Lenders Mortgage Insurance (LMI) is a policy taken by the lender to protect against the potential loss if you, the borrower, cannot meet loan payments, and the property sells for less than the outstanding balance.
First-time homebuyers often seek assistance in acquiring their initial home, and this support may come in the form of a guarantee from family members.
A guarantee is essentially a commitment from a party (the guarantor) to cover a debt owed to a lender if the borrower is unable to repay it. Guarantees serve as security for loans and can be particularly beneficial for borrowers like First Home Buyers.
An offset account and a loan redraw facility are both features associated with home loans, but they function differently.
Offset Account:
- An offset account is a separate savings or transaction account linked to your home loan.
- The balance in the offset account is offset against your home loan balance before interest is calculated. This can result in interest savings over the life of the loan.
- For example, if you have a $200,000 home loan and $20,000 in your offset account, you would only pay interest on $180,000.
Redraw Facility:
- A redraw facility allows you to make additional repayments on your home loan beyond the required minimum.
- If you need access to those extra funds, you can "redraw" or withdraw them from your home loan.
- This provides flexibility, but accessing the extra funds may be subject to certain terms and conditions, and there might be fees associated with redraw transactions.
In summary, while an offset account helps reduce the interest payable on your home loan by offsetting the balance, a redraw facility allows you to make extra repayments and later access those funds if needed, subject to terms and conditions. The choice between the two depends on your financial goals and preferences.
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