Questions about mortgages

March 28, 2025

FAQs About Mortgages in Australia: Everything You Need to Know

Thinking about buying a home or investment property in Australia? If so, you’ve probably got a ton of questions about mortgages. As a finance broker, I hear these questions all the time, so I’ve put together this handy guide to help you navigate the mortgage maze with confidence. Let’s dive in!

1. What’s a Mortgage, Anyway?

A mortgage is basically a loan that helps you buy property. The lender gives you the funds upfront, and you pay them back over time—with interest, of course. The catch? Your property is the security for the loan, meaning if you don’t keep up with repayments, the lender can take it back.

2. How Much Can I Borrow?

That depends on a few things—your income, expenses, debts, and credit history all play a role. Lenders also have their own criteria. A quick way to get an estimate is to use an online mortgage calculator, but for a more accurate picture, chatting with a broker (like me!) is your best bet.

3. What’s LVR (Loan-to-Value Ratio)?

LVR is just a fancy way of saying how much you’re borrowing compared to the value of the property. If you’re buying a $500,000 home and need a $400,000 loan, your LVR is 80%. If your LVR is higher than 80%, most lenders will ask you to pay Lender’s Mortgage Insurance (LMI)—which leads us to the next question…

4. What’s Lender’s Mortgage Insurance (LMI)?

LMI is an extra cost you pay when your deposit is less than 20% of the property’s value. It protects the lender (not you) in case you default on your loan. The cost varies depending on your loan size and LVR, and while it’s not ideal, it does help buyers get into the market sooner with a smaller deposit.

5. What Types of Home Loans Are Out There?

There’s a few to choose from:

Variable Rate Loans: The interest rate goes up and down with the market.
Fixed Rate Loans: The interest rate stays the same for a set period (usually 1-5 years).
Split Loans: A mix of fixed and variable rates.
Interest-Only Loans: You only pay interest for a set time before switching to principal and interest.
Offset Accounts & Redraw Facilities: Features that can help you save on interest.

6. What’s a Pre-Approval?

A pre-approval (or conditional approval) is when a lender checks your finances and gives you an idea of how much you can borrow. It’s super useful when house-hunting because it shows sellers you’re serious and ready to buy.

7. What’s the First Home Owner Grant (FHOG)?

Good news for first-time buyers! The FHOG is a government scheme that gives eligible first-home buyers a cash grant to help with the purchase. The amount and eligibility vary by state, and some states also offer stamp duty discounts—so it’s worth checking what’s available.

8. How Much is Stamp Duty?

Stamp duty is a tax on property purchases, and it varies depending on where you’re buying. It’s based on the purchase price, and while it can be pricey, some first-home buyers get exemptions or discounts. An online stamp duty calculator can give you a rough estimate.

9. How Do Interest Rates Affect My Loan?

Interest rates dictate how much your mortgage will cost over time. Higher rates mean higher repayments, while lower rates save you money. The Reserve Bank of Australia (RBA) sets the official cash rate, which influences what lenders charge.

10. What’s the Difference Between Principal & Interest vs Interest-Only Loans?

Principal & Interest Loans: You repay both the loan amount (principal) and the interest, reducing your debt over time.
Interest-Only Loans: You only pay interest for a while, keeping repayments lower at first but not reducing your loan balance.

11. How Can I Pay Off My Mortgage Faster?

If you want to get mortgage-free sooner, try these tips:

Make extra repayments whenever possible
Use an offset account to reduce interest
Refinance to a lower interest rate
Switch to fortnightly payments instead of monthly

12. What’s Refinancing and When Should I Do It?

Refinancing means switching to a new lender or loan to get a better deal. You might refinance if:

Interest rates have dropped
You want better loan features
You need to consolidate debt
Your financial situation has changed

13. Can I Get a Home Loan with Bad Credit?

It’s possible! Some lenders offer loans to people with bad credit, but the interest rates are usually higher. If you’re in this boat, working on your credit score and reducing debt can improve your chances of getting a better deal.

14. Do I Need a Mortgage Broker?

A broker (like me!) helps you find the right loan, compare lenders, and navigate the application process. Because we work with multiple lenders, we can often get better deals than going straight to a bank.

15. What if I Can’t Make My Repayments?

If you’re struggling, talk to your lender ASAP! Many have hardship assistance programs that can help, such as repayment pauses or loan modifications. Ignoring the problem will only make things worse, so reach out before it gets out of hand.

Wrapping Up

Mortgages can seem complicated, but they don’t have to be stressful. Whether you’re buying your first home, upgrading, or refinancing, knowing your options is key to making smart financial choices. Got more questions? Feel free to reach out—I’m happy to help!

Want to catch up with Steve to understand your options? Click here.

Time to get your tax up to date? Speak to The Accountants here.