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Home Loan Frequently Asked Questions (FAQs)

At Willow & Reed Private, we help professionals, business owners and families across Melbourne and Australia make smarter lending decisions. Below are answers to common questions about home loans, refinancing, investment lending and wealth strategies.

If you’d prefer tailored advice, we’re always happy to help.

How much you can borrow for a home loan in Australia depends on several factors including your income, living expenses, existing debts, credit score, number of dependants, and the lender’s servicing policy. Most lenders assess your ability to comfortably repay the loan using interest rate buffers and responsible lending criteria.

Borrowing capacity can vary significantly between lenders, especially for professionals, business owners, and families with complex income structures. Some lenders may also include bonuses, overtime, rental income, or company profits differently.

If you’re planning to buy a home or invest in property, getting a personalised borrowing assessment is the best first step. 

Working with a mortgage broker allows you to access multiple lenders and structure your loan to maximise borrowing capacity while still aligning with your long-term financial goals.

Home loan pre-approval in Australia typically takes anywhere from 24 hours to 10 business days, depending on the lender, the complexity of your application, and how quickly documents are supplied.

Simple PAYG applications with strong credit history may be approved quickly, while self-employed applicants or borrowers with multiple income sources may take longer.

To speed up pre-approval, have these documents ready:

  • Payslips or tax returns
  • Bank statements
  • ID documents
  • Details of existing debts
  • Savings or deposit evidence

Pre-approval gives you confidence when house hunting and can strengthen your position when making an offer.

Refinancing your mortgage in 2026 can be a smart move, particularly if your fixed rate has expired, your current interest rate is no longer competitive or, your loan no longer suits your goals. Refinancing could save your thousands.

You may benefit from refinancing if you want to:

  • Secure a more competitive interest rate
  • Reduce your monthly repayments
  • Access equity for investment or renovations
  • Consolidate debt
  • Improve your loan structure

However, refinancing isn’t just about chasing a lower rate — it’s about ensuring your loan strategy aligns with your broader financial position.

With lenders continuing to compete for quality borrowers, refinancing can be worthwhile even if your rate only drops modestly. Be careful though, break costs, discharge fees, and long-term strategy should always be considered.

A refinance review can help determine whether switching lenders or restructuring your debt makes sense in 2026.

Yes, self-employed borrowers can absolutely get a home loan in Australia. Many lenders offer products specifically for business owners, contractors, sole traders, and company directors.

Depending on the lender, you may qualify using:

  • Two years tax returns
  • One year financials
  • BAS statements
  • Accountant letters
  • Bank statements (low doc options)

Lender policies vary widely, so choosing the right lender is critical. Some lenders are far more flexible with business income, retained profits, trusts, or irregular income than others.

A mortgage broker can help self-employed borrowers present their income correctly and improve approval chances.

Debt recycling is a wealth strategy that converts non-deductible home loan debt into tax-deductible investment debt over time.

This strategy can help build long-term wealth and improve tax efficiency, but it needs to be structured correctly and aligned with your risk profile.

A typical debt recycling strategy may involve:

  1. Paying down owner-occupied mortgage debt
  2. Redrawing or splitting loan funds for investment purposes
  3. Investing in shares, ETFs, or other approved assets
  4. Potentially claiming interest on investment-related borrowings (seek tax advice)

When structured correctly, debt recycling can improve cash flow, accelerate mortgage reduction, and help grow long-term wealth.

This strategy should always be tailored with advice from a mortgage broker and accountant.

In Australia, many buyers aim for a 20% deposit to avoid Lenders Mortgage Insurance (LMI), but it is possible to buy with less.

Common deposit options include:

  • 20% deposit – avoids LMI in many cases
  • 10% deposit – common option for many buyers
  • 5% deposit – available with selected lenders or government schemes
  • Guarantor loans – may reduce deposit requirements

You’ll also need to budget for stamp duty, legal fees, inspections, and moving costs unless exemptions apply.

The right deposit amount depends on your goals, timeframe, and borrowing capacity.

For higher-income borrowers, the focus is often less about minimum deposit and more about structuring the purchase strategically.

 

Yes — using equity is one of the most common ways to purchase an investment property without needing to save a full cash deposit.

Equity is the difference between your property’s value and what you owe on your mortgage.

Usable equity can often be used for:

  • Deposit for investment property
  • Stamp duty and purchase costs
  • Renovation funding
  • Portfolio expansion

For example, if your home has increased in value, you may be able to access part of that equity without selling.

Lenders will still assess your income, expenses, and servicing ability, so equity alone does not guarantee approval.

The key is structuring your loans correctly to maintain flexibility and tax effectiveness.

A mortgage broker acts as your adviser, strategist, and advocate throughout the loan process.

Instead of offering only one bank’s products, a broker can compare multiple lenders and help find a solution that suits your goals.

