FAQ - Jais Lending Solution

Frequently Asked Questions (FAQ) for Clients Purchasing Owner-Occupied or Investment Property in Australia

1. What’s the difference between an owner-occupied property and an investment property?

Owner-Occupied Property: This is a property that you buy to live in. It may qualify for certain government benefits, such as first home buyer grants or stamp duty concessions, depending on your circumstances and location.
Investment Property: This property is purchased with the intention of renting it out or reselling it for a profit. Investment properties may offer tax benefits, such as deductions on interest payments and depreciation, but may come with different loan terms or higher interest rates.

2. How much deposit do I need to buy a property?

For Owner-Occupied Properties: Generally, you’ll need at least 5%–20% of the property’s purchase price for a deposit. If you’re a first home buyer, you may be eligible for special schemes like the First Home Loan Deposit Scheme, which allows you to buy with as little as a 5% deposit.
For Investment Properties: Typically, investment properties require a larger deposit, around 10%–20%. However, some lenders may allow you to borrow with a smaller deposit, especially if you have a strong financial profile.

3. What is Lenders Mortgage Insurance (LMI), and will I need to pay it?

LMI is an insurance policy that protects the lender if you default on your loan. If your deposit is less than 20% of the property’s value, you’ll likely need to pay LMI. However, there are some options to avoid paying LMI, such as using a guarantor or qualifying for certain loan products.

4. Can I use my existing home as equity for an investment property purchase?

Yes, if you have enough equity in your current home, you can use it as security for the purchase of an investment property. This is known as a «cash-out refinance» or «equity loan.» It’s a common strategy for investors looking to build their property portfolio.

5. What are the eligibility criteria for first-time homebuyers?

To qualify for first-time homebuyer benefits, you typically need to:

Be a permanent resident or citizen of Australia.
Not have owned property before (either in Australia or overseas).
Be purchasing the property for personal use (not investment).
Meet specific income and property value limits (varies by state).

In some states, there are additional benefits, such as stamp duty concessions or exemptions and first home owner grants.

6. What types of home loans are available for purchasing property?

There are several types of home loans, including:

Standard Variable Rate Loans: Your interest rate can change over time based on the lender’s pricing.
Fixed-Rate Loans: The interest rate stays the same for a set period (usually 1–5 years).
Interest-Only Loans: You only pay the interest for an initial period, which can help lower your repayments but may result in a larger principal balance at the end of the term.
Offset Accounts: A savings account linked to your loan where the balance offsets the amount you owe, reducing interest costs.

7. What are the costs associated with buying property in Australia?

When purchasing a property, there are several costs to consider beyond the deposit, including:

Stamp Duty: A state-based tax that varies by location and property value.
Legal and Conveyancing Fees: For preparing and reviewing contracts and property transfers.
Lenders Mortgage Insurance (LMI): If applicable (for deposits under 20%).
Inspection Costs: Building, pest, and strata inspections to ensure the property is in good condition.
Valuation Fees: For the lender to assess the property’s market value.
Home and Contents Insurance: Protects your home and belongings in case of damage or theft.

8. Can I purchase a property with a smaller deposit?

Yes, some lenders offer low-deposit loans with as little as 5% for owner-occupied properties, especially for first homebuyers. For investment properties, you may need a higher deposit (usually 10%–20%). In some cases, using a guarantor or accessing special loan schemes may help you secure a property with a smaller deposit.

9. What are the tax benefits of owning an investment property?

As an investor, you may be able to claim several tax deductions, including:

Interest on the mortgage: The interest you pay on your loan is tax-deductible.
Depreciation: You can claim depreciation on the building structure and certain items within the property (e.g., appliances, carpets).
Repairs and Maintenance: Costs for repairs and maintenance are generally tax-deductible.
Property Management Fees: If you use a property manager, their fees are deductible.

It’s important to consult a tax professional to ensure you’re maximizing your deductions.

10. What should I consider when choosing a property to invest in?

When choosing an investment property, consider factors such as:

Location: Look for areas with strong rental demand, infrastructure development, and potential for capital growth.
Rental Yield: Calculate the expected rental income against the property’s purchase price to understand its return on investment.
Property Condition: Factor in the condition of the property, potential maintenance costs, and future renovation or development opportunities.
Market Trends: Research property price trends in the area to ensure you’re making a sound investment.

11. Can I get a home loan if I’m self-employed?

Yes, but it can be more challenging than for salaried employees. Lenders may require additional documentation, such as tax returns, financial statements, and business activity statements (BAS). Low-doc loans are also available for self-employed borrowers, allowing for less documentation, though they may come with higher interest rates.

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

The approval process typically takes 2–6 weeks, depending on the lender, your financial situation, and the complexity of the application. Factors such as the need for additional documentation, property valuations, and lender backlogs can influence this timeline.

13. What happens if I miss a mortgage payment?

If you miss a payment, it’s important to contact your lender as soon as possible. They may be able to offer solutions such as deferring payments or restructuring the loan. Missing multiple payments can lead to penalties, additional fees, and, in extreme cases, foreclosure. It’s essential to stay in communication with your lender and seek financial advice if needed.

14. Do I need to get pre-approval before making an offer on a property?

While pre-approval isn’t mandatory, it’s highly recommended. Getting pre-approval gives you a clear idea of how much you can borrow, helping you avoid disappointment if you find a property you like. It also shows sellers that you’re a serious buyer and can give you a competitive edge in a fast-moving market.