Considering a home loan

Most people use ‘home loan’ and ‘mortgage’ interchangeably, however they actually refer to two entirely separate things.

What is a home loan?

A home loan is the sum of money a lender lends you to purchase your chosen property. You pay this money back to the lender over a number of years, along with interest on the loan calculated at either a variable (fluctuates with the market) or fixed (1 to 10 years) interest rate.

What is a mortgage?

A mortgage is a security measure that’s put in place when you take out your home loan that protects the lender if you default on your repayments. If you don’t pay the money back, the mortgage gives the lender the legal right to sell your property in order to recoup their losses. The mortgage stays in force until you have paid off your home loan, after which time you own the property.

What's the difference?

A home loan is a means of buying a home when you don’t have the money yourself, while a mortgage is a means of guaranteeing a loan and protecting the lender from non-payment.

If you’re planning on buying a property, it’s good to keep informed. You can contact our expert team at Tiimely Home any time if you’re ever unsure or need clarification.

Stamp duty is a state government tax levied on home buyers and it varies depending on the state or territory.

Generally, it’s 3-4% of the property value, but it’s best to use our Stamp Duty Calculator for an estimate of what you can expect to pay. Below, you’ll find an overview of stamp duty for each state and territory:

VIC
$440,001 to $550k = $18,370, plus 6% of the dutiable value over $440k.
$550,001 to $960k = $28,070, plus 6% of the dutiable value over $550k.

NSW
$80,001 to $300k = $1,290, plus $3.50 for every $100 over $80k$300,001 to $1m = $8,990, plus $4.50 for every $100 over $300k.

If you're a first home buyer, you can choose between a lump sum stamp duty payment or an annual tax that is based on your property's land value. There are conditions and eligibility criteria, which you can find here.

QLD
$75k to $540k = $1,050, plus $3.50 for every $100 over $75k.$540k to $1m = $17,325, plus $4.50 for every $100 over $540k.

WA
$100,001 to $250k = $2,090, plus $3.80 for every $100 over $100k.
$250,001 to $500k = $7,790, plus $4.75 for every $100 over $250k.

SA
$250k to $300k = $8,955, plus $4.75 for every $100 over $250k.$300k to $500k = $11,330, plus $5 for every $100 over $300k.

TAS
$200k to $375k = $5,935, plus $4 for every $100 over $200k.$375k to $725k = $12,935, plus $4.25 for every $100 over $375k.

NT & ACT
Stamp duty is determined by a formula in these territories, so you’ll need to use the calculators on the NT Government and ACT Revenue Office websites to determine approximate stamp duty.

Principal & interest is the most common type of home loan. This involves making repayments which pay down some of the principal balance plus the interest accrued.

However, some people opt for an interest only loan period. This involves making repayments for a set time (usually 1-10 years) which are lower than principal and interest repayments as they only cover the interest being accrued and none of the principal.

You might choose an interest only loan period if you know your budget is going to be tight for a few years, or in the case of property investors, for taxation or equity building purposes.

If you go down this road though, you’ll need to make sure you budget for the end of the interest only period, as your loan will then switch back to the higher principal and interest repayments.

Your borrowing power is an approximate calculation of your ability to borrow funds. Basically, it’s an indication of how much you can afford to borrow while still being able to meet your other financial obligations. Each lender will calculate it differently, but generally, a borrowing power calculator considers things like your income, current loans and liabilities, credit cards and their limits, plus your living expenses. Using our borrowing power calculator will give you an idea of what you could borrow. Learn more about what goes into calculating your borrowing power.

It’s simply the difference between whether you’re living in the property or not. If it’s where you are currently living, it’s considered owner-occupied, but if you’re intending to use your property as a source of income (through rental income or capital gains) and living in a different property it’s categorised as an investment.

How the property is used will determine what type of home loan you need (either owner-occupied or investment). Owner-occupied home loan rates tend to be lower than investment home loan rates.

A variable rate home loan is when the interest rate goes up and down with market fluctuations. These are influenced in part by the official cash rate set by the Reserve Bank of Australia (RBA).

The two main types of variable rate home loans are:

• Standard variable rate home loans – these often include features such as redraw facilities, a line of credit and an offset account, where you can use your savings to pay less interest on your loan.
• Basic variable rate home loans – these offer lower interest rates, but fewer if any of the features of a standard variable rate home loan.

Variable rate home loans are the most popular type of home loan, as they provide more features and flexibility than fixed rate home loans and usually give you the option to pay your loan off sooner.

Owner-occupied home loans tend to have lower interest rates than investment home loans because they’re generally seen as less risky than investor home loans.

Equity is the difference between the market value of your home and the amount you still owe on your home loan.
Equity is also a powerful tool that can help you to build a profitable investment property portfolio or you can borrow against it to do renovations or for any other purpose.

Refinancing

This involves replacing your existing home loan with a new one, ideally with better terms and conditions and a lower interest rate. Because it’s just one loan, it can be easier to manage than an equity loan.

Equity loan

An equity loan is a separate loan you take out in addition to your home loan. It’s often a line of credit which gives you approval to borrow up to a certain amount. You can then choose how much of this you borrow, and you only pay interest on what you use.

A roll-to rate, also known as a revert rate, is a variable interest rate that fixed rates roll to at the end of the fixed term or an interest-only period. You can find Tiimely Own home loan current roll-to rates here.

Variable rates are changeable and depend on the cost of funding at the particular time and depending on when your fixed period started, you may have a low or high roll-to rate.

What happens at the end of my fixed term period?

Depending on your lender, you may receive a reminder closer to the end of your fixed term notifying you of the roll-to rate and the applicable date.

Depending on your roll-to date, there are a couple of options you may consider:

If you're rolling to a variable interest rate that is lower than your current rate

Depending on your situation, you could let your interest rate roll to the roll-to rate. Variable rates are variable in nature and likely to move so it’s worth understanding your rate and knowing what's on offer when the time comes to move on.

You're rolling to a higher variable interest rate

It’s possible to negotiate with your current lender or start shopping around for a home loan to suit your needs, otherwise known as refinancing. There are pros and cons so make sure your new home loan meets your requirements.

Fix again

There is also the option to fix your rate again if you like to know exactly how much to budget for loan repayments, or if the fixed interest rates are low when you roll off.

Refinancing

At the end of your fixed rate term, there may be a couple of features and add-ons you’d like to have, like an offset account or redraw facility. Or perhaps you want to consolidate some debt to free up cash flow.
It pays to start researching so you can secure a better deal as soon as possible.

The interest rate is the cost of borrowing money. There's lots of information available, but it can be complex and confusing to understand. This article may help you to understand the types of interest rates and how they are calculated.

Wondering about comparison rates? They are shown to give a clearer comparison of home loan products between lenders. Comparison rates factor in the extra fees associated with a home loan over its lifetime.

Not at all. You can rent out a property as soon as you’ve purchased it.
Note: If you do rent out your home, it becomes classified as an ‘investment property’ so make sure your home loan suits this function.