Owner Occupied Loan Purpose Explained
This page will assist you with understanding residential lending purposes, meaning the purpose of what the loan will be for. Residential loan types are one thing, and Residential lending purposes are another.
What is an owner occupied home loan?
This loan is basically what it says, it is the “owner” of the property that will “occupy” the premises. This means that this loan purpose is only for an applicant who intends to live in the property.
In the eyes of the lender, when you apply for an owner occupied home loan, they know that you intend to live in it. This means that they will not ask you for rental receipts to prove further rental income, as they would for an investment type loan, because the property will not be rented to a tenant.
What can an owner occupied loan be used for?
This loan is for the following purposes:
- Refinance of an owner occupied property from another lender.
- Debt Consolidation Loan
- Purchase of an existing property.
- Construction of a property.
- Funding a major renovation to a property that you live in.
- Funding the construction of a granny flat on the property that you live in.
Can I change to a different loan at a later date if my circumstances change?
Yes, you certainly can change the loan if your circumstances change. If for example you purchased a different property to live in and wanted to convert the loan to an investment loan.
Please note: It may not be necessary at all to change your finances, as the loan purpose will more than likely be a tax issue, rather than a lender issue. You may be able to leave the loan exactly as it is. Please speak with both your Tax Professional and your Mortgage Consultant before changing your loan structure. This will avoid unnecessary costs from your lender in restructuring your finances.
What do I need to consider if I am applying for an Owner Occupied Home Loan?
Most people will already know what purpose their loan is for. If you are intending on purchasing a property to live in, and you would like further information relating to loan structures and how we can assist you, please check out the detailed information that we have put together under Loan Types
Please call Illawarra mortgage brokers to discuss your situation. With a quick phone call, you can find out exactly where you stand – usually this takes about five minutes.
What questions should I ask my broker when I call?
- How much am I able to borrow from the lenders? Critical question – if you want to borrow for example $400,000 and you only qualify for $380,000, you need to know before you apply.
- Which lenders are the most appropriate for my circumstances? We will compare several loans that fit your needs analysis. We will provide a recommendation to you once we have the relevant information from yourself. If you know details such as how much you need to borrow, if your credit history is clear, if repayments on any existing credit cards and personal or car loans are up-to-date and also know your income details, then we should be able to discuss which lenders are going to be available to you and why we would recommend a certain product.
- What are the repayments? In minutes you will know exactly what the basic repayments will be across several lenders products. Of course, once we discuss other possible loan structures that you qualify for, the repayments are likely to change marginally. The good news is, that any changes will more than likely result in a lower repayment. Please see our Split and Structured Loan page for more info.
- What are the costs to get into the loan? Costs associated with your loan application including establishment fees, valuation fees and lender legal fees are also assessed. We will also address other fees and charges on the spot, such as stamp duty costs, your legal fees if purchasing, mortgage insurance costs if applicable, and any other entry fees that may relate to your loan.
- What are the ongoing costs? We will also look at what fees the lenders will be charging on an ongoing basis. It is important for you to know what fees you will be paying after the loan is established – if any.
The questions above are ones that you should ask your finance broker about during your phone call. Obviously, it will help your situation to mention anything that you think could affect your chances of having your loan approved.
Your consultant here at Illawarra Mortgage Brokers will be asking you a few questions in any case, to have a better understanding of what you require.
A very simple example:
Let’s say a client mentioned that they had 2 children. This would prompt a couple of automatic questions from the broker:
- Are you receiving government assistance such as family tax benefits?
Firstly, we can use this type of income to support an application UNLESS a child is a certain age. If the child is over the age that the lenders policy stipulates, as a cut-off point, then it will not be practical to use this income. So the next question is obvious.
- How old are the children?
- And of course these questions assist the broker in determining if certain lenders calculators will allow you to borrow what you need. There are many potential questions that we could ask, and we are trained to look for reasons to ask those questions. This is a direct benefit to you because it allows us to narrow down the best options available to you.
What information will Illawarra mortgage brokers be able to give me?
Once we have your details and know what loans you are able to apply for, we will compare the different products available. It is easier to show you a sample of our software below, so that you can understand the detail involved.
We have taken the lenders names off this example, just to be fair to the banks we used for the example – embarrassing to be lender number four in the comparison J. In this case, we have just used a basic 5 year home loan and compared four lenders for an owner occupier client.
You can easily see the different entry fees, interest rates, ongoing charges and mortgage payments at a glance, across the four lenders in this example. You can also see the savings between each lender at a glance. It really is easy to find that right loan when you can compare hundreds of loans in a matter of seconds.
