Home buyers guide 2017

Our guide to buying your first home.

Contents

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Your questions, answered

A snapshot of the buying process

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10 steps to buying your home

20 Insider tips

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For self-employed

For couples

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First home buyers checklist

Which loan is right for me?

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Applying for a loan

Jargon buster

Introduction Buying a home – it’s your dream.

Turning this dream into a reality is our passion at Yellow Brick Road. We have hundreds of advisors around Australia that can help you.

Advisors are all about options – listening to your needs and providing you with the best loan from a variety of lenders to suit your situation.

This booklet aims to help answer some of your questions including: • What’s involved in buying a home?

• The steps in the buying process • H ow do I apply for a loan, what do I need to provide?

Basically, this booklet will answer many of your questions and give you some understanding of the home loan market and dealing with the buying process. If you have any more questions that aren’t in this booklet, don’t hesitate to contact Yellow Brick Road for an Advisor in your area.

Let’s turn your dream into a reality.

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— Mark Bouris

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Your questions, answered

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Q: How much can I borrow?

A: Depends on factors such as the size of your income and deposit, but many lenders require a maximum of 90 per cent Loan-to-Valuation Ratio (LVR), which means that you can borrow up to 90 per cent of the purchase price, but you will have to supply evidence of your ability to save at least 5 per cent of the value of the property (‘genuine savings’). Some lenders will allow loans of up to 95% of the purchase on some property subject to evidence of genuine savings to 5% and the provisions of Lenders Mortgage Insurance or Lenders Risk Fees.

Q: How much deposit do I need to buy my first home?

A: The amount you can borrow and therefore the value of property you can buy is governed by two main things: 1. Equity or deposit and 2. Capacity to service the required loan. This in turn is a function of your income, living expenses and other financial commitments.

Some lenders will allow loans of up to 95% of the purchase on some property subject to evidence of genuine savings to 5% and the provisions of Lenders Mortgage Insurance or Lenders Risk Fees. These can be expensive so saving a bigger deposit helps you avoid paying additional fees.

Q: What are deposit bonds?

A: Deposit Bonds also known as deposit guarantees act as a substitute for the cash deposit between signing a contract and settlement of a property, they are

issued by insurance companies for a fee.

At settlement the purchaser is required to pay the full purchase price including the deposit. Contact your Yellow Brick Road advisor to determine if a Deposit Bond will be required for your scenario and we can advise the costs involved.

Q: What about the First Home Owners Grant?

A: This government assistance program provides you with a one-off payment to use towards the deposit for your first home. The grant amount varies from state to state as does the qualifying criteria. Do some research on your eligibility first.

Q: Does my credit rating affect my borrowing ability?

A: Your credit rating will be checked as part of the loan process, so you may find it harder to secure a loan if you haven’t paid your bills, have skipped payments or exceeded credit card limits. Contact your Yellow Brick Road Advisor for assistance in accessing your credit history, as you might be able to improve your rating before you apply for a loan.

Q: How do I know which type of mortgage is best for me?

A: There are a number of factors to consider, including your current financial situation, your goals and how long you intend to keep your house. Your advisor will work with you to help evaluate your choices and find a solution that meets your needs both now and in the future.

That’s their job.

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A snapshot of the buying process Research the area you are buying into Calculate how much you can afford to spend and repay* Obtain pre-approval for how much you can borrow Decide whether you want a ‘cooling off’ period Make an offer* Review contract of sale (with solicitor or conveyancer) and apply for formal loan approval* Exchange contracts Arrange pest and building inspections^ Organise building insurance

Settlement takes place Organise life insurance*

* Ask a Yellow Brick Road advisor ^ Only after exchange if a cooling off period has been negotiated, otherwise prior to exchange.

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(more detailed)

Steps to buying your home

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Know the market

Do your sums

Do your homework and research the area you are buying into by browsing newspaper and Internet property listings and speaking to local real estate agents.

Once you have an idea of the property market, you need to know what you can afford to spend and repay. Your borrowing power is determined by your income and financial commitments, as well as your current savings and credit history.

Get the tick of approval

Attend plenty of property viewings and auctions, each time asking yourself: Does it suit my needs? What are its faults? What are its features?

