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Home Loan FAQs: Answers for clients in Melbourne & Australia-wide

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.

Your home loan borrowing power in Australia is calculated using your income, living expenses, existing debts, credit score, number of dependants, and the lender’s serviceability buffer — typically an extra 1-3% added to the current interest rate to test whether you could still afford repayments if rates rise.

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. 

As a Melbourne-based broker, located in Hawthorn, we service all of Australia, we have access to multiple lenders and can structure your loan to maximise borrowing capacity while still aligning with your long-term financial goals.

Visit our contact page, book in a confidential chat with Durand, our mortgage broker and strategist with over 22 years’ experience in financial services.

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, whether you’re buying in Victoria, or anywhere in Australia, a pre-approval can strengthen your position when making an offer.

Are you ready for the next step? Visit our contact page, speak to Durand, our mortgage broker and strategist with over 22 years’ experience in financial services, he will help you with your next move.

It’s generally worth refinancing your mortgage when your fixed rate has expired, your current rate is no longer competitive, your loan no longer suits your goals, or you want to access equity, consolidate debt, or improve your loan structure.

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. To learn more, read what to consider when refinancing?

As a Melbourne-based broker, we service clients Australia-wide, and a refinance review with us could help determine whether switching lenders or restructuring your debt makes sense.

Visit our contact page, book in a confidential chat with Durand, our mortgage broker and strategist with over 22 years’ experience in financial services.

Yes, self-employed borrowers can absolutely get a home loan, no matter if you’re a local, small business in Hawthorn, service all of Victoria or operate Australia-wide. 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.

Although we are based in Hawthorn, we service clients Australia-wide, we can help self-employed borrowers present their income correctly and improve their approval chances.

Running a business is hard enough, don’t add to the stress by applying for a mortgage on your own, visit our contact page, book in a confidential chat with Durand, our mortgage broker and strategist with over 22 years’ experience in financial services, for help.

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. To learn more, read our debt recycling – case study.

This strategy should always be tailored with the appropriate advice from a financial planner and accountant. Contact us for a confidential chat with Durand, our Melbourne-based mortgage broker and strategist, with over 22 years’ experience in financial services, who can work with your financial planner and accountant to build the right strategy for you.

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 (remember, the duties in Victoria, for example, differ from those in other states), legal fees, inspections, and moving costs, unless exemptions apply. Review our stamp duty calculator to see if you are entitled to any exemptions or concessions.  

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.

You can use equity to buy an investment property by borrowing against the increased value of your existing home, using it to cover some or all of the deposit and purchase costs without needing additional cash savings.

Equity is the difference between your property’s current value and what you still owe on your mortgage. As your property grows in value or you pay down your loan, this equity builds and can become usable security for a new loan.

Here’s how it typically works:

  1. Get your property valued to establish how much equity you have available
  2. Access your usable equity — lenders generally allow you to borrow up to 80% of your property’s value (sometimes higher with LMI), minus what you still owe
  3. Use the released equity as a deposit, or to cover stamp duty and other purchase costs on the new property
  4. Apply for the investment loan, which is assessed separately based on your income, expenses, and overall serviceability

Usable equity can go towards:

  • Deposit for an investment property
  • Stamp duty and purchase costs
  • Renovation funding
  • Expanding an existing property portfolio

It’s worth noting that accessing equity doesn’t guarantee loan approval — lenders will still assess your income, expenses, and ability to service the additional debt. The real value of this strategy lies in how the loans are structured. Done well, it can preserve flexibility, protect tax effectiveness, and set you up to keep building your portfolio over time.

If you’re considering using equity to invest, it’s worth getting a proper assessment of what’s usable and how to structure it before you start house hunting.

Contact us to learn more about equity release loans and let us help you build a strategy that works for you.

A mortgage broker compares home loan options across multiple lenders and acts as your adviser throughout the loan process, whereas a bank can only offer its own products.

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

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. Learn more by reading our article why seeing a Mortgage Broker is better than going direct to the bank.

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

Located in Hawthorn, Melbourne, we provide lending advice and finance solutions to clients across Australia. With access to over 70 lenders, we take an independent approach, carefully selecting the lender and loan structure that best aligns with your objectives and financial circumstances.

Visit our contact page, arrange a confidential chat with Durand, our mortgage broker and strategist with over 22 years’ experience in the financial services industry.

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.

Learn more by reading our article why seeing a Mortgage Broker is better than going direct to the bank.

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.

Check out our 11 Strategies to help pay off your mortgage sooner.

To be eligible for the First Home Owner Grant (FHOG) in Victoria, you generally need to 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 genuine 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

How much is the grant worth in Victoria?

