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Home loan questions and answers

Buying a home is one of the most exciting experiences we face. If you're new to the property market, or just out of practice, it's only natural that you'll have some questions from time to time.

What does ‘LVR’ mean? Can you make extra home loan repayments?

We answer these and a range of questions about your home loan journey, from applying all the way through to paying off your loan.

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What does that home loan-related word or phrase mean?

We bust the jargon for you in this quick A to Z list of home loan terminology.

 

This is basically a means of comparing one loan to another from any provider in Australia.

It includes all interest and known fees payable over the whole life of the loan and expresses that amount as an annual rate.

This allows you to compare loans with different fee amounts, frequencies and timings as well as the base interest rate quoted.

It is designed so that you can compare all the costs of the loan rather than just the interest rate.

An initial notification from the bank of how much they could lend you, subject to certain criteria, such as the value of the house you’re looking to buy.

We calculate the amount you could afford to borrow based on your income and known expenses and the interest rate that you would be borrowing at.

It may be useful to frame your expectations of what properties you can afford.

The date your home loan starts (is drawn down).

This is also the date your repayments and interest are calculated from.

Work out the amount you still owe on your home loan.

Subtract this amount from your home’s current market value – the resulting figure is your equity – the portion of your home you actually own.

LMI is designed to protect the lender should you not continue to meet your repayments.

It protects the lender against a short-fall in the event your security property needs to be sold to clear the loan balance.

LMI is only typically required where your deposit is less than 20% of the purchase price (Varies with some property types such as Rural) and is paid for by the borrower as a one-off premium payment to an insurer normally from loan proceeds.

It is the amount of money you intend to borrow, compared to the value of the property (not the selling price) you're looking to buy.

We use the LVR when assessing your home loan application. It’s also helps determine if you need to pay Lenders Mortgage Insurance (LMI).

For example:

 

Amount you intend to borrow:

Value of purchase property:

Therefore what the LVR is:

$400,000

$500,000

80%

 

Variable interest rates

A variable interest rate is a rate that fluctuates according to market conditions. Sometimes known as a floating interest rate.

So, this means that the variable interest rate that you are paying today may be different in 6 or 12 months time.

Fixed interest rates

A fixed interest rate is a rate that is not subject to market condition fluctuations, but only for a set period of time. When you choose a fixed rate, your rate will not change for the fixed period. 

A fixed interest rate can give some assurance when it comes to knowing what your loan repayments will be over the set term, but it also may come with the disadvantage that if variable rates drop, your fixed rate and repayments will stay the same for the set term.

Check out Greater Bank's full range of current fixed and variable home loan interest rates below.

Compare current Home Loan interest rates

Help deciding on a home loan

 

No one loan is perfect for everyone.

At Greater Bank, we understand that every one of our valued customers have different needs and are at different stages in their lives.

The right loan for you depends on these needs.

A variable rate loan means that the interest rate on the loan may go up and down over the loan period. This allows you to make additional or early repayments to take advantage of interest rate fluctuations.

A fixed rate loan means that the interest on the loan remains constant over a fixed period, so your repayments will stay the same. You will be able to budget for your repayments and are protected from rises in interest rates.

Still have questions? Contact a friendly Greater Bank staff member on 13 13 86 or visit your nearest branch.

Use one of our lending calculators to find out:

A packaged variable rate loan gives you access to a 100% Offset facility.

You also have the option of combining your home loan with other products like an everyday bank account, credit card and/or insurance for example.

Packaging them together with your loan means paying one loan package fee which covers everything instead of paying separate fees for each product.

You may also get a discounted home loan rate as well.

Talk to your lender about the pros and cons of choosing a package loan.

Applying for a home loan or refinancing

 

Yes.

We know sometimes it's hard for you to visit us when applying for a home loan, so we will come to you. Our experienced lenders can visit you at home or work, at a time that suits you.

Find a mobile lender

Find your local lender in branch

For some products and services, Greater Bank will require verification of identification.

In these instances, we may ask you to provide us with certified copies of identification.

If this is the case, the following requirements must be satisfied:

  • Certified copies of previously certified copies will not be accepted. A properly certified copy of the original document must be provided.
  • The person certifying the document must have sighted the original document/s
  • To certify a document, the authorised certifier is required to write or stamp on the document:
For a single page document

‘This is a certified true copy of the original as sighted by me'

For a document with more than one page-

On the first page: 'I certify this and the following [number of pages]pages to be a true copy of the original as sighted by me' and Initial all other pages.

The certifier must also write or stamp on the copy:

  • The date; and
  • The signature of the person certifying the document; and
  • The full name, occupation and contact number of the person certifying the document (this should be clearly printed or evident in any official stamp that is used); and
  • Where relevant, the registration number of the person certifying the document (for example a Justice of the Peace must include their registration number when certifying a document); and
  • Their address (optional).

NOTE: a certified copy is not a photocopy of a previously certified document. The original document must be sighted and certified as a true copy of the original.

Download our helpful Certification of Documents Customer Guide below.