How does its price compare with other properties seen?

The more informed your decision, the better chance the property you buy is the right one in terms of price, location, value, size and lifestyle.

(Tip: Ask a Yellow Brick Road advisor for a property or suburb report).

A Yellow Brick Road Advisor can help you work out how much you can borrow and what type of loan will suit your budget and lifestyle.

Your Advisor can advise you of the true costs involved in taking out a mortgage (e.g., stamp duty, taxes, legal costs and insurance) as well as how to build in a buffer to interest rate calculations so that you are prepared should rates rise.

To save leg work, we can help you apply for the First Home Owners Grant and check your eligibility for stamp duty discounts.

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Now you know how much you can borrow, ask your advisor about finance pre-approval.

While you can always leave this step until after you find a property, pre-approval is recommended because it gives you a realistic budget to go house hunting with and it ensures you are treated as a serious buyer by agents.

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Make an offer

Start the paperwork

Organise insurance

When you make an offer, the vendor may accept it straight away or negotiate on the price or other aspects of the sale. If you cannot agree on a price, you can withdraw your offer.

Contact your Yellow Brick Road Advisor with the details of the property you want to buy so we can get the ball rolling on obtaining formal loan approval. As part of this process the lender may organise an independent valuation of the property, to make sure the amount you’re offering for it is reasonable.

You will need to provide your Yellow Brick Road Advisor with a range of documentation.

Proof of building insurance is usually required by your lender as part of the home loan process. Your Yellow Brick Road Advisor can help arrange this.

The insurance can take effect from the date of settlement but we recommend getting a pre settlement insurance policy on the building, which can be refined into a full Home and Contents policy after.

Around this time the seller will make the Contract of Sale available to your solicitor or conveyancer for review. The contract is a legal document that outlines your offer, the date of settlement, and any conditions that must be met before the sale goes ahead.

If you’re purchasing a Strata Title unit, villa or townhouse you’ll need to obtain a Certificate of Currency from the body corporate insurer.

If you buy a home at auction, you are required to pay a deposit (usually 10% of the purchase price) immediately. If you buy privately, you are usually required to pay a holding deposit and then pay the 10% deposit when you exchange contracts.

This down payment shows that you are serious about buying but it is not until you sign and exchange contracts that the property is secured. Up until this time the seller can still decide to sell to another buyer who manages to exchange contracts before you (another reason to have finance pre-approved: it speeds up the time taken to gain formal loan approval).

Take the opportunity to do another inspection on the property, checking all fittings and fixtures are in place.

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Arrange inspections As the seller won’t provide you with any guarantees about the structural soundness of the home, it is wise to have a building inspection undertaken before you exchange contracts, this can be done after exchange only if there is a cooling off period.

You should also have the property inspected for pests because the building inspection doesn’t include the detection of termites and other timber destroying pests. Also check with the local council and the state government roads and traffic authority about whether there are any future developments planned that may affect your home.

If you’re buying a strata title property, arrange for an inspection of the books and records of the owner’s corporation.

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Exchange contracts and cool off

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A property sale isn’t signed, sealed and delivered until the exchange of contracts. Once you and the vendor have both signed the contract and the purchaser has paid the deposit, the agreement is legally binding. It generally takes four to twelve weeks from exchange of contracts until settlement (depends on your contract and your state/territory).

If you exchange contracts in a private treaty sale, some States of Australia entitle you to a legal cooling-off period, which gives you the opportunity to withdraw from the contract to buy the property (the length of the cooling off varies from state to state).

If you are absolutely certain the property is perfect for you, you can waive the cooling-off period with the agreement of the seller. Your solicitor or conveyencer will advise you through this process.

Pay and settle Stamp duty, which is calculated on the purchase price of the property, must be paid at settlement. The First Home Buyers scheme provides full or partial exemption on duty to first home buyers – we can advise you of your eligibility.

At settlement, the balance of the purchase price is paid to the seller and you become the legal owner of the property.

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Cover yourself with life insurance.

Congratulations!

