Its My Home : 2015
IT’S MY HOME - Summer 2015 | 13 PRINCIPAL This is the outstanding balance owing on your loan on which interest is typically calculated and charged. Generally, your regular home loan repayments will consist of principal and interest components, gradually reducing the amount owing on your loan. With interest-only loans, only the interest is paid each month, leaving the original principal outstanding at the end of the loan term. REDRAW This is an optional feature on certain home loans that allows access to any additional repayments made on your home loan. If you redraw funds from your home loan, your outstanding balance will increase. REPAYMENT FREQUENCY Refers to the regularity of loan repayments over a period of time which you must make as indicated in your loan agreement. Repayment frequencies are generally weekly, fortnightly or monthly. REVOLVING CREDIT OR LINE OF CREDIT This is a flexible ongoing loan arrangement that allows you to borrow within a specified and agreed credit limit. Typically, the line of credit account will also be used for everyday transactions. Interest is added to the loan each month, and repayments are not necessary while the loan is within its credit limit. SECURITY Security for a loan refers to the asset(s) a lender can claim against if you default on your loan. For home loans, it usually includes the property being purchased. SERVICEABILITY Serviceability refers to your capacity to meet loan repayments based on your income and expenses. STAMP DUTY (ON A PROPERTY PURCHASE) When you buy property in Australia, you are generally required to pay stamp duty to the relevant state or territory government. The amount varies between each state and territory, and is based on the market value of the property or the purchase price. Exemptions and concessions may apply in some circumstances. Check with your solicitor or conveyancer to see if you are eligible. VARIABLE INTEREST RATE If your loan has a variable interest rate, the interest charged on the outstanding balance of your loan may increase or decrease in line with the official cash rate set by the Reserve Bank of Australia. Lenders may also change your regular loan repayment amount based on changes in the interest rate. Lenders do not have to track changes in the cash rate and you should make allowances for higher-than-expected increases.