FAQ

The bigger your deposit the better – but you should try and make it as large as 20% of the value of the loan you want. If you are trying to borrow more than 80% of the value of a property then the lender will probably take out mortgage insurance (which protects them, not you). Mortgage insurance covers the difference between the sale of the home and the outstanding loan debt. This can be fairly expensive for you, the borrower. Also, the larger your deposit, the more you can borrow.

The amount you can borrow, commonly known as your borrowing capacity, will differ from lender to lender. To establish your approximate borrowing capacity, try our loan calculators or call us to arrange an interview with your local mortgage consultant for a more individual assessment of your situation.

RPI Financial Solutions consultants are trained in our loan comparison software to help you find which of the hundreds of home loans on the market will suit your needs.

Break costs, or exit fees are fees charged by the lender to get out of the loan. During a fixed interest or discount period the fees are higher than for a variable interest rate loan. Many people have learned a very expensive lesson of thousands of dollars when they have refinanced without knowing the costs involved. We can help you find out what costs you will need to pay should you refinance your loan, and when is the best time to do it.

The First Home Owner Grant scheme offsets the effect of the GST on home ownership by providing a grant to first homeowners. It is a one-off payment of up to $7,000 to assist eligible first home owners with purchase or construction costs. To find out if you are eligible for the grant contact us on 1300 85 75 85.

As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia , with the intention of occupying it as your principle place of residence within 12 months of the settlement. It is important to note that if you are buying the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.

Stamp duty is a state government tax based on a property’s selling price. Each state or territory has different rules and calculations; some offer discounts to first home buyers. Stamp duty can be a significant additional cost when buying property. Check out our ‘Stamp Duty Calculator’ to obtain an estimate of the stamp duty you will possibly have to pay.

As a rough guide, it is recommended that you budget 5-7% of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include (but are not limited to):

Building/pest inspection
Valuation fees
Lenders mortgage insurance (LMI)
Solicitor fees
Insurances
Connection fees – phone/gas/electricity
Rates
Removal fees

Lenders Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. It protects the lender from any losses resulting in the sale of a property due to default by the borrower. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80%, of the lender's valuation of the property. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front.

In conjunction with submitting your home loan application, you may need supporting documentation confirming your identity and substantiating your income. Documents can include:

Your consultant will be able to provide an accurate overview of what’s required for your individual situation or you can see the complete list on our ‘Documents’ page.

Most lenders these days offer flexible regular repayment plans. You can choose to pay weekly, fortnightly or monthly. Repayment can therefore be matched to your pay cycle.

We have access to more than 400 home loans provided by over 30 of Australia 's leading banks and lenders. Please review our panel of lenders.

If you have been making extra repayments above the minimum, a redraw facility would allow you to draw on that extra money if you wished, for a holiday or to buy a car for example. This can be a good way of saving, because the extra money that is paid into the home loan is reducing the interest you will have to pay for as long as you leave it in the loan.

This allows you to take your loan with you when you sell your property. This means you don’t have to pay new establishment fees and other costs when you buy your new property. This should be considered when you do not intend to stay in your new home for good.

There are advantages and disadvantages to both. A fixed rate means that even if the Reserve Bank lifts interest rates, your repayments will remain the same for the fixed period of the loan. The opposite is also true, though, that if the Reserve Bank lowers interest rates, your repayments will not decrease. Fixed rates are often helpful for budgeting, as you know what you will have to pay. The disadvantages are that fixed rates often limit or even prohibit additional repayments. The advantage of variable rates is that you can make additional repayments as you wish to pay your loan off sooner.

This type of loans allow you to deposit all of your income into them, reducing the amount of interest you pay, and you access the loan to pay for your living expenses. The longer you leave the money in the loan without drawing on it, the less interest you pay. The downside is that many lenders charge additional fees or higher interest rates for offset loans.

Generally speaking, taking out a discount variable rate for the first year does not work out the best in the longer term. Often they mean higher interest rates when the discount period is over, and often involve extra charges if you try and change the loan later on. What saves you money now, will probably cost you money later.

A line of credit is more like a personal loan secured against your property. There are a two basic types – revolving and reducing lines of credit. A revolving line of credit allows you to draw down to the prearranged credit limit as you require (usually about 80% of the value of your property). This can be great for property investors who can use the one loan to buy and sell property without having to keep re-applying for home loans.

RPI Financial Solutions will do their best to get you a loan irrespective of your credit history. It is important that you notify us of any past credit problems; however, as they will be revealed as the loan process occurs. Also, we have access to 'second-chance loans', for people who have had problems in the past.

