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An automated valuation model estimates a property's value statistically from recent comparable sales, property attributes and market trends. Lenders accept AVMs for low-LVR, low-risk lending becaus...
Risk-based pricing means your rate reflects your specific risk and value to the lender rather than a single posted rate. The main levers are LVR, loan size, owner-occupier versus investment, repaym...
Banks price credit risk using three inputs: the probability you default (PD), how much they would lose if you did (LGD), and how much you owe at that point (EAD). Multiplied together they give expe...
A lender offering you a fixed rate must eliminate its own exposure to rate movements, which it does using an interest rate swap - paying fixed and receiving floating. Your fixed rate is therefore t...
The yield curve plots government bond yields against their maturity. Its shape tells you what markets expect rates to do: upward sloping means higher rates ahead, flat means uncertainty, and invert...
The deposit is the largest upfront cost but rarely more than three quarters of the cash you need. On a $750,000 purchase in NSW with a 20% deposit, total cash required is around $181,000 - the $150...
Shortening the term raises your repayment far less than proportionally, because you stop paying interest for the years removed. On a $750,000 loan at 6.5%, cutting from 30 years to 20 costs $852 mo...
Negative gearing means your property costs more to hold than it earns, and the loss reduces your taxable income. The refund offsets part of the shortfall but never all of it - at a 37% marginal rat...
Gross yield is annual rent divided by property value. Net yield subtracts the costs of holding the property - rates, insurance, management, maintenance and strata - which typically consume 20-30% o...
When an interest-only period ends, the loan converts to principal and interest calculated over the remaining term - not a fresh 30 years. On a $600,000 loan with a five-year IO period on a 30-year...
The nominal rate is the advertised annual rate before compounding. The effective annual rate accounts for compounding within the year, so a 6.5% nominal rate compounded monthly is an effective 6.70...
Most Australian home loans accrue interest daily on the closing balance and charge it monthly. That is why the timing of your repayments and offset deposits matters: money sitting in an offset for...
