Financing

Your Investment Property

  • Basic Variable

 

A variable home loan at a lower rate and with fewer features

than a standard home loan.

 

  • Break Costs

 

Fees that are sometimes incurred when a loan is paid off early.

 

  • Bridging Finance

 

A short term loan used to bridge the gap between buying

a new property and selling an existing one.  For example, taking out a temporary loan to settle a purchase that becomes due before the date that the longer-term finance becomes available.  People who need to sell their property before they can purchase another one frequantly seek bridging finance, and when their property is still on the market when settlement of the new property falls due.

 

Glossary

With you Every Step

Of The Way

  • Cross-securitisation / Cross-collaterisation

 

When the financial institution uses your property (whether owner-occupied or investment) as security

for another purchase.

 

  • Drawdown Of Funds

 

To withdraw funds from a designated loan account, common in house and land purchases with a construction loan

where building progress payments are drawn down progressively according to construction expenditure.

 

  • Equity

 

The difference between your mortgage and your property's value.  

If your home is worth $400,000 and you owe $150,000 then you have equity of $250,000.

 

  • Fixed Rate

 

Where the home loan is locked in at a specific interest rate for a specified term, usually one to five years.

 

  • Interest-Only

 

Only repaying the interest charged on your mortgage, not paying anything off the principal or amount owing.

 

  • LMI (Lenders Mortgage Insurance)

 

Usually required by lenders when you're borrowing more than 80 per cent of the property's value.

It provides insurance to the lender in case the borrower defaults on the loan.

 

  • LOC (Line Of Credit)

 

A facility available from financial institutions that gives you a credit limit that you can draw upon at any time.

It's similar to a credit card, except you don't have to make set repayments of the principal.

 

  • Low Doc Loan

 

Relatively new, these are loans that don't require as much documentation to set up the loan.

They are popular with self-employed people and those who have not yet established a credit rating.

 

  • LVR (Loan To Value) Ratio

 

To calculate it, divide the loan amount by the value of the property then multiply by 100 to get a percentage.

Banks and financial institutions use this as a measure of whether you can afford the loan.

 

  • Principal & Interest (P & I)

 

The amount borrowed or still to be repaid, plus the interest on the mortgage.

The principal is part of the repayment that reduces the balance of the mortgage.

 

  • Refinance

 

To obtain new finance for something on different terms, usually involving the paying off of an existing loan

by means of a new (and often cheaper) loan.

 

  • Reverse Mortgage

 

Designed for seniors who are asset-rich (usually with their PPOR) but cash-poor.

The facility allows them to access the equity in their homes without having to sell it.

Most often the loan is not paid out until the borrower dies, moves into a nursing home or relocates.

 

  • Serviceability

 

Whether you can manage your mortgage payments, based on your income and expenses.

 

Investor

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