The grant amount depends on the property’s location:

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

What if I’m buying an established home?

The FHOG itself only applies to new homes. If you’re purchasing an established property, you won’t qualify for the grant, but you 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’ll still need to meet the relevant first home buyer eligibility criteria above to access these benefits.

If you’re unsure whether you qualify, or want to understand how the grant and stamp duty concessions fit into your overall buying strategy, get in touch — we’re happy to walk you through it.

The key difference between a fixed and 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 rises. Fixed loans are popular with borrowers who value stability and want to budget with confidence. The trade-off is less flexibility, including limits on extra repayments and potential break costs if you refinance or sell early.

A variable rate home loan moves up or down over time in line with market interest rates. Your repayments may change, but you benefit when rates fall. 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, combining both fixed and variable portions to balance repayment certainty with flexibility.

Which is better, fixed or variable?

There’s no single right answer — it depends on your goals, risk tolerance, and how the market is moving at the time. If you value predictable repayments and want protection from rate rises, fixed may suit you better. If you want flexibility and the ability to benefit from falling rates, variable may be the stronger fit. A split loan is worth considering if you’d like a bit of both.

The right structure depends on your personal circumstances and broader financial strategy, so it’s worth contacting us for tailored advice before locking anything in.

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. Learn more by reading what is Lenders Mortgage Insurance (LMI) – and do you really need it?

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.

Visit our contact page, book in a confidential chat with Durand, our mortgage broker and strategist with over 22 years’ experience in financial services to understand more deeply what buying a property will really cost you.

 

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.

A comparison rate combines a loan’s interest rate with most fees and charges into a single percentage, making it easier to compare the true cost of different home loans.

Lenders are required to display comparison rates because the advertised interest rate alone doesn’t tell the full story. Two loans with identical interest rates can have very different comparison rates once application fees, ongoing fees, and other charges are factored in.

When comparing loans, the comparison rate gives you a more accurate picture of total cost over the life of the loan — but it’s based on a standard loan amount and term, so it’s a guide rather than an exact figure for your situation. 

Contact us for a free, confidential chat, we can model the real cost based on your specific loan amount and goals.

An offset account is an everyday transaction account linked to your home loan, where the balance is used to reduce the interest, you pay.

Instead of earning interest on your savings, the money sitting in your offset account “offsets” your loan balance. For example, if you have a $500,000 loan and $50,000 in your offset account, you only pay interest on $450,000.

Offset accounts are popular because they reduce interest costs while keeping your money fully accessible — unlike making extra repayments, which can be harder to redraw depending on your loan type. Most variable rate loans offer offset accounts, though availability on fixed rate loans varies by lender.

Read our post offset vs redraw to learn more.

A guarantor loan allows a family member — usually a parent — to use the equity in their own property to help you borrow, often without needing a large deposit.

Instead of providing cash, the guarantor offers part of their property as additional security. This can allow you to borrow up to 100% (or more, to cover costs) of the purchase price without paying Lenders Mortgage Insurance.

Guarantor loans are commonly used by first home buyers who have stable income but haven’t yet saved a full deposit. It’s important that both the borrower and guarantor understand the risks and obligations involved, which is why this is one area where getting professional advice before proceeding really matters.

There’s no single minimum credit score across all lenders, but generally a score above 600 (out of 1,200 on the Equifax scale) puts you in a reasonable position with mainstream lenders, while a score above 700 is considered strong.

Lenders look at your overall credit file, not just the number — this includes your repayment history, number of credit enquiries, existing debts, and any defaults.

If your credit score is lower than you’d like, options still exist. Some lenders specialise in near-prime or specialist lending, and a broker can help identify which lenders are likely to look favourably on your situation. Improving your score before applying — by reducing credit card limits, paying bills on time, and limiting new credit enquiries — can also strengthen your application.

Yes, it’s possible to buy a property with as little as a 5% deposit, though it typically means paying Lenders Mortgage Insurance unless you qualify for a government scheme.

Options for low-deposit buyers include:

  • Standard lending with LMI applied
  • The Home Guarantee Scheme (for eligible first home buyers, single parents, or regional buyers), which allows purchase with as little as 5% deposit (or 2% for eligible single parents) without paying LMI
  • Guarantor loans, which can reduce or eliminate the deposit requirement entirely

A 5% deposit loan means borrowing a larger amount relative to the property value, so lenders will assess your application more closely. Speaking with us early can help you understand which pathway suits your situation best.

Contact Durand today, he is our mortgage broker and strategist with over 22 years’ experience in financial services.

Book a confidential strategy call.