Basic
Rate
Commonly called 'No Frills Loans' which may have a lower interest
rate than Standard Variable Rate Loans but normally do not have
features such as a redraw facility or mortgage offset.
Application / Establishment
Fee
A fee which covers basic costs in setting up a loan, some lenders
includes legal fees while others don’t. REIG Finance’s
relationship with some lenders permits this fee to be waived.
Capped Rate
The rate applied to Introductory or “Honeymoon” Loans
which is capped at a rate that will not rise above the prevailing
Standard Variable Rate, but may fall.
CCC – Consumer
Credit Code
See UCCL
Deposit Bond
An instrument
that, by agreement with the vendor, can replace the need for a
cash deposit. It is a convenient way of purchasing a property
without the need to arrange a large cash deposit or immediately
cashing in or selling an investment that may mature at some point
in the future.
DSR - Debt Service
Ratio
Maximum of the applicants income which will support loan repayments
over the agreed loan term. Most lenders set a maximum DSR between
30% to 33% of gross income, but we have access to lenders who
accept much higher, and without penalties to you.
Exit Fee
Fee imposed by some lenders where the borrower has sought refinance
with another lender within the first few years of the loan.
Fixed Rate
Refers to a period of the loan where the rate does not change.
Loans are available where the interest rate is fixed for a period
of 1 – 10 years (5 or 10 year Fixed Rates are normally higher
than 1 year) before reverting to the SVR.
Home Equity Loan
/ Line of Credit
An overdraft style loan that offers the flexibility of being able
to deposit and withdraw funds at any time. It is as easy to use
as a regular savings account, and can come with cheque books,
linked credit cards, BPAY, internet banking etc. This allows you
to use funds for any purpose such as the purchase of a second
property, shares, cars, holidays or anything else all at a home
loan interest rate.
Lenders Mortgage
Insurance (LMI)
Some lenders may provide up to 95% of funds for a loan if you
agree to mortgage insurance. This figure is a one off payment
usually made at the time of settlement. REIG finance has access
to lenders who will include the cost of LMI into the loan, and
in effect, allow you to borrow greater than 95% of the value of
your property.
It is important
to realize that this insurance protects the lender in the event
of a default, the borrower’s debt transfers to the Mortgage
Insurer.
LOC – Line
of Credit
See Home Equity
Loan.
LVR – Loan
to Value Ratio
Refers to the maximum loan amount lenders will approve against
the value of any property taken as security for your loan. This
varies between lenders, but is generally 80%. A higher LVR can
be gained (up to 95%) if Mortgage Insurance is taken out. A higher
LVR means that a lower deposit amount is required if a new property
is being purchased, or that more funds will be available to you
if you are refinancing.
Lo-doc
A Low Document loan assists applicants who are unable, or unwilling,
to provide the fully verified financials that are required with
a traditional loan. These loans are ideal for self-employed people
or people with inconsistent incomes, property developers, busy
people who haven’t yet completed recent tax returns, or
people who know they can afford a loan that a traditional lender
says they cannot. These loans generally carry an interest rate
loading, however, REIG Finance can source lenders where this loading
is only marginal, and may actually reduce over the loan period.
See Non-Conforming Loans.
Mortgage Offset
Where interest charges are reduced according to the amount of
credit in another account (the “offset account”).
The loan balance is reduced by the amount of credit in the offset
account before interest is calculated (ie Interest is charged
on only the net amount of debt).
This can help reduce
your tax bill by offsetting taxable income from deposit accounts
against interest paid in after tax dollars on mortgage repayments.
Some lenders may
not provide a 100% offset of the funds in your offset account,
called a “partial offset account”.
Non Conforming Loans
Loans designed for applicants who are unable, or unwilling, to
meet the criteria for regular lending. Typical reasons range from
impaired credit history, insufficient or inconsistent income,
start up finance for a new business or property development, or
the borrower may simply not want to provide all of the financial
statement required by a “regular” lender. These loans
generally carry an interest rate loading, however, REIG Finance
can source lenders where this loading is very low (0.8% higher
than SVR).
Portable Loans
Allow you to sell your house and move to a new one without having
to refinance. This saves application and legal fees.
Redraw Facility
A redraw facility allows you to make additional repayments on
your mortgage, and then have access to those additional repayments
later. This allows you to reduce your loan principle and therefore
reduce interest charges. There are many variables with these loans,
and it is important that you understand the conditions of any
redraw facility.
Serviceablity
The ability of an applicant to afford the loan, normally expressed
by the DSR. There are significant differences in the way lenders
assess serviceability – REIG Finance is familiar with the
serviceablity requirements of lenders, which saves you time and
money.
Service Fee
A fee charged by lenders for administering and maintaining the
loan account. These fees vary widely amongst lenders (some do
not charge this fee at all). REIG finance assesses these fees
when selecting the best finance options for you.
Standard Variable
Rate - SVR
The lender’s “benchmark rate”. Normally applies
to the 'premium' home loan product.
Switching Fee
A fee that the lender may charge when a borrower requests a change
to an existing loan to another type of loan. e.g. Changing from
a Variable Rate Loan to Fixed Rate Loan
UCCL (CCC)
The Uniform Consumer Credit Code Legislation - a Federal Act of
Parliament to ensure uniformity amongst all credit providers.
E.g. all loan contracts must now adhere to a uniform format as
specified by the Act. It must set out all fees and charges that
the borrower (and, if required, guarantor) are liable for under
the loan contract.
Valuation Fee
A fee which may be charged to cover the cost of valuing a property
taken as security for the loan. This may be included in an Establishment
Fee. Additional valuation fees may be charged when more than one
property is provided as security for a loan.
Variable Rate
The rate applied to an Introductory or Honeymoon Loans which is
variable and usually set at a discount below the Standard Variable
Rate.
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