Untangling the jargon and reviewing your home loan
Canstar’s Stephen Mickenbecker busts some home loan jargon by explaining the meaning of some of the common terms used when talking home lending. Stephen also gives some tips on how to review your home loan.
| What is the difference between fixed and variable interest rates? |
| fixed rate loan has an interest rate that is fixed for a period and during that fixed rate period, your loan repayment won't fluctuate. With a variable rate loan, the interest rate is subject to change, meaning that your interest rate and repayments could go up or down. You might consider a split loan. A split loan allows you to set a specific amount of your loan at a fixed interest rate with set repayments and have the remaining amount set at a variable interest rate. |
| LVR is another term used a lot. What does it mean? |
| LVR stands for Loan to Value Ratio which is the proportion of money you borrow for a home compared to the value of the property you wish to purchase. |
| Should I get an offset account? |
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Please insert you content here An offset account reduces the balance of your home loan by the amount in your offset account for the purposes of calculating interest. If you have savings in another account, you may wish to consider an offset account. While you don’t earn interest on your savings if you put them in an offset account, you could be charged less interest on your home loan and this could help reduce the loan term. Your repayments stay the same, but the time it take you can reduce.
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| What is Lenders Mortgage Insurance? |
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Lenders Mortgage Insurance is generally a one-off insurance payment, but it may be funded under the loan also. This insurance protects your lender against a potential default on your home loan. Often, lenders mortgage insurance is required to be paid when the Loan to Value Ratio (LVR) is 80% or more.
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| Reviewing your home loan |
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It’s important to review your home loan regularly to make sure you're getting the best deal possible for your needs. It can pay not to settle for your current home loan and instead shop around.
Our tips for reviewing you home loan are:
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