Benefits of using a mortgage broker include:

  • Access to multiple lenders
  • Better loan comparisons
  • Guidance through the application process
  • Help for self-employed or complex borrowers
  • Refinance and restructuring advice
  • Ongoing reviews as rates change

Banks can only recommend their own products, while a broker can often provide broader options and strategy.

For borrowers wanting choice, convenience, and expert guidance, using a mortgage broker can be a smart move.

For busy professionals and families, this saves time and often results in a better long-term outcome.

In Australia, a mortgage broker is usually paid by the lender, not the client. When your home loan settles, the lender pays the broker an upfront commission, followed by a smaller ongoing (trail) commission for as long as the loan remains in place.

For most clients, this means you receive expert guidance, lender comparisons, and end-to-end support without paying a direct fee.

How mortgage broker commissions work

  • Upfront commission: A one-off payment from the lender after your loan settles
  • Trail commission: An ongoing payment (typically monthly) while your loan remains active
  • No impact on your rate: These commissions are built into the lender’s pricing and don’t increase your interest rate

Do you ever pay a mortgage broker directly?

In most standard home loan scenarios, no fee is charged to the client.

In more complex situations — such as commercial lending, SMSF loans, or highly specialised structures — a fee may apply. If so, it will always be clearly disclosed upfront, so you can make an informed decision.

Are mortgage brokers biased towards certain lenders?

Mortgage brokers in Australia are bound by the Best Interests Duty, which legally requires them to recommend loan options that are appropriate for your needs and objectives.

An experienced broker focuses on long-term outcomes — not just securing approval but ensuring the loan structure continues to support your financial position over time.

The choice between fixed and variable rates depends on your goals, risk tolerance, and market conditions.

  • Fixed rates offer certainty and stability
  • Variable rates offer flexibility and potential savings

Many borrowers are now choosing a split loan strategy, combining both fixed and variable to balance risk and flexibility.

There are several ways to reduce your loan term and save on interest:

  • Making extra repayments
  • Using an offset account
  • Structuring your loan correctly from the start
  • Reviewing your loan regularly
  • Using strategies like debt recycling

Even small changes can save tens or hundreds of thousands over the life of a loan.

The First Home Owner Grant (FHOG) is a government incentive designed to help eligible first home buyers enter the property market. It was introduced in 2000 to offset the impact of GST on home ownership and is funded by state and territory governments, each with their own rules and eligibility criteria.

The FHOG is a one-off payment available to buyers who meet specific requirements.

How much is the First Home Owner Grant in Victoria?

In Victoria (VIC), the grant amount depends on the property location:

  • $20,000 for eligible new homes in regional Victoria
  • $10,000 for eligible new homes in metropolitan areas

Who is eligible for the FHOG?

To qualify for the First Home Owner Grant in Australia, you must generally meet the following criteria:

  • Be 18 years or older
  • Be an Australian citizen or permanent resident (at least one applicant if buying jointly)
  • Be a first home buyer (you must not have previously owned property in Australia or received the FHOG)
  • Purchase or build a new home (typically less than 5 years old)
  • Live in the property as your principal place of residence for at least 6 months
  • Apply as an individual (natural person) — companies and trusts are not eligible

Can you get the FHOG for established homes in Victoria?

No — the FHOG in Victoria is only available for new homes. However, first home buyers purchasing an established property may still be eligible for stamp duty savings, including:

  • Full exemption for homes valued up to $600,000
  • Concessions for homes valued between $600,001 and $750,000

You must still meet the relevant first home buyer eligibility criteria to access these benefits.

Need help with your FHOG eligibility?

Understanding your eligibility for the First Homeowner Grant and stamp duty concessions can make a significant difference to your buying power. If you’d like tailored advice based on your situation, feel free to get in touch — we are here to help guide you through it.

The key difference between a fixed rate and a variable rate home loan is how your interest rate behaves over time—and how much certainty or flexibility you want.

A fixed rate home loan locks in your interest rate for a set period (usually 1 to 5 years). This means your repayments stay the same during that time, giving you certainty and protection against interest rate increases. Fixed loans are popular for borrowers who value stability and want to budget with confidence. However, they typically come with less flexibility, including limits on extra repayments and potential break costs if you refinance or sell early.

A variable rate home loan, on the other hand, can move up or down over time in line with market interest rates. This means your repayments may change, but you benefit if rates decrease. Variable loans generally offer greater flexibility, including the ability to make extra repayments, access offset accounts, and refinance more easily.

Many borrowers choose a split loan, which combines both fixed and variable portions. This can provide a balance between repayment certainty and flexibility, depending on your financial goals.

The right option depends on your personal circumstances, risk tolerance, and future plans. If you’re unsure which loan structure suits you best, it’s worth getting tailored advice to align your loan with your broader financial strategy.