The keys are yours

Protect yourself and your loved ones. Ensure you have life insurance. Now that you’ve taken on such a large amount of debt, it is critical that you cover yourself and your family and be able to pay that debt off should something unexpected happen to you.

Protect your greatest asset – yourself. Your Yellow Brick Road advisor can help you with this.

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Yellow Brick Road is putting the power in your hands with our 20 insider tips on what to say and do when negotiating a home loan.

Insider Tips

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Insider Tips

1. Have a clear goal Don’t waste your efforts on unrealistic ambitions. Develop clear and achievable goals in terms of what you want to buy and how much you need to borrow.

2. Understand your budget Know your gross income, your living expenses and the costs of your financial obligations. Understand your household budget before approaching a lender.

3. Have a deposit Generally speaking, you’ll need to save 20 per cent of the property purchase price, plus allow another 5 per cent for legal costs, inspections and stamp duty, etc. However, you can borrow up to 95% of the purchase price with the inclusion of Lenders Mortgage Insurance, which protects the lender in the event that you can’t repay the loan.

4. Prove you can save A lender wants to see that you can make regular repayments on a home loan, and the ability to save is one important indicator. So put your savings into one account and contribute to that account frequently.

5. Work on serviceability It isn’t your gross earnings that are calculated by the lender. It’s your net disposable income, or the amount you can use for housing after taking out the living expenses, taxation and other financial liabilities. Use home loan calculators to see how much you can borrow and then alter your household budget to give yourself better serviceability.

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Insider Tips

6. Show consistent income Lenders are uncomfortable lending to someone with an irregular employment history or long gaps between employment. Demonstrate you can stay with one employer for a year or more, and be able to show consistent profits if you are self-employed.

7. Have a solid rental history If you are renting, try to not move for at least six months prior to going for a loan. A lender wants to see stability in your living situation.

8. Lower your limits on credit cards very $1 of credit card limit stops you borrowing up to $5 of home loan.

E So, reduce your credit cards to one and reduce that card’s limit to what you use. Pay-off and cancel the credit card if you can.

9. Audit yourself Lenders use credit scores to assess your credit risk, so you should know what they know. Most lenders credit-score you on the Veda system, which shows your current and past credit activity. Your Yellow Brick Road Advisor can check your Veda score for you so there are no surprises when it comes time to apply for a home loan.

10. Avoid 'interest free period' Store finance, It doesn’t matter that you have a strategy to repay before interest kicks in – lenders will assume that you are happy to pay the high interest.

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11. Accentuate the positive I f you’ve recently paid out a loan or credit card, advise your potential lender.

This information supports your promise of repayment conduct or justifies what may have looked like low savings.

12. The mum and dad option If you want to save money quickly, you can move in with parents or relatives.

But only do this if you’re going to save!

13. Reduce luxury overheads The easiest way to boost your net disposable income is to reduce monthly overheads. Do this by looking at discretionary spending such as car leases, expensive smart phone plans and pay TV charges. They can reduce your net income and reduce how much you can borrow.

14. Clean up your finances Before applying for a mortgage, you should stop applying for credit cards and store cards and ensure your existing credit cards and store cards are in order this means no over-limits or missed payments. Having too many cards suggests you live outside your means and the limits on those cards inhibit how much you can borrow. Also, get your bank accounts in order and make sure you have no overdraws. One ‘clean’ account is better than several with patchy histories.

15. Become an expert In the area you want to buy in. Know what you’ll have to spend before you sit down with a mortgage professional. Also learn about the market for home loans: there are different interest rates, features and limitations. You want to be well informed so you aim for a loan at the best rate and with the features that are relevant to your lifestyle.

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Insider Tips

16. Don't apply for too many mortgages

19. Get your paperwork in order

Do your homework and target a lender that’s right for you. Applying for too many home loans affects your credit scoring.

enders need documents that prove L who you are, where you live, how much you earn and how much rent/mortgage you are already paying. Start a file of your latest tax returns, your last three payslips and documentation of how much rent/mortgage you pay. Have your career well documented (take current references), and have a copy of your rental history. Look organised!

17. Outsource the hard stuff If you’re worried about loan selection, your credit score or questions about serviceability, a broker can get you prepared before you apply.

