loan to Value Ratio is expressed as a percentage of the value of your house. It is calculated by dividing your loan amount/s by the value of the security property/ies. For example, a loan amount of $500,000 against a property worth $700, 000 would have an LVR of 71%.
Lenders Mortgage Insurance (LMI) is insurance that protects the lender in the event the security property is sold and the funds from the proceeds are not enough to discharge the loan. The LMI then pays the Lender the shortfall. The rights to recover the shortfall from all of the parties on the loan (borrowers) are then transferred across to the LMI who will pursue the shortfall. The cost of LMI insurance is a one off payment at the start of the loan. It is usually added to the loan amount and should not be confused with Income Protection Insurance.
Principal and Interest loan repayments are calculated so that you pay back all of the money you borrowed (principal) and all of the interest that will be charged over the term of your loan. When the term ends (usually 30 years), you will end up with a nil balance on your loan.
An Interest Only loan allows you to pay only the interest on the loan, rather than paying back both principal and interest. At the end of the interest only period (usually five years), you will still owe the full amount you originally borrowed. The advantage with the interest only feature is that the loan repayments are lower during this period. Interest Only loans are popular with investors who are planning to sell the investment property at the end of the term.
A comparison rate is a legislated calculation which gives consumers an idea of the actual cost of the loan, as it includes the interest rate and the standard fees applicable to that loan. It avoids consumers being misled by lenders advertising a lower interest rate, but charging high fees to compensate for the low rate. Homestar may, from time to time, offer a loan advertising an interest rate that is identical to its comparison rate. This is because these loans do not have fees.
A redraw facility is a facility where you can withdraw money from your loan account. If you have made extra repayments to your home loan, you can withdraw these funds for your own use. The benefit of having a redraw facility is that the additional repayments can reduce the interest you pay, but you can withdraw them easily when you need them.
If approved, you can borrow up to 80% of the value of your property. This applies to both Owner Occupied and Investment loans. However, this is subject to lending criteria being met by the borrower.
You should make sure you have enough saved to cover the stamp duty, registration, insurance and legal costs that are associated with any loan that you take out, irrespective of the lender. As a guide you will generally need to have at least 10% of the value of the property available to cover these costs. If you need to borrow more than 80% of the value of your property, you may also need to save more to pay for Lenders Mortgage Insurance.
Your repayments take into account the annual interest rate, loan term, repayment frequency, loan amount and whether you wish to pay all of the principal back (Principal and Interest) or just the interest (Interest Only).
The maximum amount that can be borrowed is up to 80% of the property value. This is for both Owner Occupied and Investment properties.
Interest is calculated on the daily outstanding balance of your loan and charged to your loan account monthly. You can reduce the interest you will pay on your loan by making extra repayments or depositing additional funds into your loan account to reduce your daily balance (Homestar does not charge you for this). You may be able to redraw these funds when you need them depending how you have set up your Homestar home loan.
Yes, you can make extra repayments either by increasing your direct debit repayment, your salary credit amount or one-off amounts, via internet. We do not charge you for making extra payments on a variable rate account. Fixed rate, however, has a maximum repayment amount of $20,000 per year.
Once approved, yes you can. Our loans are designed to allow you to access the equity you have built up in your property (that is the difference between what your house is worth, and what you owe). Depending on your circumstances, you may be able to use the funds to acquire other assets such as shares, an investment property or a new car.
All you need to begin your application online are details of your income, current credit obligations (like personal loans and car loans), available credit limits (from credit cards, store cards and interest fee accounts) and the amount you are looking to borrow.
Our fees are specific to each product and can be found on the applicable fact sheet. We try to avoid charging fees to our customers but depending on your circumstances additional costs may apply. There are some costs that will apply to all our products like government fees and legal disbursements.
In general, we do not offer face-to-face appointments because this would significantly add to the cost of providing you with your loan. We would need to pass this cost on to you in the form of higher interest rates or fees – which we really do not want to do! Our Lending Specialists use great loan processing technology so that we can do all the things that you would typically expect in a face-to-face loan application process by phone- and we can do it in a fraction of the time that a face-to- face meeting would take.
A property valuation is a professional assessment of how much a property is worth. Similar to all lenders, Homestar requires a valuation of any property that is being offered as security for a Homestar loan as part of our lending process.
You should get conditional approval if all the information you have provided to us is correct and verified, and our standard lending criteria have been met. This involves receiving a satisfactory valuation the proposed security property, checking your credit history, financial obligations and whether your income is enough to service this loan Conditional approval does not allow you to borrow immediately so please do not rely on this to exchange contracts on the purchase of property or enter into any legal agreements.
We hire an external valuer who will inspect the property. They will consider all the factors that affect the value to produce a professional property report and valuation for Homestar.
Depending on your circumstances and where your property is located, you may have to pay government fees in the form of stamp duty. Stamp duty payments are based on the value of the property you purchase. Check your state government’s revenue office website to work out how much you may have to pay in stamp duty.
Loan Security Stamp Duty for Individuals
If your mortgage is for personal use, you are likely to be exempt from paying mortgage stamp duty. This applies to both owner occupied housing and investment housing. The exemption only applies where the borrower is a natural person (individual).
Loan Security Stamp Duty for Companies
Stamp duty is payable if the mortgage is for commercial use. The amount of loan security stamp duty will be deducted at settlement. If you are refinancing, the mortgage may be exempt from mortgage duty for the first one million dollars of new advances.
If you would like us to stamp the documents for the refinance exemption, please send us the original document showing the mortgage duty and a copy of the current loan agreement evidencing the borrowing entity.
If you have found a property, it is a good idea to ask a lawyer or conveyancer to look over the proposed ‘Contract of Sale’ before you sign it. You will also need a lawyer or conveyancer to assist you with the settlement process and the exchange of title documents if you are purchasing a property.