Lenders Mortgage Insurance (LMI) is a one-off insurance premium that protects the lender—not the borrower—if you default on your home loan. It is typically required when your deposit is less than 20% of the property’s value.

How LMI Works

When you borrow more than 80% of a property’s value (known as a higher Loan-to-Value Ratio or LVR), the lender takes on greater risk. To offset this, they require LMI.

  • The cost of LMI is based on your loan size, deposit, and LVR
  • It can range from thousands to tens of thousands of dollars
  • Most lenders allow you to capitalise LMI (add it to your loan), rather than paying it upfront

Importantly, even though you pay for LMI, it does not protect you. If you default on your loan, the insurer covers the lender’s loss, and you may still be liable for any shortfall.

When Do You Need to Pay LMI?

You will generally need to pay LMI if:

  • Your deposit is less than 20%
  • You are refinancing with limited equity
  • You are purchasing an investment property with a higher LVR

How to Avoid or Reduce LMI

There are several strategies that may help you minimise or avoid LMI:

  • Save a 20% deposit to stay below the 80% LVR threshold
  • Use a guarantor loan (often a family member)
  • Check eligibility for government schemes such as first home buyer guarantees
  • Work with a broker to find lender-specific LMI waivers (common for certain professions like medical, legal, or accounting)

Is LMI Worth It?

In many cases, paying LMI can be a strategic decision. It may allow you to enter the property market sooner rather than waiting years to save a full 20% deposit—especially in rising markets.

The key is weighing the cost of LMI against potential property price growth and your long-term financial goals.

Expert Insight

LMI isn’t simply a cost—it’s a lever. When structured correctly, it can accelerate your entry into the market and help you build equity sooner. The right strategy depends on your income, borrowing capacity, and future plans.

When purchasing a property in Australia, your deposit is only one part of the overall cost. Understanding the full scope of expenses upfront can help you avoid surprises and plan with confidence.

Here are the key additional costs to consider:

1. Stamp Duty (Transfer Duty)

Stamp duty is typically the largest upfront cost after your deposit. It varies by state, property value, and whether you’re an owner-occupier or investor. In some cases, concessions or exemptions may apply.

2. Lenders Mortgage Insurance (LMI)

If your deposit is less than 20% of the property value, you may be required to pay LMI. This is a one-off premium that protects the lender, not the borrower.

3. Legal and Conveyancing Fees

A solicitor or conveyancer will manage the legal aspects of your purchase, including contract review and settlement. Fees generally range from $1,500 to $3,000 depending on complexity.

4. Loan Establishment Fees

Some lenders charge upfront fees to set up your home loan, including application or settlement fees.

5. Building and Pest Inspections

These inspections are strongly recommended to identify any structural issues or pest damage before you commit to the purchase.

6. Government and Registration Fees

This includes title transfer and mortgage registration fees, which vary depending on your state or territory.

7. Moving and Setup Costs

Don’t overlook practical expenses like removalists, utility connections, and initial home setup costs.

8. Ongoing Costs

Once you’ve purchased the property, you’ll also need to budget for council rates, insurance, maintenance, and (if applicable) strata fees.

Pro Tip

Many buyers underestimate the true cost of purchasing property. As a general guide, allowing an additional 4–6% of the purchase price (on top of your deposit) will help cover most upfront costs.

To apply for a home loan, lenders will need a clear picture of your financial position. While requirements can vary depending on your situation, most applications will include the following supporting documents:

1. Proof of identity

  • Driver’s licence or passport
  • Medicare card

2. Income verification

  • PAYG employees: Recent payslips (usually last 2–3) and your latest PAYG summary or tax return
  • Self-employed borrowers: Last 2 years’ tax returns and financial statements
  • Other income: Rental income statements, dividends, or Centrelink statements (if applicable)

3. Financial position

  • Recent bank statements (typically last 3–6 months)
  • Credit card statements
  • Details of any existing loans or liabilities

4. Deposit and savings

  • Evidence of genuine savings (usually 3+ months)
  • Gift letters (if part of your deposit is gifted)
  • Sale contract (if funds are coming from another property)

5. Living expenses

  • A breakdown of your regular household expenses
  • Lenders may also review your transaction statements to verify spending habits

6. Property details (if you’ve found a property)

  • Contract of sale
  • Details of the property and purchase price
A smarter way to approach it

Getting your documents right from the start can significantly speed up your pre-approval and reduce back-and-forth with the lender.

Working with a mortgage broker means you’ll know exactly what’s needed based on your situation — whether you’re salaried, self-employed, or building a property portfolio — so your application is structured correctly the first time.

If you’re unsure where to start, it’s worth having a quick conversation before you begin. It can save you time, avoid delays, and put you in a stronger position when it matters most.

Book a confidential strategy call.