18. Focus on speed The faster you repay a mortgage the less interest you pay. So before committing to a home loan, make sure that the loan allows you to put in lump sums and repay fortnightly rather than monthly.

Do not take a Line of Credit mortgage if you cannot live within a strict budget.

Only disciplined people make these mortgages work for them.

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20. Don't lie to lenders! here’s no point telling fibs. It’s T against the law, it will forever affect your ability to get a loan, and you could be talking yourself into a loan you simply can’t afford.

For self employed Proof of income

Get your taxes done

A lender wants to see sufficient and regular income to repay the mortgage. So you need to demonstrate that your business has a history of stable profits.

Get your taxes done before applying and make sure there’s no tax owing on your ATO account. Ensure you’ve addressed all tax obligations before committing funds to a purchase/loan scenario.

Know your status Don’t get confused between casual and selfemployed. If you pay tax with each payment you receive, you are casual. If you’re paid on an hourly/daily rate with no tax deduction, you are self-employed and you should seek the assistance of an accountant or tax agent.

Most lenders now will accept casual income from certain industries, where the income is constant.

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Show consistent savings Lenders want to see evidence of good financial management, rather than windfalls.

Use a separate savings account, regular deposits and few withdraws to show consistent savings.

For couples

Talk to a solicitor Make sure you get legal advice on what kind of property title you need to use when buying with a partner, and what - if any - agreement you need with your partner or spouse.

Know your status Marital status is crucial in the assessment of an application, so you should decide what your status is, perhaps discussing it with an accountant or solicitor.

If married, lenders expect to be able to assess expenses as a family unit, which might increase your expenses when your partners are added in; but if you make a sole application, you may not be able to reflect in your finances that many expenses are shared with your partner. Consider your marital status before you apply.

Be honest about your relationship I f separated, a lender will query if there are any financial settlements due with your ex-partner.

De facto relationships are treated similar to married relationships now in that de facto relationships are now handled in family law courts.

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i Government Help

Governments around Australia provide a range of grants and tax concessions, depending on the state you’re buying in.

Here’s a snapshot, but check with your YBR adviser for further details.

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Government Help

Western Australia $10,00 grant available to buyers of new homes WA

Grant applies to properties under the value of: $750,000 if south of the 26th parallel $1,000,000 if north of the 26th parallel A stamp duty concession may also apply to recipients of the grant

Northern Territory NT

FHOG of $26,000 for new homes Stamp duty reductions for properties up to $500K: saving of up to $23 928.60

Queensland The grant of $20,000 for first home buyers QLD

Available for NEW houses, units or townhouses valued at less than $750,000.

Program extended until 31 December 2017

ACT

Australian Capital Territory FHOG of $7,000 for purchase of new homes

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New South Wales No stamp duty on all homes up to $650,000 NSW

Reduced stamp duty for homes up to $800,000 A $10,000 grant for - builders of new homes up to $750,000 - purchasers of new homes up to $600,000 No insurance duty on lenders’ mortgage insurance

Victoria Stamp duty exemption for homes under $600K VIC

Stamp duty reductions for properties $600 - $750K (calculated on a sliding scale) Grants to first home buyers: - $10K in Metro Melbourne - $20K in Regional Victoria

Tasmania TAS

FHOG of $20,000 for new homes – When contract entered into between 1 July 2016 and 30 June 2018.

Grant reverts to $10,000 after 1 July 2018

Source: www.firsthome.gov.au

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First home buyer's checklist First time house-buying can be tough and confusing, but you can make things easier by being prepared.

Take a look at this checklist to ensure you are on the right track to getting into your first home.

✓ 1. Have a clear goal: Know your price range and work backwards. Ensure you have a big enough deposit and that you can afford the mortgage repayments, even if interest rates rise. Be clear about the cost of stamp duty, conveyancing, property inspections and lender’s mortgage insurance (LMI).

