Frequently Asked Questions — Home Loans

Have questions about home loans? You’re not alone. Below are answers to the most common questions Australians ask when buying a home, refinancing, or investing in property. If you need personalised advice, Daniel Nguyen at Finance Hub is available to help.

General Home Loan Questions

1. How much can I borrow for a home loan?

The amount you can borrow depends on your income, expenses, existing debts, credit history, and the size of your deposit. Most lenders use a serviceability assessment to determine your borrowing capacity. As a general guide, lenders typically allow you to borrow up to 4–6 times your annual income, though this varies significantly. Speaking with a mortgage broker like Finance Hub can give you a precise borrowing estimate based on your individual circumstances.

2. What is the difference between fixed and variable interest rates?

A fixed interest rate stays the same for a set period (usually 1–5 years), giving you certainty over your repayments regardless of market changes. A variable rate moves up or down in line with the Reserve Bank of Australia (RBA) cash rate and lender decisions. Variable rates typically offer more flexibility, such as the ability to make extra repayments without penalty. Many borrowers choose a split loan — part fixed, part variable — to balance certainty with flexibility.

3. What is Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance (LMI) is a one-off insurance premium charged by lenders when you borrow more than 80% of a property’s value (i.e. your deposit is less than 20%). LMI protects the lender — not you — if you default on the loan. The cost varies depending on your loan amount and LVR, but can run into thousands of dollars. Some first home buyers can avoid LMI through the First Home Guarantee scheme or by having a guarantor.

4. How much deposit do I need to buy a house in Australia?

In Australia, the standard deposit required is 20% of the property’s purchase price to avoid paying Lenders Mortgage Insurance (LMI). However, many lenders will accept deposits as low as 5% if you pay LMI. First home buyers may be eligible for government schemes that allow purchasing with as little as 5% deposit without paying LMI. You should also factor in stamp duty, conveyancing fees, and other purchase costs on top of your deposit.

5. What is a comparison rate?

A comparison rate is a standardised interest rate that includes both the loan’s interest rate and most fees and charges, expressed as a single annual percentage. It allows you to compare the true cost of different loan products more accurately than the advertised rate alone. By law, lenders must display a comparison rate alongside their advertised rate in Australia. Keep in mind that the comparison rate is calculated on a standard loan amount and term, so it may not reflect your exact costs.

Refinancing Questions

6. How does refinancing work and when should I consider it?

Refinancing means replacing your existing home loan with a new one — either with your current lender or a different one. People refinance to secure a lower interest rate, access equity, consolidate debts, or switch to a loan with better features. It’s worth reviewing your home loan every 2–3 years, as the lending market changes frequently and you may be paying more than necessary. Finance Hub can run a free home loan review to identify whether refinancing makes financial sense for your situation.

Pre-Approval & Application

7. What is a pre-approval and how long does it last?

A pre-approval (also called conditional approval or approval in principle) is a lender’s confirmation that they are willing to lend you up to a certain amount, subject to the property and final verification of your details. Pre-approvals typically last 60–90 days, though this varies by lender. Having a pre-approval gives you confidence when making offers at auction or private treaty. Finance Hub can help you obtain a pre-approval from a suitable lender before you start house hunting.

Loan Features

8. What is an offset account?

An offset account is a transaction account linked to your home loan. The balance in the offset account is “offset” against your loan balance daily, reducing the interest you pay. For example, if you have a $500,000 loan and $20,000 in your offset account, you only pay interest on $480,000. Offset accounts are a powerful tool for reducing your interest costs and can significantly shorten your loan term if used consistently. They are available on many variable rate loans and some fixed rate loans.

9. What is a redraw facility?

A redraw facility allows you to access any extra repayments you have made above your minimum required amount. For example, if you’ve paid an extra $10,000 off your loan ahead of schedule, you can redraw those funds if you need them later. Redraw differs from an offset account in that the money reduces your loan balance directly, and access to redrawn funds may be subject to lender approval or minimum amounts. It’s a great feature for borrowers who want to pay down their loan faster while maintaining a financial safety net.

10. How long does it take to get a home loan approved?

The timeline for home loan approval varies depending on the lender and complexity of your application. Pre-approvals can often be obtained within 1–3 business days. Full unconditional approval typically takes 3–10 business days once all documentation has been submitted. Some lenders may take longer during busy periods. Finance Hub works with lenders who can provide fast approvals when time-sensitive purchases are involved, and we manage the entire application process to avoid unnecessary delays.

11. What documents do I need for a home loan application?

Typical documents required for a home loan application include: photo ID (passport or driver’s licence), recent payslips (usually 2–3), tax returns (particularly for self-employed applicants), bank statements (usually 3–6 months), evidence of savings or deposit, and details of any existing liabilities such as credit cards and personal loans. If you are purchasing a property, you will also need the signed Contract of Sale. Finance Hub provides a personalised document checklist to make the application process as smooth as possible.

Working with a Mortgage Broker

12. What is the difference between a mortgage broker and a bank?

A bank can only offer you their own home loan products, whereas a mortgage broker has access to dozens of lenders and hundreds of loan products. A broker acts as your advocate, comparing options across the market to find the loan that best suits your needs, goals, and financial situation. Mortgage brokers are also regulated under the National Consumer Credit Protection Act and must act in your best interests under the Best Interests Duty. Finance Hub works with 30+ lenders including major banks, second-tier banks, and specialist lenders.

13. How much does a mortgage broker charge?

In most cases, mortgage brokers in Australia do not charge clients any upfront fees. Brokers are typically paid a commission by the lender once your loan settles. This commission is disclosed to you upfront as part of the credit guide and proposal. Finance Hub’s services are provided at no cost to you in the vast majority of cases, and any fees that may apply will always be disclosed clearly before you proceed.

Government Grants & Schemes

14. What is the First Home Owner Grant (FHOG)?

The First Home Owner Grant (FHOG) is a government grant available to eligible first home buyers purchasing or building a new home. In New South Wales, the grant is $10,000 for new homes valued up to $600,000 (or $750,000 for new home builds). Eligibility criteria apply including that you must be an Australian citizen or permanent resident, be purchasing your first home, and intend to live in the property. Finance Hub can help you determine your eligibility and assist with the grant application as part of the loan process.

Self-Employed Borrowers

15. Can I get a home loan if I am self-employed?

Yes — self-employed Australians can absolutely obtain home loans, though the documentation requirements differ from PAYG employees. Most lenders require two years of personal and business tax returns, plus financial statements prepared by an accountant, to verify your income. Some lenders offer “low-doc” loans for self-employed borrowers who cannot provide full financials, though these typically come with higher interest rates. Daniel Nguyen at Finance Hub has extensive experience helping self-employed clients navigate the home loan process and find lenders that look favourably on their income structures.

Still Have Questions?

Our team at Finance Hub is here to help you every step of the way. Whether you’re a first home buyer, investor, or looking to refinance, Daniel Nguyen can provide personalised, obligation-free advice.

📱 Mobile: 0430 11 11 88
🌐 Website: finhub.net.au
📧 Email: daniel@finhub.net.au

Credit Representative 369168 is authorised under Australian Credit Licence 389328. Your full financial situation would need to be reviewed prior to acceptance of any offer or product. Subject to lenders credit criteria, fees and charges will apply.