Commercial Product Comparison Summary
For example purpose only – Bank names removed
|Lender||Lender 1||Lender 2||Lender 3||Lender 4|
|Product Name||Commercial Fixed Rate Loan||Commercial Base Rate||Commercial Small Business – Residential Security Fixed||Business Fixed Rate Loan|
|Interest Rate(s)||4.76% 4 yrs (fixed)4.47% 3 yrs (fixed)4.75% 1 yr (fixed)4.67% 2 yrs (fixed)4.82% 5 yrs (fixed)||8.43% 30 yrs (var)||5.40% 1 yr (fixed)5.50% 2 yrs (fixed)5.60% 3 yrs (fixed)5.85% 4 yrs (fixed)6.10% 5 yrs (fixed)99.00% 10 yrs (var)||5.06% 5 yrs (fixed)4.90% 1 yr (fixed)4.80% 2 yrs (fixed)4.65% 3 yrs (fixed)4.92% 4 yrs (fixed)99.99% 15 yrs (var)|
|Repayments||$3,892/month 4 yrs$3,835/month 3 yrs$3,876/month 1 yr$3,866/month 2 yrs$3,880/month 5 yrs||$3,820/month 30 yrs||$3,041/month 1 yr$3,070/month 2 yrs$3,097/month 3 yrs$3,158/month 4 yrs$3,209/month 5 yrs$23,739/month 10 yrs||$2,702/month 5 yrs$2,660/month 1 yr$2,634/month 2 yrs$2,598/month 3 yrs$2,655/month 4 yrs$28,128/month 15 yrs|
|Features||Extra Repay: Yes, you can make additional regular or lump sum repayments of less than $20,000 per year.Interest Only: Maximum term 5 years. Maximum LVR for interest only is 70% up to $2 million and 60% up to $3 million||Extra Repay: $500 per month extra repayments without penaltiesInterest Only||Interest Only: Interest only to a maximum of 5 Years or Principal and Interest repayment options|
|App Fee||Other: $500||Application: $600||Valuation: $200Application: $800|
|Discharge Fees||Early Repayment Fee : Applies to loans discharged within the first 5 years. 1 month interest calculated on original loan amount. Break Costs : May apply if: Fixed rate loan is discharged prior to the end of the fixed term. $20,000 or more in additional repayments in 1-year period.||$1,200: Applies if the loan is paid out within 1 – 4 years||$300: Break Administration Fee : In the event of a full termination of a Fixed Rate Loan Agreement, an administration fee of $300 will be charged. This is an addition to any Break Costs that may apply of you repay early all or any part of a Fixed Rate Loan.|
|Total Monthly Fees||$0||$3,600||$4,500||$0|
|Total Annual Fees||$0||$0||$0||$7,200|
|Total Setup Costs||$500||$600||$1,000||$0|
|Total Loan Cost||$197,430||$879,324||$2,919,989||$5,048,570|
Please remember that this is just an example and in a real life assessment we would be inputting a lot more data relating to your needs. The results would obviously vary with each individual scenario.
We recommend that you have an in-depth discussion with your mortgage broker to decide if this type of loan is suitable for you. You will find that they will give you some good options that you may not have thought about, allowing you to make a more informed decision before you apply this type of loan.
How can you apply?
These are your simple steps to apply for a loan.
- Contact us– to speak to a mortgage broker, please call (02) 4257 5626 (Southern area) or (02) 4283 5626 (northern area) or fill in our contact us online enquiry form.
- You will speak with a broker who will take into account your needs by discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
- Once we know what you require, we will draft and email you a proposal – this will usually consist of a few options that are easy to understand.
- Once you have had a chance to look at what options are available, you can contact your broker or the broker will call you, to discuss the proposal.
- You can then decide if you wish to proceed or you may just want to discuss more options.
Decided to go ahead? Great.
- Your broker will now take all of your information by completing a standard questionnaire with you and confirming details from your prior discussion – this is a 15 minute process for an average couple or you might prefer a face-to-face appointment.
- You will then be asked to complete a document checklist for your chosen lender and in the meantime, our office will prepare an application on behalf of the chosen lender.
- All that needs to be done now is for you to sign the application and give your checklist documents to your broker and your loan will be lodged
- We will then follow up on the progress of the loan and keep you informed as it progresses right up until the loan is completed.
It is that simple.
Put us to the test. Call your mortgage broker on 0242 575 626 to discuss your needs. You will be glad that you did.
(Southern office) 0242 575 626
Unit 3 / 10 Manning St KIAMA NSW 2533
(Northern office) 0242 835 626
253 Princes Highway CORRIMAL NSW 2518
Thank you for visiting our site and taking the time to learn what your mortgage broker does.
Posted 20 February 2015
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Mortgage finance brokers for residential and investment loans in Wollongong and the Illawarra region.