✓ 2. Shop around for the best rate: You want to minimise costs and that starts with your interest rate. With fixed and variable rate mortgages at historic lows, you should be looking for a mortgage that suits your long term goals but has the most competitive rate available to you. The difference between a half a percent in a home loan rate means huge savings over the life of your loan. Have a look at the difference between 4.25% and 4.75%, on a $300,000, 30-year mortgage. At 4.25% your monthly repayment is $ 1,475.82, while 4.75% means a monthly repayment of $1,564.94. The monthly difference of $89.12 might not break the bank, however the difference over the life of the loan is more than $32,000, so shopping around is worthwhile.

✓ 3. Understand first home owners grants: First home buyers can get help from the government but the grants are always changing. In NSW the first home buyers grant was reduced to $10,000 on January 1st, 2016, and Western Australia has now abolished the FHOG of up to $3,000 for the purchase of established homes, while the $15,000 grant still applies for ‘new’ homes. It’s important to do your homework so you know what you are eligible for from the get go.

✓ 4. Understand credit ratings: Credit reporting means you have to be careful about paying bills, credit cards and loans on time. If a lender doesn’t like your credit rating, they could charge you more for the mortgage or not make you an offer. Get yourself organised so you don’t miss payments.

✓ 5. Get advice: If you’re pressed for time and need expert guidance, use an Advisor. They’ll find the best rate and best product, and they’ll guide you through the process and paperwork

✓ 6. Cover yourself with life insurance.

Protect yourself and your loved ones. Ensure you have life insurance. Now that you’ve taken on such a large amount of debt, it is critical that you cover yourself and your family and be able to pay that debt off should something unexpected happen to you. Protect your greatest asset – yourself. Your Yellow Brick Road advisor can help you with this.

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Buying your first home is a big step. But most concerns can be resolved with preparation and an expert’s advice.

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Which loan is right for me?

Don’t know where to start when it comes to choosing the right home loan?

With features and fees varying from one loan to the next it might seem like a bewildering array of options, but the good news is that you don’t have to go it alone. Our role is to work with you to assess which of these loans will prove the best match to your income, goals, budget and lifestyle. Your home loan should fit into your long term financial picture so it's important to seek advice at the beginning of your journey, a loan should be structured to suit your long term goals, its not always about the rate.

Fixed Rate (Principal and Interest) Fixed rate loans are priced according to a pre-determined interest rate and therefore have fixed loan repayments. The time period of these loans can vary, but you can usually ‘lock in’ your repayments for between one and five years. When the fixed term expires, you can decide whether to fix the loan again for another period of time at the current market rates or convert the loan to a variable interest rate.

Variable (Principal and Interest) The rate charged on variable loans moves up or down in accordance with interest rates.

A basic variable has fewer features and flexibility than a standard variable, which may typically offer low introductory rates and the ability to make additional payments (redraw).

Split Rate (Principal and Interest) You can divide split rate loans between fixed and variable interest rates, selecting yourself how much to allocate to each.

Interest-Only You repay interest only on the loan principal for a period of between one and five years.

At the end of this period, you revert to making both principal and interest repayments.

Line of credit A line of credit allows you to access additional funds by drawing on the equity value of your home. After fixing a limit on how much you can borrow, you direct income from all sources into your loan account and then draw down funds as required.

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These are some of the most common types of home loans. Contact your Yellow Brick Road advisor for details about the full range of loans available.

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Applying for a loan What happens next?

Your Yellow Brick Road Advisor will submit your application for assessment and then notify you as soon as we hear back from the lender. When your loan is approved, you will receive a letter of offer, which is a legal contract outlining the terms and conditions of your loan.

Once the exchange of contracts is complete, your loan will be drawn down, paying out the previous owner and any taxes and fees. Loan repayments begin on the chosen repayment date after settlement, according to whether you have selected weekly, fortnightly or monthly repayments.

What you need To apply for a home loan you should fill out a mortgage application form that will ask you for details about your income, credit and savings. Your Yellow Brick Road Advisor will have these.

The application helps determine if you qualify for a loan and measures your debt ratio, an important part of working out how much of a house you can afford.

The type of documents you need for your application include: • Personal identification: e.g., passport, drivers licence, birth certificate.

• Property information: e.g., Contract of Sale.

• Financial information: e.g., cheque account and savings statements.

• Liabilities: e.g., loan and credit card statements.

• Income: e.g., group certificates, payslips, tax returns.

