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All you need to know
What is a mortgage?
Mortgages are another name for home loans, and Australian residents are blessed with a secure and variable home mortgages industry that is the envy of the world.
When you borrow money from banks or lenders to buy a property, you enter into a legal agreement that requires you to make agreed home loan repayments over the life of your loan. If you calculate your mortgage options before you start looking for a property, you can make choosing from suitable home loans a little easier. You can do this with any of Mortgage House’s mortgage calculator options, which search all our home mortgages to find suitable options based on your financial situation and property goals.
When you are first looking for the best home loan, or mortgage, there are a few main types to consider:
- Principal and interest. This is the most common of our home loans. Mortgage repayments are made up of both the principal amount and the interest banks and lenders charge to allow them to provide you with the loan.
- Interest only.These kinds of home loans require you to pay back only the interest amount of the mortgage repayments, usually over an agreed, shorter, period of time. The goal of these home loans is to sell the home before the interest-only period ends and use the proceeds to pay off the principal amount.
- Owner Occupier.Owner occupier home loans are mortgages for people who intend to live in the property they are looking to buy. These home loans are the most popular offered by financial institutions, and as a result there are a lot of options to choose from. Use a home loan calculator to calculate your mortgage needs and take one step closer to finding a suitable home loan for you and your family.
- Investor home loans are for those looking to use real estate as an investment. Investing in property can have tax benefits and making regular mortgage repayments in Australia can help your credit rating over the long term
Our lending specialists have helped new home buyers understand the process of entering into a mortgage successfully for over 35 years. We have put together a range of helpful guides to give you valuable information as well. Feel free to explore our First Buyer Home Loan Guide today.
How does a home loan or mortgage work?
A successful home loan application is when a bank or a lender determines that you are capable of making mortgage repayments over the life of the loan, based on a range of factors.
Essentially, a home loan is the money you need to pay for the difference between the total cost of your property and the deposit amount you have at your disposal. The money is lent to you by a bank or lending institution with interest payable on the loan amount each month.
Your lender will calculate your mortgage suitability by looking at your credit file and credit history, your current income and expenses and a range of other variables such as how long you have been with your current employer.
Different types of borrowers will be eligible for different home loan products to suit their circumstances. For example a first buyer home loan will require a different application process to an investment home loan or self employed home loan.
You may be able to calculate your home loan borrowing capacity before applying for any home loans. A Borrowing Calculator can give you an indication of how much you may be able to borrow, helping you narrow down your property search. Importantly, this kind of mortgage loan calculator is not a pre-approval, and is only a guide, but it can be a good start.
If you want a quick glance into monthly payment estimate based on the property value and your affordability, all you need to do is search our home loans for one that suits your needs, fill in the details of the mortgage calculator and we will calculate your home loan borrowing options, including mortgage repayments.
Types of home loans or mortgages offered
There are a range of different kinds of home loans that may suit you and your property goals. Everyone is different, so it makes sense that Mortgage House offers its customers choice when it comes to the home loans themselves and mortgage repayments options in Australia. Here’s a snapshot of some of the different types of home loans Mortgage House has available:
- Fixed rate:A fixed interest rate home loan is one where the interest rate is fixed over an agreed period of time. This period is usually between 1 and 5 years, and the time can vary among financial institutions.
- Variable rate: Variable rate home loans are the most popular in Australia and mean the interest rate can increase or decrease over the short and long term. Both internal and external factors can impact on whether the interest rates for these kinds of home loans rise or fall.
- Toggle Offset:These kinds of home loans can be a good compromise between the above two. With a toggle offset home loan, half has a fixed interest rate, and half a variable. You can toggle between the two to make the most of current interest rates and save.
- Split home loans: Mortgages like these are similar to toggle home loans, with portions that are both variable and fixed, but there are no restrictions on the proportions.
- Portable loans: These kinds of home loans are ones you can take with you when you move.
- Line of credit:A line of credit can be either a home loan or a personal loan and can help you access money when you need it most.
- Low Doc loan:If you are self-employed or don’t have access to the documents most financial institutions require when applying for home loans, a Low Doc loan may be the answer.
- Construction loan:Australians love building homes, and Mortgage House has a range of home loans that are designed just for that purpose. A Construction Loan will pay the builder in agreed stages, with interest only charged on the amount paid out, not the overall mortgage.
- Bridging loan:If you are selling your home and buying a new one, Bridging Loans can help you fill the gap.
Feel free to get in touch with one of our Lending Specialists to discuss the best home loan type for you.
How much is mortgage insurance?
At Mortgage House, we understand that getting into the property market, especially in Australia’s capital cities like Melbourne and Sydney, can be difficult. That is why we have a range of tools and resources that aim to make it easier. One of the tools that may be available to you is Lenders Mortgage Insurance (LMI). While most financial institutions require you to have a 20% deposit when applying for home loans, LMI can allow you to borrow up to 95% of the value of the property you are looking to buy.
Mortgage insurance such as LMI protects the lender in case you default on your loan, and how much you pay can depend on the value of the property and the amount of deposit you have. In most circumstances, Mortgage House should be able to arrange your mortgage insurance, with the added benefit that it will be a one-off payment only. You can pay for mortgage insurance up front or add it to your home loan and pay it off over time. If you decide to do it this way, it is important to add the mortgage insurance fee to your home loan mortgage calculator at the very beginning. Importantly, as your property value increase, you could easily make up for the cost of mortgage insurance. And if you build up enough equity over time, you could also refinance your home loan and avoid paying mortgage insurance.
As your property increases in value over time, it could make up for the cost of LMI. Over time you could also unlock the equity in your home to refinance and avoid paying LMI.
Read more about LMI here.
What is a reverse mortgage?
