Getting with the lingo

Confused about how to go about buying a property in Australia?

OMG! We love our acronyms from ROTFL – rolling on the floor laughing, to MAMIL – the middle aged man in lycra – riding past you on the way to work.  Perhaps you were even ROTFL at the MAMIL you saw…  But when you start looking to purchase property, you may find yourself thinking…IDGI?

The mortgage industry is a wide, wondrous world with a language all of its own.  Mortgage Brokers (finance professionals who help you select a loan that suits your needs) bandy around acronyms which, to everyone else, sound like we’re speaking a different language.  I’m going to break it down FYI…

LVR       Loan to Value Ratio:  In the simplest terms, the LVR is the percentage of the property’s value, as assessed by the lender, that your loan equates to. So, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is 80 per cent of the property value, making your LVR 80 per cent.

LVR is important because different lenders and loan types have different maximum LVRs, and some lenders will only lend up to a certain LVR (60-70%) for small properties i.e. units or properties in certain areas, like inner-city, high density locations.

LMI       Lenders Mortgage Insurance:  This is a fee that the bank charges you because you have less than 20% of the cost of the property.  The purpose of LMI is to protect lenders in case the borrower fails to make repayments and, when the loan-to-value ratio exceeds 80 per cent, so the loan amount is more than 80 per cent of the value of the property being mortgaged, the risk of a lender not recouping their costs should the borrower default is increased. A higher deposit, or the support of a guarantor means a smaller loan amount, so will decrease the LVR and the perceived risk, and may be the key to avoiding paying LMI.

FIRB      Foreign Investment Review Board is an Australian government department that assesses applications from foreigners who would like to invest or buy a home in Australia.  If you’re on a Temporary Visa you need approval from the FIRB to purchase property in Oz.  You can only buy one established dwelling and it must be to live in, however you will be required to sell it once you do not live there anymore.  You can buy an investment property, however it must be a new property or vacant land to build a new property.  However, you are exempt if the property developer has obtained an exemption certificate for the new property that you are buying.

FHB       First Home Buyer is someone over the age of 18 who has never owned property in their own name, or jointly with another person.  FHBs can claim a concession on Transfer Duty (previously called Stamp Duty) when purchasing a home under the value of $550,000.  There will still be other fees and charges, but you could save up to almost $16,000!

FHOG    First Home Owners Grant – FHB (see above) may be eligible for a cash grant. If your contract is dated 1 July 2018 or later, you can get $15,000 towards buying or building your new house, unit or townhouse (valued at less than $750,000). The grant is paid per new home; not to each of the applicants for the same home.

• You must be an Australian citizen or permanent resident (or applying with someone who is).
• You or your spouse must not have previously owned property in Australia that you lived in.
• You must be buying or building a brand-new home.
• The value of the home including the land is less than $750,000.
• You must move into the new home as your principal place of residence within 1 year of the completed transaction and live there continuously for 6 months.

FHLDS   First Home Loan Deposit Scheme is an Australian Government initiative whereby the Government will cover the 15% LMI that you would normally pay if you only have a 5% deposit.  For example, if you were to purchase a home valued at $400,000, your 20% deposit would be $80,000 + costs.  If you have less than that, the bank would charge you LMI (see above).  But, if you have saved 5% – $20,000 + costs, the Government will cover the LMI for you so you don’t have to pay it or add it to your loan amount.  Max price for a property in Brisbane is $475,000.

So, HTH.  If you have any questions, speak to your relocation agent or check our mortgage brokers website for FAQ!

(Hope I get to TTYL.  From The BB – The Boutique Broker https://boutiquebroker.net.au/)