Home Loan FAQs

1) Understand how much you can borrow

This depends upon several things:

• Whether the property you wish to buy is:
  • A home to live in - at Hume you may be able to borrow as much as 97% of the property’s value (including the Lenders Mortgage Insurance) or,
  • A residential investment property - at Hume you may be able to borrow up to 85% of the property’s value (including the Lenders Mortgage Insurance), using just the investment property as security
• Your savings and credit history:
  • Keep your savings account statements as evidence of your savings history
  • Additional payments on existing loans can also be used as evidence of savings
  • Should you ever default on a loan, a record of this default could affect future loan applications
  • Part of the rental income from investment properties can also be considered in determining how much you can borrow
• Your Net Disposable Income (NDI)
  • NDI is calculated by considering your earnings and the extent of your existing financial commitments. Your personal situation influences your ongoing weekly/ monthly outgoings.

If you have equity in an existing property you may be able to borrow 100% of the purchase price for another property, plus the money to cover your costs such as stamp duty.

Most importantly, you need to be comfortable with your monthly loan repayments (and don’t forget to build in an allowance for potential increases in interest rates as well as any planned changes in your personal situation, such as paying for a wedding or stopping full time work to start university). Try our borrowing power calculator below to estimate how much you could borrow as a guide to determine not only your borrowing power but also your monthly repayments. Find Hume's full suite of calculators here

2. Research the Market

Finding the perfect home is not easy. Gather as much information as possible to enable an informed decision about buying your home. Look through newspapers and talk to your local real estate agents.

You need to consider if the house is:

• In an area you want to live
• Convenient for work, schools, transport and lifestyle amenities (shops, pools, parks/reserves)
• Free from excessive noise from road traffic, aircraft or trains
• In a price range you can afford
• Environmentally friendly – is there natural light? Is it easy to heat and cool?
• The right size for your family needs, both today and into the future

Ensure you know what your ongoing costs may be, including rates, land tax, and body corporate fees. Finally, check for any planned future development.

3. Pre-approval

Hume is able to provide a free pre-approval, which is a conditional approval based on your ability to repay a loan. Knowing how much you can spend on a home will allow you to attend auctions or make an offer with confidence. Your approval will be confirmed with a letter outlining the terms and conditions. Pre-approvals are valid for three months.

To apply for a pre-approval call 02 6051 3233 to make an appointment with a Hume Lending Manager.

4. Once you have found the home you want

The seller’s agent will normally be able to provide you with a copy of the contract of sale. You should take a copy of this to your Solicitor/Conveyancer who will help you decide what reports and inspections should be carried out before you buy.

• At some point, you will make an offer to purchase the property. This would normally be made to the vendor’s agent, and can be expressed as “subject to” such things as a satisfactory (i.e. clean) pest inspection, or structural survey. You may be asked to leave a “good-will” deposit to prove your genuine interest in the property. As formal approval of your loan cannot be given until details of the property are known to the lender, you can also make your offer to purchase “subject to finance”.
• You need to provide a copy of the Contract of Sale to Hume so that your loan can be formally approved. If approval in principle was not previously organised, an application will be taken and a decision provided as soon as possible. A formal valuation and/or inspection of the property may be necessary.
• Your Legal Representative will also conduct a title search before you commit to anything. You should not exchange contracts to purchase a property until you have had all the necessary searches and inspections undertaken.
• If a “cooling off” period applies to your contract, you may be able to have the inspections and searches completed between the exchange of contracts and the end of the “cooling off” period.

Searches and inspections may include:

• Building Inspection - The written report should detail any problems with damp, the structure of the building and the roof.
• Pest Report – This report should detail any evidence of pest infestation such as white ants and, if required, recommend treatment.
• Surveys – Surveys check the position of the house and its boundaries and confirm that the house is built on the correct block. They will also confirm that the house and any extensions have been built in accordance with local council requirements.
• Title Search – A title search provides details of who owns the property and who else has an interest in the property. It will also note restrictions and conditions in relation to what can and can’t be done with the property (e.g. fence heights, location of sheds, etc.)

5. Exchanging Contracts

When your offer to purchase has been accepted, you and the seller (vendor) sign and exchange the Contract of Sale, you are then legally bound to go ahead with the purchase. At this point, a deposit will be required of between 5-10% of the purchase price. To assist with this cost, a deposit bond can be used (conditions apply), see “deposit bonds” below for more information on this. You should consider taking out building insurance to cover your investment; Hume's Lending Manager can provide information regarding free home insurance cover until settlement. You can contact a Hume Lending Manager on 02 6051 3233.

6. Settlement

Settlement usually takes place between 1 and 3 months following exchange of contracts.

