A: A loan pre-approval means that a lender has agreed to lend you an amount of money towards the purchase of a property, subject to conditions. You’re under no obligation to take the loan and the lender has no obligation to lend you the amount if you don’t meet the remaining conditions which usually relate to the property that you are purchasing such as contract of sale and valuation.
A: When a lender pre-approves you for a loan for a specific amount, you will have a realistic idea of your budget so you can focus on properties you can afford. It also indicates that you’re serious about buying, making you a more attractive buyer to a seller as your offer is less likely to be withdrawn due to a lack of financing because it has already been approved in principle by the lender.
A: Pre-approval requires you to submit an application with supporting documents like payslips, recent bank statements, personal identification and a summary of your assets and liabilities including savings and debts such as credit card limits, personal loans or HELP/HECS debt. This is also where your mortgage broker comes in! We first review your scenario and advise which lender, product and structure is best going to suit your circumstances. We then submit your application and documents for pre-approval on your behalf, guiding you through the process, and answering any questions you may have along the journey.
Once your application is submitted, it is assessed by the lender. They will conduct a credit check and come back to us with anything they want to clarify or for more information. Once they are satisfied with the information you have provided, they will give you pre-approval. This is subject to an acceptable valuation of the property you plan to buy and no substantial changes to your financial circumstances. In other words, before you make any changes when it comes to your employment or assets and liabilities, please speak to us beforehand to ensure that it won’t compromise your pre-approval.
A: If you provide all the required documentation upfront to your broker, pre-approval is likely to take 3-5 business days. If your situation is more complex, it could take up to 2 weeks.
An important thing to note is that not all pre-approvals are the same. Some are system generated which means that a human has not reviewed the application and your application will still need to be assessed in full once you have actually purchased a property. We have helped many clients who thought they were pre-approved because their current bank gave them a “lite” or system-generated pre-approval only to discover that when requesting formal approval, based on their particular circumstances, their bank wouldn’t formally approve their loan and they had to scramble at the last minute to secure their purchase.
A: Once you have received pre-approval, you’re ready to go house-hunting with a realistic idea of your overall budget. When you have finally found the right property, you can start the formal approval process for your home loan.
A: The short answer is no, not always. While pre-approval means that you're more likely to have a loan approved, it doesn't provide an iron-clad guarantee. Changes in personal circumstances and unsuitable properties can mean your application requires reassessment or is rejected. It is critical that you communicate with us throughout your buying process to ensure no unwanted surprises due to the property you want to purchase being unsuitable or a change in circumstances that render the original pre-approval null and void.
A: If your personal or financial situation changes after you have been pre-approved, the lender will need to reassess your application. These circumstances can include:
● A change in employment
● Changing from a permanent position to casual or becoming a contractor/self employed
● Taking on a new credit card or loan
● Change in family circumstances such as children or a new relationship (i.e single to couple or vice versa)
● Lenders finding out about loans or credit cards that you did not originally disclose
These changes don’t necessarily mean your application will be rejected, but your lender will need to reassess your application.
A: A pre-approval does not include an assessment of whether the property is acceptable by the lender and some lenders have restrictions on the type of property they will pre-approve you for. Certain types of properties that may be deemed risky by some lenders include:
● Small apartments, particular apartment blocks or locations
● Hobby farms
● Certain locations
● A property with large power lines close to it
Final approval also depends on the lender’s valuation of the property – if the sale price is considerably higher than the lender’s valuation of the property, it may affect what you can borrow.
A: For most lenders, pre-approvals are valid for between three and six months. This is because both a borrower’s financial situation and the property market can often change over a few months. It may be a smart move to not apply too early in the game if you are not serious about looking to buy as it will mean having to go through the application process again.
A: Once your pre-approval expires, your loan eligibility will be assessed once again and a credit check may also be requested.
A: Applying for multiple pre-approvals from different lenders in a short time frame can reflect poorly on your credit score. Every time you apply for a pre-approval, the lender you apply with runs a credit check. This then leaves an enquiry on your file and too many enquiries could impact your credit score in a negative way as lenders may start to question why there are so many and if there is a reason behind the multiple applications.
At Kudos Money, we run an upfront credit check which does not affect your credit score so that we can better understand your circumstances and be able to provide you with better advice regarding which lenders are likely to approve your application.
