When you’re applying for a low doc home loan, there are a lot of different terms, product types and figures to take into consideration. However, knowledge is power and understanding the various different aspects of home loans can help you make the most of your finance application process.
The vocabulary of a mortgage application can be difficult to wrap your head around. Here are two common terms you’re bound to come up against in the world of home loans. Wrapping your head around these can help you to understand more about home loans and what’s involved.
Lenders Mortgage Insurance
Borrowing for a home loan is an essential thing for most people in order to buy their own home in Australia. Often, it’s expected that the buyer fronts 20 per cent of the property’s overall value as a deposit, with the lender providing the remaining 80 per cent as a mortgage.
However, in the event that the buyer needs to borrow more than this amount, one step that may be required for the transaction to go ahead is lenders mortgage insurance (LMI). This is used to protect the lender in the event the buyer is unable to make repayments. Usually, the home is used as security.
The amount of LMI charged depends on the value of the property, as well as the amount of money borrowed in the first place.
Offset account
This is one of the strongest additions to look into for your mortgage, especially if you’re interested in paying off your home loan as fast as possible. Setting up an offset account helps to reduce the amount of interest you pay on your home loan.
Let’s say your remaining mortgage balance is $500,000, but you have $50,000 in your offset account. This means that you’ll only pay interest on the remaining $450,000, rather than the full balance. The benefits of this are immeasurable, allowing you to save money in the long term while chipping away at your mortgage repayments.
