ADVANTAGE FINANCE (SA) – FREQUENTLY ASKED QUESTIONS

If your question is not answered here please contact us.

Q: What does accredited mean?
A: To arrange finance on your behalf with a bank or lender a broker must be accredited with that bank or lender. If the broker is not accredited they are unable to introduce or arrange finance for you with that lender. Advantage Finance (SA) is an accredited lender and member of the Mortgage Brokers Association of Australia.

Q: What is the difference between fixed and variable interest rates?
A: Fixed rates lock in the interest rate for a set number of years. Variable interest rates move inline with movements in the banks interest rate and the Reserve Banks interest rates.

Some fixed rate loans lack flexibility and might not allow you to make extra repayments or have substantial penalties for early repayments.

It is possible to split your loan into fixed and variable interest rates giving you the best of both worlds. This can provide the security of a fixed loan with the flexibility of a variable loan.

Q: How much will a finance broker charge me?
A: Most finance brokers do not charge the applicant anything for organising a home loan. Adavntage Finance is a finance broker who do not charge clients any extra for organising a home loan. The commission earned by the broker is paid by the lender direct to the broker after the loan has been drawn down. Other types of finance such as personal loans, car loans commercial property finance for example may have a brokerage charged up front as some of these finance products do not have commission for the broker built in. We will disclose this to you beforehand.

Q: What is Loan to Value Ratio (LVR)?
A: Loan to value ratio is the percentage of a property a borrower owns compared to the loan size a lender has secured against the property. If a $100,000 house is purchased with $20,000 deposit and the purchaser borrows $80,000 for the rest the loan to value ratio would be 80%. If the purchaser only had $20,000 and had to borrow the purchase costs as well to complete the sale then the loan to value ratio would be closer to 85% based on a purchase by a non first home buyer in New South Wales.

Q: What is Lenders Mortgage Insurance (LMI)?
A: Once the loan to value ratio increases above a certain amount the lender may require that the loan is insured to cover the increased risk that is involved. The level varies depending on many factors and most loans are subject to LMI when there is less than 20% deposit or owner equity involved in the security property. Some loans may require LMI even if there is more than 20% equity level and some lenders mortgage insure every loan. Other options available from other lenders is that the loan can be approved with no mortgage insurance involved where it normally would be and the interest rate is increased instead. Usually the premium can only be calculated after the total loan amount is known and a firm valuation for the property has been received. Then the premium is calculated from the ratio of these factors from a sliding table of percentages that increase with risk such as loan amount, loan to value ratio, documentation level for the application, geographic area the security is located in etc.

Q: What is serviceability?
A: Serviceability is a calculation which takes into account an applicants total income and total commitments such as day to day living expenses and other financial commitments to determine if there is any available surplus of money that could be used to repay a proposed loan.

Q: How long will the application take?
A: Generally there will be an answer in about 48 hours from the time the application is lodged. some banks have an online application system which Advantage Finance (SA) are authorised to access and this type of loan application lodgement can provide an answer within minutes.

Q: Should I find a suitable property first?
A: If desired but is far better to have Advantage Finance (SA) lodge a loan application for an approval in principle prior to making an offer on a property. This ensures that your loan is conditionally approved by the lender, if the application is successful. Conditional approval is usually based on a condition that an acceptable property to the lender is chosen. This helps avoid any delays once you have found a property and avoids committing to more that you may be able to borrow.

Q: How does a Home Loan work?
A: A home loan is basically made up of principal and interest. Principal is the amount you borrow and interest is what you pay to borrow and use the money. Home loans generally run for 20, 25 or 30 years. This is the term of the loan.

At the start of the loan your loan repayments will largely consist of interest with a small amount paying off the principal.

For example if you took out a $100,000 loan at 7% over 25 years you would end up paying a total of $212,000 – $112,000 in interest plus the $100,000 principal.

Need more information or explanation?
Contact one of our friendly loan consultants and we will gladly assist you – 08 8351 5444