When you purchase a property, you will need to pay a deposit to show the vendor (the owner of the property that you want to purchase) that you are serious with your offer and you will be completing the purchase in the specified settlement time frame.
In other words, this is your down payment on the purchase price of a property made to the real estate agent after your offer has been accepted and you’ve signed the contract. This is usually 10% of the purchase price, however you can negotiate the amount of a deposit and the timing of when the deposit is paid with the real estate agent prior to making your offer on a property.
At a private sale, you pay the deposit once you and the seller have exchanged signed contracts and you have decided to go unconditional on the purchase contract. Going unconditional on the purchase contract means that you have satisfied all conditions that you had on your initial offer such as subject to finance, subject to building and best Inspection and any other conditions that you have negotiated. Typically, you may pay an initial holding deposit of $1,000 to $2,000 when you make the offer and sign the contracts and then pay the balance of the deposit when you go unconditional on the purchase contract.
If you buy at auction, you sign the contract on the day and generally pay the deposit the following business day of the auction, however it is best to check with the real estate agent as some will require a deposit paid on the day. Any deposit paid is typically held in the real estate agent’s trust account until settlement day.
On settlement day, you pay the balance of the purchase price and officially own the property. Generally, the balance will be made up of any additional deposit that you have saved and a loan from a bank or lender.
The most common ways to pay your deposit are:
● Electronic funds transfer/Bank transfer - make sure you’ve changed your daily transfer limit!
● Personal and bank cheques
● Direct bank deposit
● Deposit bond - some sellers may not accept deposit bonds as they may need access to the deposit instantly to enable the purchase of their next home (See further down for an explanation on a Section 27).
You’ll need to check with the real estate agent on how they prefer to receive the deposit before you make an offer on a property - especially if you are intending to buy at auction when you may need to pay your deposit on the same day.
How can I pay the deposit if it is tied up in the equity of my other property that I intend to keep?
Accessing your equity without selling your existing property can be done by:
● Refinancing or restructuring your home loan - you can borrow against the equity in your property to cover the deposit, stamp duty and other costs
● Using savings from an offset account – if applicable and you have enough funds to cover the deposit and costs, you can use the money you’ve been putting into the offset account attached to your home loan
How can I pay the deposit if it is tied up in the equity of my other property that I intend to sell?
Timing the sale of your property with the purchase of the new one can be tricky. You can look at:
● Using savings from an offset account - using the money you’ve been putting into the offset account attached to your home loan for the deposit of your new property purchase
● Bridging loan - Bridging loans are short-term interest-free loans designed specifically to cover the gap between buying and selling property
● Using a deposit bond to cover the deposit - if your current property sale is due to settle either before or on the same day as the new property is due to settle
How do I pay the deposit if I have a guarantor and am borrowing 100% of the purchase price?
The purchaser will either need to negotiate a very small token deposit, use a deposit bond or find temporary funds for a deposit up until settlement (where they can effectively repay that deposit amount from the loan settlement proceeds.
What is a deposit bond?
A deposit bond allows a buyer to pay the deposit to the vendor when going unconditional on the purchase by using the deposit bond instead of using cash from their own accounts or having to refinance or restructure a current loan to get access to a cash deposit. When a deposit bond is used in lieu of a cash deposit, no money is exchanged until settlement date and the deposit bond acts as an insurance policy for the vendor should you not complete the settlement.
Why would I use a deposit bond?
If you are looking to put in an offer on a property but don’t have access to the required deposit, a deposit bond may be the best solution for you. They are often used for property purchases where:
● The buyer is awaiting funds from an existing sale
● The buyer has a security guarantee/family pledge in lieu of a cash deposit and is borrowing 100% or more of the purchase price
● The buyer is an investor who has adequate equity but minimal liquidity or access to cash
Do I pay a deposit bond back?
In most cases, no! Come settlement when you pay the purchase price in full, the bond simply lapses.
The only time that you would be required to pay a deposit bond back is if you do not complete the purchase that you have committed to. Effectively, a deposit bond is an insurance product that you pay a premium for and if you don’t complete the purchase, the vendor can then claim on the bond for the original deposit amount. The deposit bond company will then require you to repay the deposit amount to them. Even if you paid a cash deposit and you were not able to settle the purchase, the deposit would be forfeited to the vendor.
What is a Section 27?