A reverse mortgage is a way to help older or retiring Australians get the most out of the equity in their current home, without selling it. When you have built up enough equity in your home, financial institutions may be able to help you use that equity for a reverse mortgage. You don’t have to make regular mortgage repayments and the money back can be paid back when you sell your current home, move into a retirement home or pass away. This option is commonly used by people who need extra money, are retired and/or don’t want to sell their home. As such, most financial institutions will only allow those over 60 to apply.
Reverse mortgages can be used for a range of investments opportunities including:
- Investing. Reverse mortgages are very flexible and can be taken various ways, including as a lump sum, line of credit, income stream or a combination of all of them. How much you are eligible for can depend on your age, so if you have a large amount of equity, it may be a good idea to leverage it into borrowing money for an investment that has a good chance of a strong return.
- Buying property.Increasing your property portfolio can be good move no matter what stage of life you are at. And if an opportunity arises that needs to be jumped at immediately, then being able to leverage your equity through a reverse mortgage can be a good strategy. However, speak with your accountant to ensure the property you are buying stacks up financially, and compares favourably to the value of your current home. That’s important because reverse mortgages have to be paid back.
It is important to realise reverse mortgages will need to be repaid, and they will also accrue interest, even when you are not scheduled to be making repayments. Make sure this is in your budget planning, so when you do sell your home and repayments begin, it is not too big a shock.
How long does it take to pay off a home loan or mortgage?
A mortgage calculator can give you an indication of how long it takes to pay off a mortgage, and how much your mortgage repayments may be each week, fortnight or month. Most Australians can apply for home loans for up to 30 years, but you can choose smaller periods if you wish. Most Mortgage House home loans give you the option of paying them off sooner than the agreed period, without being penalised. While some financial institutions can charge you for making extra mortgage repayments in Australia, Mortgage House has a large range of low rate home loans that won’t. That means that for owner occupier and investors, making extra repayments, and paying off your loan sooner, is something that is simple to do. Refinancing your loan can also help you achieve this aim.
Making extra mortgage repayments in Australia means you will pay less interest over the life of the loan, saving you money. It’s worth understanding how to calculate your mortgage repayments, including any extra ones, before making any property decisions.
If you have used our home loan calculator and aren’t sure whether extra repayments will fit in your budget, but you would still like to have the option, Mortgage House have a range of home loans that include a Redraw Facility.
Redraw means you can draw-down, or withdraw, any extra repayments or lump sum payments you have made over the life of your mortgage loan, either in the short term or long term. You don’t have to spend the money on your home, and you can withdraw it whenever you like, as long as your regular minimum repayments are up to date.
Searching through Mortgage House’s home loans to find an interest rate that may suit your current budget and financial situation is a good place to start.
View our list of flexible low rate loans here.
How do you calculate mortgage repayments?
Working out how much your mortgage repayments are likely to be is simple, thanks to Mortgage House’s mortgage calculator. Once you have narrowed down a few home loans that may be suitable, simply put all the relevant information into the calculator below and we will do the rest.
How much your home loan repayments are will depend on the home loan, how much you borrow and for how long. Not only will our mortgage calculator give you an idea of the repayments, but it will break them down for you into interest and principal amounts. That means you will get a clear picture of how much interest you will pay over the life of the loan. You can adjust the loan period to discover how much you can save by paying off your mortgage sooner, and you can adjust the interest rate up or down to mimic any variable rate fluctuations, allowing you to see the full picture of what might happen in the future and how that will affect your budget.
Our helpful home loan calculator is flexible, easy to use and can give you some of the information you need to take the next step. We also recommend exploring our best budget planner calculator to help give you essential visibility over your finances.
Know where you stand with helpful calculator resources
Whether you are completely new to the home loan process or a seasoned borrower, our calculator tools will give you valuable visibility over your finances.
How much can I borrow calculator
Important Disclaimer: This is intended as a guide only. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House's prevailing credit criteria apply. We recommend you seek independent legal and financial advice before proceeding with any loan. The Comparison Rate for each of the home loan products contained in this page is based on a loan of $150,000 over a 25 year term. Fees and charges may be payable.
WARNING: The comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. * This mortgage calculator shows indicative repayments based on 12/26/52 equal repayments for monthly/fortnightly/weekly options.
Important Disclaimer: This information is intended as a guide only. The calculation of fortnightly and weekly instalments varies with the specific loan product. Higher loan repayments will be required on principal and interest loans where the instalment calculation is based on half the monthly payment for a fortnightly payment or a quarter of the monthly payment for a weekly payment. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House's prevailing credit criteria apply. We recommend you seek independent legal and financial advice before proceeding with any loan.
Mortgage Repayment Calculator
Important Disclaimer: This is intended as a guide only. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House’s prevailing credit criteria apply. Please note that your actual fortnightly repayment would be equal to the monthly repayment amount divided by two. Weekly repayments would equal the monthly repayment amount divided by four. If you choose to pay fortnightly or weekly, your actual repayments will be higher than repayments shown on this page. You can reduce the term of your loan if you choose to make repayments fortnightly or weekly. We recommend you seek independent legal and financial advice before proceeding with any loan.
Switching Loans Calculator
Important Disclaimer: This is intended as a guide only. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House's prevailing credit criteria apply. We recommend you seek independent legal and financial advice before proceeding with any loan. * The interest rate shown on Toggle products is a blended rate comprised of 50% fixed interest rate and 50% variable interest rate. The Comparison Rate for each of the home loan products contained in this page is based on a loan of $150,000 over a 25 year term. Fees and charges may be payable. * This mortgage calculator shows indicative repayments based on 12/26/52 equal repayments for monthly/fortnightly/weekly options.
WARNING: The comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.