Manage your Home Loan
HOME LOANSHere's the low down on everything home loan management – from how to make repayments, understanding your options, discharging your mortgage and much more.
If you are concerned about your financial position and feel that you are struggling or may struggle to meet your financial commitments, we may be able to assist you.
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If you’re thinking of refinancing your home loan or selling your property, mortgage discharge might be on your radar. It might seem daunting, but don’t worry, we make it easy. Here’s some things to consider first before making your decision.
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Reward Me Home Loan
Please note the Reward Me home loan is no longer offered for new applications.
Existing customers can still manage a Reward Me home loan and companion account through the hub.
Jargon unplugged
There’s such a lot of jargon kicking around when we talk about your home loan. So, we’ve tried to cut through all the confusing home loan terms and make it simple with this glossary.
Comparison rate
The interest you pay on the home loan is just part of the cost. A comparison rate gives you the true picture once all the known ongoing, up-front and other fees are factored in (including those honeymoon rates and hidden costs some lenders sneak in). The intention is to provide you with a fair figure so you can compare apples with apples between home loans.
LVR
The loan to value ratio (LVR) is the amount you borrowed, represented as a percentage compared to the value of your property.
The LVR is calculated by dividing the loan amount by the property's value or purchase price, and then multiplying by 100 to get a percentage.
- For example, let’s say that you’d like to borrow $450,000 and the property price is $600,000.
The LVR of the home loan would be calculated like this:
($450,000 home loan ÷ $600,000 property value) x 100 = 75% LVR
It’s important to know that we will calculate your LVR based on our valuation of the property/s to be used as security for your loan, so the LVR may change based on what you paid for the property or your estimate of the property value.
Rate lock
Fixed rates can change at any time before you settle your loan (or before your new fixed rate period starts to apply). We offer the ability to 'rate lock' your fixed rate to manage this risk.
Rate lock protects you against any rise in the fixed rate for up to 90 days from the date of your request. A rate lock fee of $750 of the loan value applies. If you are fixing more than one loan, and you request rate lock, a rate lock fee will be charged for each loan.
Variable rate
A variable rate home loan is a home loan with an interest rate that may fluctuate, varying up and down over time. It means your home loan interest rate can rise or fall over the term of your loan
If you choose a variable rate home loan, you may be able to take advantage of any interest rate reduction over your loan’s term. Conversely, if your home loan interest rate goes up during your loan term, you could subsequently pay a higher interest rate, and regular repayment amounts than at the start of your loan term.
This can make budgeting for your interest payments more difficult because you have to take into account potential rate rises during your loan term.
Visit our rates & fees page for more information.
Fixed rate
A fixed rate is where the interest rate on your loan is locked in for a period of one to five years. This means that for that period your applicable interest rate will not change (up or down) and allows you can sleep at night because you know exactly what your repayments are. Fixed rates could be higher (at least initially) than the variable rates on offer.
If you are thinking about fixed rates, remember that if you fix the entire loan you may have to sacrifice flexible features like your offset facility and redraw.
If you would like to fix your loan, give us a call on 13 81 51 and our Customer Care Team will help you out.
Visit our rates & fees page for more information.
Offset vs Redraw
While on the surface offset and redraw sound similar, dig a little deeper and you’ll discover they’re quite different. And that can make a big difference to how you use your money. So, if you’re weighing up your options about redraw vs offset and you’re not sure which one is best for you, we can help.
What is the difference between redraw and offset account?
When it comes to offset account vs redraw facilities, there are some similarities and some differences.
- Both features can help to reduce your interest costs and pay down your home loan sooner. But they do that in different ways. The offset feature is on a separate account where you may have money regularly coming in and out of. While the redraw feature is a feature on variable rate loans, where you can withdraw additional repayments made (above the minimum repayment amount) when you need to.
- There could also be different tax implications when using either feature (particularly for investment properties) if you are seeking to make the interest charged on your loan tax deductible.