A Section 27 Statement (also known as an “Early Release of Deposit Authority”) allows the seller to request access to the deposit funds paid by the purchaser prior to settlement. They may do this if they want to purchase a property prior to settlement and require additional funds to secure a property that they are interested in purchasing.
When can a Section 27 be served by a vendor?
A Section 27 can be served when the contract of sale is unconditional, and the cooling-off period has expired. This is when the purchaser is now bound by the contract to fulfil their purchase obligations.
Can you as a purchaser object to a Section 27?
If the buyer is not satisfied by the particulars disclosed in a Section 27 Statement, they may object within 28 days if:
● The vendor has not provided supporting evidence from the mortgagee as to the particulars of the statement
● The vendor owes more than 80% of the sale price
● A caveat has been lodged in respect of the land
If you fail to object within 28 days of receiving the Section 27, you will be deemed to have given authorisation to the early release of the deposit
Get in touch with us with any questions or to discuss your deposit options
A: Settlement is the final important step in the home buying process, you have almost made it to the finish line! At settlement, the ownership of the property is transferred from the seller to you, the buyer. Your conveyancer or solicitor will coordinate the settlement where the final documents of the sale will be exchanged and the balance of the purchase price is paid to the seller.
A: Property settlement periods vary from state to state and case to case. For existing properties, it can be between 30 to 90 days, however some people may elect for a longer settlement period, but this must be agreed upon by both buyer and seller as part of the negotiations when purchasing the property. Off-the-plan unbuilt properties may not settle for a number of years.
The contract of sale will outline the settlement period agreed on by both parties. The settlement period begins on the day the written contract of sale is signed by both parties (known as the exchange of contracts) and ends on settlement day.
A: This is your chance to take one last look around the property and make sure the property is in substantially the same condition it was when the contract of sale was signed weeks earlier. When you view the property for the final time you should check:
● Any items included in the contract of sale are still on the property and in working order (heating, air conditioning, hot water system and other appliances)
● Structure, walls, light fittings, window and floor coverings are in the same condition as when you first saw the property
● Locks, keys and automatic garage door controls are supplied and working
A: It’s the day you have been waiting for! You pay the balance of the sale price to the vendor and receive ownership of your new property. Your conveyancer or solicitor will meet with the lenders and the seller’s legal representative either online or in person. Final documents of the sale will be exchanged and the balance of the funds to complete the purchase will be transferred, including any additional funds you are contributing to the purchase and the amount that the lender has loaned you.
A: You won’t need to be present on settlement day. Your conveyancer or solicitor manages everything, including liaising with your bank and the vendor’s conveyancer/solicitor. There is nothing for you to do except wait for confirmation that the transfer has taken place and then meet the real estate agent to collect the keys to your new property.
A: Once you get confirmation that the sale of the property has gone through, the real estate agent will arrange a time with you to hand over the keys. In the rare case where settlement is delayed a day or two, it is recommended you do not plan to move in on settlement day.
A: The majority of the time settlement day will go off without a hitch. However, there are a few things that could delay settlement:
● You might discover an issue that needs to be rectified during their final inspection of the property before settlement.
● The seller’s lender or your lender isn’t ready for settlement for some reason
● The sellers or a tenant have not yet moved out of the house where vacant possession is to be provided.
● You or the seller is late returning important documents to your conveyancers/solicitors or if there are any errors in the paperwork.
A: While it’s not always a legal requirement, it is recommended you insure the property you are buying as soon as you exchange signed copies of the sale contract with the seller. Lenders require buyers to take out home insurance before they book in settlement to ensure that the property is protected after settlement. This is important as the last thing you would want is to owe a debt to a lender based on property value and in the unforeseen circumstances such as a house fire, only have a vacant block of land left and no way to rebuild your home.
If you are purchasing a unit, townhouse or apartment, insurance is normally covered by the Owners Corporation, however it is still important to check that this is the case to ensure that your property is covered.
A construction or building loan is purposely structured for borrowers who are building or even renovating their own home as opposed to buying an existing property.
Rather than receiving your full loan amount in a lump sum as you would for a standard home loan, the lender pays instalments of the construction loan amount to cover building costs at the different stages of construction.