Refinancing lets you change your home loan to suit your new circumstances. RPI Financial Solutions recommends a regular home loan health check to ensure the original home loan you chose is still the most suitable option.

When you take out a new loan, you use some or all of the funds to pay out your existing loan. The new loan often comes from a different lender, but many people refinance with the lender they've been using for years. If you move to a new lender, that lender will take care of paying out your existing loan.

By refinancing, you can use your mortgage for home improvements, buying a new car or paying off larger credit card balances. Home loan refinancing may be used for different reasons including:

Renovating your home.
Paying off your debts quicker and cheaper by rolling them into your home loan.
Obtaining a cheaper rate, even if it means giving up a few loan features.
To raise cash for a purchase.
To get a home loan that will apply to money you have earning interest – an ‘all-in-one’ account.
You are paying a high interest rate – for example, if you arranged a low-start, rising-rate loan from your homebuilder.
You want to switch from a fixed rate to a variable rate, perhaps because you can accept the risk of higher repayments.

Refinancing is a smart way to manage your money. By obtaining a lower mortgage interest rate, you can lower monthly payments. When you refinance to lower the interest rate you have to pay, you can significantly reduce your monthly mortgage payment as long as you don't increase your mortgage principal amount (as would occur with a line of credit). Refinancing can save you money and help increase the value of your assets.

When the Reserve Bank raises interest rates, banks and other lenders usually follow suit by increasing your mortgage repayments. Refinancing your home loan from a variable to a fixed rate can provide certainty with your repayments.

When done properly, mortgage refinancing can save money and work very well. However, there are drawbacks involved – namely the cost. The reasons for refinancing should be legitimate and the cost benefits in the long run should definitely outweigh the short-terms costs. At RPI Financial Solutions we have no home loans of our own to sell, so you can be sure we will provide you with a number of options to suit your needs – not the needs of a bank.

There are few differences between what you need to do to borrow for a property you'll live in and for one you'll rent out. Some lenders charge a higher interest rate for investment properties because their risk may be higher.

If you have owned your own home for a few years, you will have built up quite a bit of equity in your property. Instead of finding a cash deposit to buy an investment property, you can use this equity as the deposit. When you buy a property, costs such as establishment fees, solicitor fees and stamp duty add up to a few thousand dollars. Instead of trying to find cash to pay these fees, take them into account in your borrowings. That means you don't need thousands upon thousands of dollars in savings to get started.

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceeds the income it produces. Simply put, your investment must make a loss before you can claim a tax benefit.

Negative gearing is a tax minimisation strategy where you have a net tax loss due to receiving less rental income from your investment property than the costs of maintaining that property. This net tax loss is offset against your salary income, so you pay less tax on your income. Thus, whilst your property is generally increasing in value over time, you are reducing your taxable income.

You can also positively gear a property. This occurs when the investment income exceeds your interest expense (and other possible deductions). Note that you may be subject to additional tax on any income derived from a positively geared investment.

Property owners can claim deductions and depreciation against income on the property. The three main classes of deductions available to investors are:

Revenue deductions – including interest on the loan as well as ongoing maintenance and recurrent expenses such as agent’s fees, council fees, advertising charges, bank fees, body corporate fees, cleaning expenses, gas, water, gardening and insurance.
Claims for capital items – large capital items such as a hot water service, white goods, etc are subject to depreciation. This means the owner must claim the cost over a number of years rather than all at once. Depreciation schedules are set by the Taxation Department and range from a few years to more than 20 years.
Claims for building allowances – owners can claim depreciation of capital works, specifically for building and landscaping.

It’s the tax charged on any capital gains that arise from the sale or disposal of any asset bought or acquired after 19 September, 1985 . You are liable for CGT if your capital gains exceed your capital losses in any income year. Any capital gain must be shown in your income tax return for that year. While you do not pay capital gains tax on your place of residence, investment properties are subject to the tax when sold. Any investment property acquired on or after 1 October, 1999 , and held for at least one year, is taxed at only half of your capital gain.

At RPI Financial Solutions we believe having the right type of structured loan is one of the very first steps in achieving any investment objective. Investment property provides enormous opportunity for investors, and if you prepare your finances in a structured manner it may result in increased leverage. Call RPI Financial Solutions today to arrange an appointment with a consultant to discuss your investment loan opportunities.

Investment properties have many benefits when building long-term wealth. If you take the time and select your investment properties well – for example, to meet the demands and lifestyle expectations of the changing demographic – property can deliver good returns for long-term investors.

Frequently Asked Questions