If you’re worried about the impact of fluctuating interest rates on your ability to pay your loan, a
fixed rate loan may better suit your needs. Your repayments are locked in, based on an interest rate
that’s fixed for an agreed term (one to five years).​
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Essentially, you’re opting for certainty over flexibility with a fixed rate loan – peace of mind knowing
exactly what your repayments will be.

Benefits of our fixed rate home loans:

• Your repayments are protected against future rate changes for a fixed period
• Fixed repayments make it easier to budget
• 40% offset account available to help you save on home loan interest
• You can make extra repayments of up to $10,000 each year to help reduce your loan term
• Redraw your extra repayments if you need – note that fees may apply.
• You can opt to pay interest only for a period of time
• Unless you’re making monthly interest only repayments, you can choose to make weekly, fortnightly or monthly repayments.

Things to consider:

• You won’t benefit from lower repayments if rates fall
• Break fees may apply if you decide to break the loan during the fixed period
• At the end of the fixed rate period, you may be able to fix a new rate for a further period, or your home loan will revert to the standard variable rate.

Not to be confused with mortgage protection insurance (which is designed to protect the borrower), LMI is insurance that covers the lender’s risk within a residential mortgage transaction should the loan go into arrears and the borrower is unable to resolve the situation satisfactorily. LMI is a fairly common practice within the industry, particularly for new home buyers who may struggle to save a deposit. It allows an additional fee to be paid by the borrower and usually applies when the loan is more than 80 percent of the purchase property’s price.

The purpose of LMI is to ensure security for the lender in case the borrower fails to make loan repayments. Even though the actual house acts as security, the nature of the property market, like any investment class, means there is a chance that its value could decline, resulting in a financial loss for the lender.

The cost of the premium is dependent on several factors, such as the loan size and property value, and most insurers are flexible when it comes to the method of payment. It can either be a one-off upfront premium payment or that premium could be included in the overall cost of the loan and included in monthly repayments. It is not transferable, which means a new loan may require a new fee depending on how much equity the borrower has.

What’s in it for me?

While it may appear that it is exclusively favourable to the lender, there is value to borrowers in paying the premium. Opting for LMI means it allows a borrower to independently purchase a property sooner than they otherwise might. LMI is the alternative to using a guarantor or having to save for a bigger deposit, both of which are not feasible options for many first home buyers.

A deposit of at least 20 per cent of the desired loan amount is required for a borrower not to be deemed ‘high-risk’. If you consider that the average price of a home in Sydney is $650,000, that would mean a deposit of around $130,000 is required. The beauty of LMI is that it buys time, which means borrowers with smaller deposits are able to enter the market sooner rather than later.

The major benefit of LMI is that it allows the dream of homeownership to become a reality for a lot of first home buyers. To see if this is the case for you, speak to an MFAA Accredited Finance Broker.

An interest only mortgage limits your monthly repayments to just the interest for an agreed period of time – usually one to five years. Benefits of making interest only repayments

• Making smaller repayments can free up your cash flow so you can redirect your money to other investments, or pay for short term expenses like parental leave or education costs
• Potential tax and gearing benefits if used as part of your investment property strategy.

Things to consider:

• The principal amount of the loan (the amount you borrowed) will not reduce during the interest only period, so you’ll have to start paying it off when your interest only term is up
• You’ll end up paying more interest over the loan term. This is because you’ll be charged interest on the full loan amount (principal) for longer, as it hasn’t been paid off. What’s more, higher interest rates may apply if you’re choosing an interest only repayment option
• When the interest only period ends, your repayments will be higher because you’ll have a shorter term remaining to pay off the full loan amount.

Make sure your future finances can support your repayments. Take a look at our home loan repayments calculator to get an idea of what your monthly repayments could be.​​ It’s important to speak to your financial adviser before you decide to apply for an interest only home loan.

Making principal and interest repayments

This means making repayments on both the loan amount (the principal) and the interest. While your initial repayments are higher than interest only repayments, the main benefits include:

• Lower interest rates than an interest only home loan
• Lower average repayments over the life of the loan
• You’re paying down the principal and building up your equity from day one.

Find out more about the reasons to pay principal and interest.

Gearing up for a big build or renovation? Construction loans let you draw down the loan in stages as the building or renovation progresses. This helps to monitor the build and ensure you’re only paying for work that’s been completed.​
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What’s more, you don’t have to make repayments on your full loan amount until your home is completed. This means you can have some extra money handy during the build.

Here’s how construction loans work The builder issues an invoice at each stage There are usually five stages of construction. These are typically known as slab, frame, lock-up, fixing
and completion. As each stage is completed, your builder will issue an invoice.

We make progress payments With a construction loan, you simply have to pass the invoices to relevant bank and authorise bank to make the progress payments from your home loan to your builder. Valuations are done at certain stages.