During the construction period, borrowers typically only make interest-only repayments to help with cash flow, which is especially helpful if you are still paying rent or a mortgage on your current home. The interest-only repayments are made only on funds that have been drawn down at that point - not the whole loan amount like in a standard home loan. For example, if you are given a $540,000 construction loan but only $150,000 of it is drawn to cover the initial stages of the construction, you will only pay interest on that $150,000. This means you actually have reduced repayments throughout the construction until the property has been completed and the loan is full drawn.
As the lender continues to release the money to pay your builder's invoices, the interest payments will increase as the balance of the loan increases closer to the full limit. Once construction is complete, your loan will revert to a standard principal and interest loan.
As with any standard home loan, you’ll be required to submit an application with supporting documents like proof of identity, payslips, recent bank statements and a summary of your assets and liabilities including savings and debts such as credit card limits, personal loans or HELP/HECS debt.
To apply for a construction loan, you’ll also need to have a building contract, plans and specifications and details of any work you plan to do yourself.
As with a standard home loan, the ideal deposit is 20% of the property value. Depending on the lender, you may be able to secure a construction loan with a 5% to 10% deposit. If your deposit is under 20% you may need to take out Lenders Mortgage Insurance (LMI) which adds an additional cost to your loan.
Keep in mind that most people go over budget when building a new home. As your broker, we try to ensure that you get approval for a slightly higher loan amount to ensure that there are plenty of funds available. We also recommend you keep saving throughout the construction process for any unexpected costs and try to avoid any large expenses until the construction is complete.
You may be eligible for the First Home Owner Grant (FHOG) or transfer/stamp duty exemptions on concessions from your state or territory government to help you buy your first home. You can find out what FHOG are available in each state and your eligibility here.
For Victorians buying their first home, you may be eligible for:
● $10,000 FHOG towards buying or building a new home in Melbourne up to $750,000.
● Full exemption on stamp duty on properties up to $600,000.
● Stamp duty concession for a property with a dutiable value from $600,001 to $750,000.
Check your eligibility here. Other states may have different first home buyer conditions, so please reach out to the team to confirm what is available in your state.
Once your lender’s requirements are completed such as getting council approved plans, builders warranty and public liability insurance, they will inform you and your builder when construction can commence.
Depending on your lender, you will be required to commence building which is usually within 6 to 12 months from the disclosure date on your contract. In most cases, money from your construction loan will only remain available for 24 months from the disclosure date on your loan contract.
Depending on your lender, if construction isn’t completed within 24 months of the disclosure date in the contract, approval of the loan or the undrawn loan balance may be withdrawn and a new construction loan application may be required.
At each stage of the build determined by the Progress Payment Schedule you will:
Going over budget on a new build is more common than you think. The construction loan only covers payments up to the amount stated on the progress payment schedule. If you exceed this amount, you’ll need to pay any additional costs with your own money or borrow additional money which will be treated as a new loan application. As soon as you anticipate exceeding approved funds, contact us immediately.
Sometimes we change our minds - we’re only human! Changes to the building contract price which are called adjustments may mean your lender needs to reassess the loan all over again which can cause long construction delays and incur fees from your builder. To avoid any issues, make sure the building contract provided to the lender is the final one and try to pay for any small changes from your own funds.
Before final payment is made to your builder, your lender will usually arrange a final property inspection to confirm the property is completed to the proposed specification. They will also need to see a certificate of occupancy and a current house insurance policy for the minimum amount of cover stated in the loan offer.
Once the final progress payment has been made on your loan, it will switch to principal & interest payments if that is what you chose at application stage, otherwise, it will remain at interest only in examples such as an investment property that has been set up as interest only for a set period of time.
Get in touch with us if you want to discuss your specific situation and options
Debt consolidation is used to clear existing debts from multiple lenders by rolling them into one loan with one lender for easy-to-manage repayments. This is usually set up as a separate split from your home loan with its own repayment. For example, instead of making monthly payments on two different credit cards, a personal loan and a car loan, each with a different lender and with their own fees and interest rates, you combine all of them into a low-interest rate loan which makes life easier and saves you money if done correctly.
If you’re struggling with credit card debt or have difficulty juggling payments on multiple loans, debt consolidation can give you a clearer picture of what you owe and potentially save you money.
Having several credit cards, personal loans and other debts can be overwhelming when managing cash flow and ensuring repayments are paid on time. Consolidating your debt to just a home loan and a single debt consolidation loan is a great way to simplify your finances, create good credit habits and have a clear pathway to becoming debt-free. As a result, you will have manageable regular repayments, fewer sets of fees, potentially lower interest rates, fixed loan end dates and only have to deal with one lender.
