Residential home loan applications are typically divided into three categories.
The first category is the new purchase of any real estate. The products for the purchase of real estate properties are usually obtained via a loan from a financial institution. These products incorporate both owner occupied and investment properties. Generally, the loan amount that one can obtain from the lender is 80% of the security value. The highest that any lender will let you borrow is 95% of the security value, however, this is generally subject to higher Lender’s Mortgage Insurance (LMI) – which is a one-off payment that protects the bank against any losses they may incur if you are unable to repay the loan – and much stricter income approval conditions. There are some individual lenders that also can waive LMI up to 90% of the security value for certain industries, such as accountants (CPA), financial analyst (CFA), lawyers and doctors. Furthermore, there are also some lenders that provide LMI waivers up to 85% for first home buyers.
The second category is the refinance of any existing home loan. Refinance usually refer to the process of when you transfer an existing security to a new bank through the process of reapplying for a new loan. Refinancing is generally done in order to lower interest rates, change the way you structure your loan or extend the loan period in order to adjust your monthly repayments. At this point in time, many lenders are currently offering varying amounts of cash back promotions. Thus, making this an ideal time to consider refinancing your existing loan.
The third category is equity release. An equity release allows the applicant to essentially swap to a new lender and refinance your existing property, while in the meantime, also cashing out a portion of your home’s value in order to receive extra money in order to meet your needs. These can range from a down payment for your next property or funds to invest in other low-risk investments etc.