The settlement process:

1. Your solicitor / conveyancer will prepare and arrange for you to sign a Transfer of Land document at least two weeks prior to settlement and arrange to have this stamped (if applicable) with the appropriate amount of state duty.
2. Your solicitor / conveyancer should advise you one week prior to settlement of the exact date and time and the amount of funds you are required to provide prior to settlement (if applicable). This amount is usually required to be paid by bank cheque one day before settlement, or you can give Hume permission to arrange for this amount to be drawn from your savings account on the settlement day.
3. Your solicitor / conveyancer will arrange for your loan to be drawn down.
4. After settlement has taken place the seller’s solicitors will contact the real estate agent that sold you the property and advise them to hand over the keys to you.
5. Your solicitor should contact you and confirm settlement has taken place and send you a statement to show you how the funds have been disbursed.
6. Congratulations, the home is then officially yours.

Deposit – Generally a minimum of 5% of the house cost is required as well as additional savings to pay for associated costs such as stamp duty and conveyancing costs.

Lenders Mortgage Insurance (LMI) - LMI is usually required if you borrow more than 80% of the value of the property. As the name suggests, it is actually Hume, and not you as the borrower, who is covered by the insurance policy, which covers Hume in the event that you default on the loan and we suffer a shortfall.

Unlike traditional insurance products, there is a once-only premium payable. This is payable when your loan funds are advanced and provides cover for the full term of the loan. This premium amount is added to your loan amount.

The cost of Lenders’ Mortgage Insurance varies depending on the amount of the loan and your level of equity in the security property.

Mortgage Protection Insurance - Is designed to protect you, the borrower, if you are unable to make your loan repayments in the event of death, disability, involuntary unemployment or trauma. A Hume Lending Manager can assist you in organising mortgage protection insurance during the loan application process.

Stamp Duty - Stamp duty is a state government tax on the mortgage documents and on the property price. Stamp duty rates vary from state to state. Stamp duty on the purchase price of your property will probably represent the largest add-on expense of the transaction. Depending on individual state legislation, the duty is payable to the Office of State Revenue anywhere from the day of settlement to three months after the date of exchange of contracts.

People purchasing vacant land (on which they will start construction of a home on within six months) or people buying a brand new home may be eligible for a reduction in stamp duty.

Rebates vary between the states and depend on the property price and other factors.

Registration Fees - The Land Titles Office charges a fee to register any document relating to your property. You can talk to your solicitor or the Land Titles Office in the State or Territory in which the property is situated to work out how much the registration fees will be. A Hume Lending Manager may also be able to work this cost out for you.

Conveyancing - After stamp duty, conveyancing costs often represent the next largest administrative amount you will have to pay during your property purchase. Most people choose to engage a conveyancing expert or solicitor who will manage the process for a trouble-free exchange. Their fees will vary, as will the extent of the services provided. In some cases, the fee will include the costs of the various searches which are necessary or it may include the cost of building and pest reports. Ask up front what the cost will be and what will be included.

Inspection Fees - To avoid any nasty surprises with your property down the track it’s a good idea to get a building inspection to check the structural soundness of the property and a pest inspection to check for any signs of past or present pest infestation.  Both inspection reports should list any visible defects, infestations and necessary repairs. It is important to make sure the inspection company you use is fully licensed and insured. If you're buying at auction, ask the agent if someone has already commissioned inspections – you may be able to get a copy at a discounted price.

Home and Contents Insurance – It is a condition of the loan that your home is fully insured and Hume will need to see evidence of this insurance before settlement can take place.

Many people will actually insure the home as soon as they have signed the contract to buy the home and have paid their deposit. This provides peace of mind for the purchaser in the event that something happens to the house before settlement. Hume can provide this insurance between contract signing and settlement free of charge.  Beyond this period, your Hume Lending Manager can provide you with a quote for Home and Contents Insurance.

Council Rates – From the settlement date you are responsible for all the council, water rates and levies on a property. You may need to reimburse the previous owner for any payments they have already made on a pro-rata basis. This can normally be handled by your solicitor as part of the settlement process.

Moving Costs - Don’t forget to budget for a removalist as well as your utility connection or transfer fees.

For a fast loan approval you will need to bring the following information along to your appointment with a Hume Lending Manager:

If you are a salaried employee:

• 2 recent payslips
• Your latest year’s PAYG payment summary (group certificate), tax return, or notice of assessment issued by the tax office.
• A letter of employment, detailing type of employment, length of service, and income may also be required.

