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Frequently Asked Questions

Whether this is your first time working with WS Accountants, you might have a few questions about working with us. We have compiled a list of frequently asked questions to assist you.

Mortgage Solution - FAQ

Can I borrow money for stamp duty?

Generally, yes. You can add the stamp duty expense on to the principal amount of your loan. The stamp duty will be paid out of the cash you use as a down-payment on your loan. The amount of stamp duty you owe varies by state and by the value of your home.

How much money can I borrow for a home loan?

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards.
A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.
If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.
While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

What is Lender’s Mortgage Insurance (LMI)

Lender’s Mortgage Insurance (LMI) is an insurance policy, which protects your bank if you default on the loan (i.e. stop paying your loan). While the bank takes out the policy, you pay the premium. Generally you can ‘capitalise’ the premium – meaning that instead of paying it upfront in one hit, you roll it into the total amount you owe, and it becomes part of your regular mortgage repayments.
This additional cost is typically required when you have less than 20 per cent savings, or a loan with an LVR of 80 per cent or higher, and it can run into thousands of dollars. The policy is not transferrable, so if you sell and buy a new house with less than 20 per cent equity, then you’ll be required to foot the bill again, even if you borrow with the same lender.
Some lenders, such as the Commonwealth Bank, charge customers with a small deposit a Low Deposit Premium or LDP instead of LMI. The cost of the premium is included in your loan so you pay it off over time.

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.
Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

Can I take out a home loan while on a disability pension?

A disability pension is a valid income source for the purpose of making a loan application. As with any loan application the amount of income from a disability pension, or from any other source, factors into the amount you can borrow and affects eventual the terms of the loan.

How much is the mortgage registration fee?

The mortgage registration fee varies from state to state. Generally, mortgage registration fees can be found on each state's or territory's website. If I am unemployed but have rental income is there any way to get a home loan? If rental income is your only source of income, it is likely that a lender will require an additional source of income. Simply being unemployed does not disqualify you from obtaining a mortgage. Having income from rental property will help make qualifying for a mortgage a bit easier.

Is there a difference between a land loan and a regular home loan?

You purchase the land before the house is built When buying the land first you will generally have to pay a deposit of 10% of the purchase price, with the balance being payable on settlement. This way you will only pay stamp duty on the land, rather than on the construction cost of the house. In this situation, you will need two home loans - one for the land and one for the construction. Progress payments on the mortgage will need to be made at different stages of construction. You buy the house already completed on the developer's land If you decide on this option, all you need to do is give a 5% deposit, with the rest being payable once the home is completed. There are no progress payments with this option, which you can use to your advantage for either renting whilst the home is being built, or saving a larger deposit for the home loan. Research your location and developer Getting an idea of the following will help: _ What experience have they got and how long have they been in business? _ How many packaged homes have they sold? _ Get referrals, and ask the owners if they were satisfied with the workmanship. _ Check on appropriate builder's warranty and insurance cover. _ Check if they offer a fixed price building contract, so you aren't left with unexpected fees.

What Other Costs Should I Account for When Purchasing a Property?

✓ Registration of the mortgage
✓ Stamp Duty on the mortgage
✓ Registration of transfer
✓ Stamp Duty on the property purchase
✓ Land tax