• Expenses: e.g., rent payments, electricity bills.

• The choice of making repayments on a weekly, fortnightly or monthly basis.

• The ability to transfer your loan if you buy another property.

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Jargon Buster

Application fee: Also called an establishment fee, it’s paid to set up your loan and usually includes legal fees and valuation charges.

Appreciation: Alternatively capital gain is an increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation or capital loss.

Arrears: To be behind in a repayment.

Body corporate: An administrative body made up of all the owners within a group of units or apartments of a strata building. The owners elect a committee which handles administration and upkeep of the areas shared by the owners.

Break costs: Break costs are exclusive to fixed rate loans where the loan is paid out early, or additional paid in above agreed limits. Not to be confused with Exit costs.

Bridging loan: Finance to buy another property before an existing property has been sold.

Building insurance: Insurance that covers the cost of rebuilding or repairing a property following structural damage, for example by flood, fire, storm and subsidence.

Certificate of title: The certificate detailing the ownership and land dimensions of a property.

Certificate of currency: A document issued by an insurance company indicating that a formal policy is currently in place for the insured property.

Company title: A property title that applies

when owners of units in an apartment block form a company. Each has shares in the company that owns the land and buildings. The owner of the shares is entitled to exclusive occupation of a flat. However, if you want to alter occupancy in any way, you must have the company’s approval to do so. This type of title can be restrictive for use by many lenders and shouldn’t be confused with Torrens or Strata Title held in a Company Name.

Contents insurance: A policy insuring household contents against theft and damage.

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Comparison rate: An attempt to express some of the costs of a loan into a single interest rate. These ‘costs’ include the nominal interest rate, some ‘up-front’ fees and on-going charges.

It does not include fees and charges based on future events which may not occur e.g. redraw fees, progress payments etc. which are not typical of all loans. The aim of the comparison rate is to help consumers make a more informed judgement of the costs of a loan, and in so doing, help them to compare various like loan products and services offered by the various lending institutions.

Contract of sale: Or Contract for Sale is a legal document that details the conditions relating to the sale or purchase of the property.

This document is legally binding when signed by both the vendor and buyer.

Disbursements: The various costs your Solicitor or Conveyancer has to pay to other organisations and bodies on your behalf, including, for example, search fees and stamp duty/ land tax. Your Solicitor or Conveyancer will itemise the disbursements on the invoice they send you.

Equity: The difference between the amount you owe on your home loan and the current value of your property.

Exit fee: Generally administration 'break costs' associated with discharging the mortgage and finalising the loan.

FHOG - First Home Owner’s Grant: A grant available to Australians who

Conveyancer: A person qualified and

are buying or building their first home, and have not previously owned a home, either jointly, separately or with some other person.

Conveyancing: The legal process where ownership of a property is transferred from the vendor to the buyer.

Fixed rate: An interest rate set for an agreed term regardless of any variations in the market. The benefits are that you know exactly how much you will be paying and are not affected by any rate rises during the fixed term.

licensed to handle all documentation for the sale and or purchase of a property.

Credit history: A record of an individual’s open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Daily interest: A method of calculating interest that takes into account the amount you owe on a day-to-day basis. All home loans in Australia, whether principal and interest or interest only have interest calculated daily and charged monthly. Therefore the more regular repayments that reduces the Principle outstanding, the lower the interest charged.

Default: Failure to make mortgage payments

on a timely basis or to comply with other requirements of a mortgage.

Deposit: The money you pay on exchange

of contracts as part of your initial contribution to the purchase of your home. This could be between 5-10% of the purchase price. You could also pay your deposit by way of Deposit Bond.

Gearing: Borrowing to invest. Positive

gearing is when you borrow to invest in an income producing asset and the returns (income) from that asset exceed the cost of borrowing leaving the investor with a surplus.

Negative gearing is where the return on an investment is less than the interest costs of the loan used to fund the investment. This amount can be claimed as a tax deduction.

Guarantor: A party who agrees to be responsible for the payment of another party’s debts.

Home insurance: A way of referring to

building insurance.