If you are Self-Employed

• Last 2 year’s Business/Company tax returns (including balance sheet and profit and loss statement)
• Last two years’ personal tax returns and assessment notices

Social Security

• A letter from Centrelink outlining current/ongoing benefits or,
• Recent bank statements where payment is being deposited

Rental Income (one of the following)

• Letter from the Real Estate Agent stating the proposed rental
• Current Lease Agreement or Real Estate rental statement
• Bank statements confirming the deposit as rental income

Savings and Commitment details

• Current savings account statements, including a statement that covers the most recent 3 months of the account where your deposit is held (If applicable)
• 3 months history on other home loans
• Statement on other existing loans
• Recent credit card statement (on all credit cards or interest free cards)

For property purchase

• Copy of Contract of Sale
• Solicitor/Conveyancer details
• Rates notice of any existing property which may be used as additional security

For Refinance/Mortgage Insured Loans

• Rates notice for the property you currently own
• A recent statement providing 6 months history on the loan being refinanced or 6 months history on the account where your deposit is held

Construction Loans

• Plans and specifications
• Builders contract for the construction costs or a quote if the contracts have not yet been drawn up
• Proof of Builders Insurance

Identification (for new customers only)

• If you are not already a Hume customer you will need to bring along the right Identification. Hume’s ID requirements can be found here

Hume is able to provide approval in principle for a home loan so that you can indicate to agents and vendors that you are interested in a property and in a position to make an offer on the property (subject to finance). 

Your approval in principle will be confirmed with a letter outlining the terms and conditions, and will generally be valid for 3 months. 

In order to provide you with an approval in principle, Hume will need to do a preliminary credit assessment based on credit reports and financial information provided by you. An approval in principle can only be given if the information supplied to us indicates that you would meet our lending criteria for the loan amount. 

An approval in principle means that it’s likely we’ll give you formal approval for a loan, unless we find that your personal or financial details differ from what was used to give you approval in principle, the security isn’t sufficient or acceptable, or the loan type that was approved in principle doesn’t suit your circumstances. Our commitment to lend is always subject to formal approval and an executed credit contract.

Once you’ve used your approval in principle to make an offer on a property (subject to finance), we’ll arrange to have the property valued and complete a full credit assessment for your loan. If the property meets our lending criteria and our other lending criteria are met, we’ll arrange to provide formal approval for your loan. 

To apply for an approval in principle call 02 6051 3233 to make an appointment with a Lending Manager. 

Generally a minimum of 5% of the house cost is required as well as additional funds to cover stamp duty, legal fees, application fees and registration costs.

If you are borrowing more than 80% of the home's value, you will also need Lenders Mortgage Insurance, and this cost will be added to your loan amount.

To help you buy your first home, state governments may provide a one off payment of up to $10,000 to eligible applicants.

Additional funds may also be available to you depending on your circumstances. For more information on your eligibility for the FHOG and other entitlements, please visit your relevant state government’s website here or talk to a Hume Leading Manager on 02 6051 3233.

The criteria to qualify for the First Home Owner's Grant varies state by state. For the latest information relevant to your state visit www.firsthome.gov.au

A Hume Lending Manager can also help you with your First Home Owner's Grant application on 02 6051 3233

There are a number of ways to pay off your loan sooner:

• Make repayments more regularly and aim to pay more than just the minimum payment. For example, on a 30 year loan of  $250,000 at 5%pa; paying just $360 a week instead of $1342 per month (the minimum payments) will save you over $70,000 in interest, and shave 8 years off your loan. 
• Make additional lump-sum repayments where possible. A tax refund, a work bonus, or an inheritance can often provide a little extra money to make this possible.
• Set-up an offset account so your savings offset your loan (see below).

Estimate the strategies that could save you using our home loan calculators.

The Flexible Loan Offset Account (FLO) is a transaction account that when linked to your home loan account enables you to reduce the amount of interest you pay on your home loan.

You can use the FLO account as a normal transaction account; and the more money you have in your FLO account, the less interest you pay on your linked loan.  Whatever the balance in your FLO account, whether it is $100 or $10,000, that amount will be used on a daily basis to offset the loan and therefore reduce the interest payable.

If you keep your repayments at their current level, a linked FLO account reduces the interest that accrues on your home loan, and you will pay off your home loan faster!

The Flexible Loan Offset Account is available on Standard Variable Rate and Introductory Rate home loans

Lending institutions, including Hume, will lend you money against the value(s) of your property up to a certain percentage.  Generally, you can borrow up to 80% of a home’s value (conditions apply). If you have an existing home, the difference between what you owe on your home loan and what the bank will lend you (up to this percentage) is referred to as equity.

You can use equity in your home to borrow for things such as home improvements, motor vehicles, holidays, weddings, education expenses or to purchase another property. Call 02 6051 3233 to make an appointment with a Hume Lending Manager to discuss using equity in more detail.