Lost in Translation! – unpacking home loan jargon

The purchase of your first home should be an exciting time, but the sheer amount of information available can be overwhelming. Then you add “home-loan-jargon” which can make one feel like they are mastering another language! What does it all mean??

That’s where a broker can be of great help – we can guide you through the language, a little like an interpreter! We’ve compiled a glossary of some common terms you will hear the lender, the banker and the conveyancer all refer to when purchasing your first home, their meaning and application.

LVR – Loan to Value Ratio

Your Loan to Value Ratio is where the loan you are seeking (the loan amount required to purchase your new home) is compared to the property valuation (what your home is actually deemed to be worth). While property prices are based on value they are also affected by market, financial climate and demand, which means a home may have an asking price well above its valued price simply due to the level of interest in the home. LVR is calculated as a percentage, and while a lower percentage means you may be less of a risk, a higher LVR means your lender will assess you as a greater risk, and likely require LMI costs (What is LMI, you ask? We’re very glad you asked! See below….).

LMI – Lenders Mortgage Insurance

Lenders Mortgage Insurance is a policy the lender has in place should you default on your loan repayments. It is usually required when borrowers have not been able to save a 20% deposit on their loan, or when the LVR is very high, and the property is valued under the asking price. This protects the lender financially should you not be able to make your repayments on your loan, and is charged to you at the inception of the loan.

FHOG – First Homeowners Grant

The Qld Government is still offering a First Home Buyer’s grant, however there are several eligibility criteria to qualify. You need to be purchasing a newly built home which has never been lived in before, or a “substantially renovated” home. This sum of money can be used to offset the costs of your new home, and in some cases can be part of the loan application process with your lender.

FHLDS – First Home Loan Deposit Scheme

The Federal Government has introduced a scheme to support eligible first-time home buyers to purchase their new home sooner. The FHO Deposit Scheme aims to assist those homeowners who have a limited deposit for their new home purchase, by providing a guarantee to the lender, saving the purchaser from being charged Lenders Mortgage Insurance. When first released, this scheme proved extremely popular and quickly reached capacity – check in with us first to see if this is currently available!

Stamp Duty: PPR & FPPR – Principal Place of Residence & First Principal Place of Residence

Stamp Duty is a tax paid to the Office of State Revenue on the purchase of your new home. However, this fee may be waived for First Homeowners who will be purchasing a property in which they plan to live, or may be reduced for Home Owners who will be purchasing a property in which to live. There are some eligibility criteria, such as duration of time in home once purchased.

Do you have any questions regarding any strange bank-speak or finance-lingo, or perhaps you are just feeling overwhelmed and unsure how to proceed? Please reach out, we’d love to help you. Our team have over four decades of experience; while we understand “home-loan-jargon”, we talk every-day, easy to understand language. We’d love the opportunity to help you!

 

DISCLAIMER: “While parts of this article can translate for some situations with buying a home in Australia, this opinion piece is in the context of the Toowoomba Home Market. We cannot give blanket advice on loans that require tailoring to the individual’s circumstances. Please contact our team and we can help you find out how to get those finances healthy and ready to get into your very own home.”  

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