Once you’ve consolidated your debt, it’s important to cut up those credit cards and not be tempted to start building up your personal debt again.
You can consolidate multiple debts, such as personal loans, credit cards, car loans, store cards, debts from other credit providers such as Afterpay, Zip Pay and other small debts.
Consolidating your loans could potentially save you money! When you only have debt with one lender, you no longer need to pay multiple fees across multiple debts. Ideally, you want your new debt consolidation loan to have a lower interest rate, ultimately saving you on interest.
However, it is important to set up the debt consolidation loan structure correctly in order to maximise the benefit. That usually means having the debt that has been consolidated as a separate loan split to your original home loan so that you can focus on paying that down quicker than the usual 30-year loan term. We recommend this because if you take a short-term small debt from a higher interest rate and put it on a 30-year low-interest home loan, it may end up costing you more interest given the longer term, even though the interest rate may be less. It is important your broker recommends the right structure for you to ensure that you ultimately benefit from the debt consolidation.
You may need to factor in any ‘break’ fees or early repayment charges when consolidating your debts, and even a lower interest rate can end up costing more if it’s stretched out over a long repayment period, however, we would assess that as part of our process.
If you have equity in your home loan, refinancing to consolidate your debts might be an option. Fees may be involved when refinancing your mortgage, but you would likely receive a lower interest rate on refinancing your home loan than the unsecured personal loan option. You also have the option to make additional repayments on the debt being consolidated with the money you’re saving each week, meaning you pay off your debt sooner and save on interest.
Total Debt: $635,000
Monthly Repayments Before Debt Consolidation: $6,368 per month
Total Savings After Refinancing: $3,816 per month
Our clients came to us after having a business fail and amassing a number of debts. They were now both working PAYG jobs, making enough for the repayments but with very little money left over. They were stressed and deflated, working only to make their monthly repayments. Their total debt was around $635,000 and was made up of:
● 1x Home Loan
● 2x Investment Loans
● 1x Business Loan
● 1x Overdraft
● 1x Business Credit Card
● 1x Car Loan
● 1x Personal Loan
● 3x Personal Credit Cards
● 1x Store Card
Originally their total repayments were a huge $6,368 per month. We were able to refinance and consolidate their debts, bringing their monthly repayments down to $2,552 which is a saving of $3,816 per month.
They now have a strategy in place to take half of the $3,816 savings each month and make additional payments to their consolidated debts. This will enable them to pay off the consolidated debt much quicker and at a lower rate, while still having an extra $1,908 back in their budget each month. The refinance, debt consolidation and additional repayments will allow them to pay off the debt in 14 years and 4 months, saving them $147,000 in interest.
Get in touch with us if you want to discuss your specific situation and options
Deposits, Deposit Bonds & Section 27 FAQs
Before making an offer on a property, it is important to consider and discuss with your Broker and Real Estate Agent how you will access and pay your deposit.
Are you wanting a loan to build a new home?
Securing a loan to buy land, build a new home, purchase off-the-plan or a house and land package is a little different than buying an established house. Discover more about construction loans.
Everything you need to know about pre-approval
A loan pre-approval means that a lender has agreed to lend you an amount of money towards the purchase of a property, subject to conditions.
A helpful glossary
The following is a glossary of some common terms that you may come across when dealing with home loans. This is a guide only, general in nature and not intended to constitute advice.
What you need to know about simplifying your finances with debt consolidation.
Debt consolidation is used to clear existing debts from multiple lenders by rolling them into one loan with one lender for easy-to-manage repayments.
Kudos Money is a registered trading name of Kudos Money Aust Pty Ltd ATF Kudos Money Unit Trust ABN 81 976 529 731.
Kudos JP Partners Financial is a registered trading name of JWPL Holdings Pty Ltd ATF JWPL Holdings Unit Trust ABN 94 505 643 519. All product and lending services are provided by JWPL Holdings Pty Ltd ATF JWPL Holdings Unit Trust t/as Kudos JP Partners Financial ABN 94 505 643 519 | Corporate Authorised Representative 515831 Beagle Finance Pty Ltd Credit Licence No 383640
The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.