You make repayments As each progress payment is made, you’ll only need to pay the interest on your loan until construction is finished. Making lower repayments during the construction period could mean you have some spare cash up your sleeve for things like expenses you didn’t see coming or rent to stay somewhere else while you’re building.​
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When construction is complete, you can start making repayments on both the principal (loan amount) and interest, or you can continue to pay interest only for a period of up to five years.​
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Our Mortgage Brokers can help you use one of our variable rate loans as a construction loan.

Understanding the finance approval process can help make applying for a home loan less confusing. From conditional approval to unconditional approval, we break down the stages for you – when to apply, what’s involved and what you need to do.

a)Conditional approval (before you buy)

Before you start your property search, it’s worth getting conditional approval for a home loan. It’s a letter from your lender that indicates how much they’re likely to let you borrow. It’s based on a few things, like review of your financial details, goals and requirements.

Reasons to get conditional approval

It gives you a clear idea of what properties you could realistically afford. It also puts you in a strong position when you make an offer, as it shows the seller and real estate agent that you’re a serious buyer. If you’re thinking about purchasing a property at auction, then it’s wise to get conditional approval before making a bid.

How to apply for conditional approval

Our Mortgage Broker can help you through the process.

Things to have ready:

• Your ID (if you’re new to Bankwest)
• An idea of your expenses, assets and liabilities
• Evidence of your income, like payslips, tax returns or bank statements.
• Make an appointment with a Mortgage Broker

b)Unconditional approval (after you’ve made an offer)

Unconditional approval (also known as full loan approval) happens after your offer on a property has been accepted. You usually sign a contract ‘subject to finance’ when you make an offer, so after that, you can apply for unconditional approval.

How to apply for unconditional approval

You need to get in touch with a Home Finance Manager or Broker and provide a copy of the signed contract of sale. From there, they’ll organise the rest of your application and let you know if any documents are missing. They’ll also help you select a suitable home loan product that’s right for you.

After you apply

Your application will be assessed, and then the bank will carry out a valuation on the property. This can take a week or two, depending on your situation and the settlement period.
Tracking your application

Your Home Finance Manager or Broker will keep you up to date, but you can also track your application and receive email notifications for key milestones with our Home Loan Application Tracker.
After your loan has been approved

Once your home loan has been unconditionally approved, the bank will send your contract documents to you and you’ll need to read, sign and return them. The bank will then verify the contract documents and settlement will be booked.

Debt consolidation means bringing different loans together into a single loan. One way to do this is to refinance your home loan to encompass your other debt.  To help you decide if this is the right option for you, we’ve laid out the pros and cons of refinancing your home loan to consolidate debt.

There are a number of potential benefits when it comes to consolidating debt into your home loan, with the most popular being that it may save you money.

• Save money. Your home loan interest rate will typically be much lower than the interest you’d pay on a credit card, car loan or personal loan. Switching to one single loan with a lower interest rate may reduce your repayments and mean you’re paying less in fees.
• Save effort. Instead of dealing with multiple lenders, you’ll only have to make repayments to one lender. That means less paperwork and potentially less time on the phone – which is appealing to almost everyone.

What do I need to watch out for?

While consolidating debt can be a good way to save money, there are a few potential pitfalls, including:

• Higher repayments. It’s essential to ensure that once your debts are consolidated you can afford the new repayments.
• Fees and charges. There may be exit fees for the existing loans and application fees for the new loan. Remember to factor in these costs when calculating the potential savings.
• Accruing more debt. If you’re consolidating debt to pay off a credit card, don’t forget to cancel the card so you don’t continue to accrue debt while you’re paying off the existing balance.
• Extending timeframes. When it comes to refinancing home loans, it’s important to think ahead. Sometimes consolidating debt into your home loan inadvertently leads to you taking longer to pay off the loan.

The best place to start is with a qualified mortgage broker who will be able to help you tailor your loan to suit your lifestyle and budget.

If you’re interested in the savings you might make through consolidating your debt, a qualified mortgage broker is well placed to help you to explore your options. Call 13 19 20 to speak to an iSelect broker today or get started by completing our online needs analysis.

Understanding all the costs involved in buying a property upfront is important, and many first home buyers ask this question early on when meeting with a broker. Costs of buying a property may include:

• Stamp duty
• LMI
• Legal / conveyancing fees
• Mortgage or loan application fees
• Pest and building inspection reports or a Strata search (for apartments)
• Utility connections
• Insurance

The costs of purchasing a property vary by state/territory and also by service provider, so it’s good to get a few quotes before agreeing to go with the first conveyancer or insurance provider you find. Your broker can help you work out what costs will apply to you based on where you live, the type of property you’re buying and other factors, like the type of home loan you want and the size of your deposit.

If you have any worries, there just may be a solution that your broker can provide to help you get into your new home sooner.