You’ll find the list of people who can certify a document for you (like a copy of your ID), and the legal requirements for this, on the Federal Register of Legislation website

Check this register to make sure the occupation of the person who is to certify your document meets certification requirements. If any of these requirements are not met, the certified copy CANNOT be accepted.

Making home loan repayments

 

Pay extra on my fixed rate home loan without a penalty?

You can make additional payments during a fixed period on Principal and Interest and Interest Only loans but a pre-payment fee may apply.

You can make extra repayments up to 5% of your original loan amount before there is any chance that a prepayment fee may apply.

Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.

A prepayment fee may aply to extra repayments you make over and above the 5% threshold.

A fee only applies if the current rate we could relend those funds at for the remainder of your fixed term is lower than the rate your loan is fixed at.

The fee, if applicable, is charged to your loan account at the end of the month that the extra payment is made.

When this fee does apply, it will only represent a small portion of the interest you may save by making the extra payment.

Even though your loan will be debited with a fee, it may still be beneficial to make the extra payment and reduce the interest charged to your loan.

Please take into account your own individual circumstances when making any extra payments.

Example 1 – no pre-payment fee
  • Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
  • Extra payments made that month: $6,500

In this example, no prepayment fee will apply.

The total amount of extra payments is less than 5% of the original loan amount ($7,500).

Example 2 – pre-payment fee applies
  • Original loan amount: $150,000 fixed for 3 years @ 7.0% p.a.
  • Extra payments made that month: $9,000
  • Remaining Fixed Period: 2 years
  • Current 2 year Fixed Rate: 6.75% p.a.

In this example, a prepayment fee will apply.

The total amount of extra payments is greater than 5% of the original loan amount and the current fixed rate for the remaining fixed period of the loan is lower than the rate that the loan is fixed at.

Note: Pre-payment fees don’t apply to an extra repayment on a variable rate home loan.

To calculate a pre-payment fee we take the extra payment over and above the 5% of the original loan amount and times it by the remaining fixed period and then times it by the interest differential.

Let’s look at an example:

For a $1,500 loan pre-payment, with a remaining fixed period of 2 years and an interest differential of 0.25%, the calculation is:

$1,500 X 2 X 0.25% = $7.50

Or, $1,500 times 2 times 0.25% equals a $7.50 pre-payment fee in this example.

Paying off a home loan

 

Congratulations! We’re so pleased for you that you’re about to pay off your loan!

Paying off the loan before the end of the fixed rate period

We understand your circumstances may change which might require you to payout your loan completely or change your fixed rate loan by changing the loan type.

However to do so, you need to ‘break’ the terms of your loan contract and a break fee may be payable.

A break cost fee is intended to recover any loss that Greater Bank will incur when a customer breaks their fixed rate contract; which can happen as a result of changes in interest rates.

A break cost fee may be payable if the loan is repaid before the end of the fixed rate period, or if you switch to another loan type during the fixed rate period e.g. from a fixed rate to a variable rate.

The break cost fee is an estimate of the interest we should have received for the rest of the fixed rate period compared to the interest we would receive if we relend those funds.

We compare the interest rate you locked into the equivalent current interest rate based on the time remaining on your fixed rate period.

If fixed interest rates have increased since you locked in your fixed rate, it’s quite possible that you won’t be charged a break cost fee.

We only charge a break cost fee if we will incur a loss as a result of you breaking your fixed rate loan.

A simple version of the break cost formula is:

Break cost = Loan Balance Owing x Interest Differential x Remaining Fixed Period

Here are some example break cost calculations:

 

Example 1 Loan balance of $300,000 with a fixed rate of 5.00% p.a. for 5 years, which is repaid after 2 years. The time remaining for the fixed rate term locked in is 3 years and the current 3 year fixed rate is 4.00% p.a.
  • Break Cost fee = $300,000 x 1.00% x 3 years
  • Break Cost fee = $9,000 approximately
Example 2 Loan balance of $300,000 with a fixed rate of 4.80% p.a. for 5 years, which is repaid after 2 years. The time remaining for the fixed rate term locked in is 3 years. The fixed rate of 4.80% p.a. is the discounted interest rate (fixed rate less a discount of 0.20% p.a.). The current 3 year fixed rate is 4.00% p.a. and the equivalent current rate after allowing for a discount of 0.20% p.a. is 3.80% p.a.
  • Break Cost fee = $300,000 x 1.00% x 3 years
  • Break Cost fee = $9,000 approximately
Example 3 Loan balance of $300,000 with a fixed rate of 4.00% p.a. for 5 years, which is repaid after 2 years. The time remaining for the fixed rate term locked in is 3 years and the current 3 year fixed rate is 5.00% p.a.
  • Break Cost fee = $NIL approximately
  • A break cost fee would not apply as there is no loss, because we can re-lend the loan funds at a higher interest rate.

 

Changing home loans

 

Changing from one Greater Bank Home Loan Product to another is easier than you might think.

Get in touch with us today to see what our lending staff can do to make life greater?

  • Make a loan enquiry online now
  • Call 13 13 86 and we’ll schedule a time with one of our Lending Managers 
  • Visit your nearest branch to speak with your local Lending Manager

Note: Fixed Rate break costs and Conversion fees may apply.

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