Honeymoon rates: Honeymoon rate, or introductory rate, lenders offer a low interest rate for an introductory period, usually the first 1-3 years of the loan. Once the honeymoon or introductory period ends, the interest rate usually reverts to a higher rate. This is often, but not always, the lender’s standard variable rate.

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Interest only: This is where you only

pay the interest on the loan. It is popular with investment properties for tax benefits.

Life assurance: A form of insurance by

which someone’s life is insured. Life assurance policies can run parallel with a principal and interest home loan, so the loan will be repaid if you die before the end of the term.

Line of credit: This loan lets you free up the equity you have in your home for other purposes. It provides you with a revolving line of credit through a convenient single account that you can use daily.

LMI – Lenders Mortgage Insurance: Insurance written by an

independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LVR of 80.01% or higher.

Low Doc Loan: Are a flexible financing

will not be able to inspect the property or see the standard of finishes, the practical layout, the size and dimensions or the outlook. However the Purchaser may be able to view a display unit and sample finishes.

Offset account: An account linked to a

mortgage account so that the interest earned is applied to reduce the interest on the mortgage.

Pre-Approval: A home loan pre-approval confirms how much you can borrow from your lender. It is conditional upon the property you wish to purchase being acceptable security, and your lender confirming your income and other information provided in your application.

Pre approvals usually last for a maximum period of 90 Days (some lenders 60), and is always subject to further assessment and usually formal valuation. An excellent option when looking to purchase but yet to identify the house of your dreams.

Private treaty: A sale of a property at an

solution for self-employed people who have income and assets, but may not have the usual paperwork at the time of application.

advertised price that can be negotiated.

Private treaty along with public auction are the two most common ways to sell and buy property in Australia.

LVR – Loan to Value Ratio: The ratio of the amount of your loan to the appraised value. The LVR will affect products available to the borrower and generally, the lower the LVR the more favourable the terms of the products offered by lenders.

Redraw facility: This allows you to access any additional payments you have made on your mortgage. It is not a feature of all loans and may attract a fee, and also have a limit.

Mortgage term: The length of time over which you agree to pay back your mortgage, usually up to a maximum of 30 years.

Negative gearing: See 'Gearing'.

No doc loan: No-document home loan

(or no-doc loan for short), applicants simply fill out an application form stating their income and assets. These loans were commonplace prior to the Global Financial Crisis, but legislation introduced since that time has outlawed these types of loans.

Off the plan: When you buy a property

from the plans only and not the finished building. The purchaser 29

Reverse mortgage: Is a flexible financing solution for seniors who are retired and are generally aged 60 and over. It allows you to access the equity in your home without limiting your lifestyle. This loan for Seniors enables you to access the equity in your home for such things as home improvements, the purchase of a new car, payment of medical expenses, taking a holiday or simply to supplement your income. A reverse mortgage does not require repayment until the applicant moves out of the home on a permanent basis (e.g. moves into permanent age care or dies).

Settlement: The finalisation of the property purchase where your solicitor/conveyancer and the lending institution exchange money and

documents so that you become the legal owner of the property.

Serviceability: The one key aspect

that all Lenders look at. They need to know if you can afford to keep up the monthly repayments to your loan. lenders vary in the way they calculate serviceability, so the amount you can borrow will vary from Lender to Lender. All apply a stress tested assessment rate or affordability rate that tests the borrower’s ability to make repayments if interest rates rise.

Stamp duty: Your purchase may attract government duty depending on the purpose of the loan, this duty is applied to the land valuation, usually the purchase price, not the mortgage amount and varies from state to state. Contact a Yellow Brick Road advisor to work out what stamp duty applies to your situation.

and apartments and is proof of ownership of a unit. Individuals each own a portion, known as a ‘lot’. They share common property, which can comprise: external walls, roof, foyers, fences, lawns or a pool.

All owners contribute to the maintenance of these facilities.

Utilities: Electricity, gas and phone supplies.

Valuation: A written assessment of how much a property is worth by a registered valuer.

Variable rate: The opposite of fixed rates, variable rates go up and down as interest rates rise and fall.

Strata title: A strata title is the most common title associated with townhouses

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Yellow Brick Road’s guide to buying your first home.

ybr.com.au