Just remember, when considering redraw vs offset, not everyone’s situation is the same and what’s suitable for one person may not be suitable for another. So, it’s important to consider your own individual situation.
Equity
Equity is the difference between the value of your property and the outstanding balance on your home loan. You gain equity as you pay back your loan and as the value of your property increases (through improvement or growth).
You can view an estimate of your current property equity in the Virgin Money app.
Visit our FAQ support page to learn how.
Mortgage discharge
It’s the legal process where you close a home loan. A mortgage discharge needs to be registered to legally release your current lender from mortgage obligations.
Variation requests
Depending on the type of loan you have, you may be able to request a variation to your home loan. Speak to our Customer Care Team on 13 81 51.
- Product switches
- Limit reductions
- Partial discharges
- Security swaps
Interest repayments
Principal and Interest vs Interest Only home loans
When it comes to choosing the right loan for you, a good place to start is deciding between an interest only home loan and a principal and interest home loan. But what exactly are they and what’s the difference?
What is a principal and interest loan?
When you make a home loan repayment, there’s a component that goes towards paying down the principal balance of the loan (the amount you borrowed) and a component that goes towards interest (the cost of borrowing). This is known as a principal and interest (P&I) repayment.
Principal & interest means you're repaying both the original amount borrowed (principal) and the interest charged.
What is an interest only loan?
Another option is to only pay the component that goes towards interest, for a specified period. This is known as an interest only repayment. For this period, you are not paying back any of the money you actually borrowed.
Interest-only means that you're only repaying the interest but not repaying any of the principal. You usually agree interest-only with your lender for a period of time before you then switch to 'principal & interest' repayments for the remainder of the loan term.
What is the difference?
The difference between interest only and principal and interest, it all comes down to what your repayments are used for and the effect that has on your ongoing repayments.
While the repayments over the initial interest only period would be lower (given no principal balance is being repaid yet), after the initial interest only period ends, the loan would convert to principal and interest repayments.
You will now have a shorter time period left to pay off the principal. As a result, the repayments are likely to be higher over the remaining term of the loan.
Principal and Interest Pros and Cons
- Pro:
Depending on your current and long-term objectives, you may prefer principal and interest repayments over interest only. Although your repayments are typically more to begin with, some real financial benefits kick in over the life of your loan.
It’s usually offered at a lower interest rate than an interest only loan, and you’ll pay less interest over the life of your loan (because you’re reducing the principal on which the interest is charged). And that means you’ll pay off your loan sooner.
- Con:
Paying principal and interest repayments is a greater cost up front.
Interest Only Pros and Cons
- Pro:
Interest only home loans can be a tempting option because initially they’re friendlier to your hip pocket as your repayments will be less.
It also may suit your tax arrangements and financial strategy if you’re an investor.
- Con:
It’s important to consider that while repayments could be smaller during the interest only term, they could increase after the interest only term ends, and you could end up paying more in interest over the life of the loan.
Interest only term
If you wish to switch to an interest only term, there are some key things to consider.
Depending on your loan purpose and repayment type, there are a few different options available. However, these are subject to assessment and approval.
| Variable | Fixed | |
| Owner Occupied | 1 -5 year term | 1-5 year term |
| Investment | 1-5 year term Max term 10 years |
1-5 year term |
Switching to interest only repayments does require an approval process. Here are a few things we need to look at:
- your current financial situation
- your future financial goals
- why you wish to switch to interest only repayments.
Interest Only term end
What happens to my home loan at the end of my interest only term?
When you applied for your interest only loan, you would have nominated the period of your interest only term. This is usually 1 to 5 years. At the end of your interest only term, your loan automatically changes to a variable rate loan with principal and interest repayments. As a result, your repayment amount may change and is likely to be higher. But that’s not the end of the story. You do have other options.
What are my options after my interest only term ends?
While your loan will revert to a variable rate loan with principal and interest repayments, you’re not locked into that. Depending on what is important to you, other potential options could include:
- extending your interest only term (subject to assessment and approval)
- switching to a fixed rate term
- just staying on a variable rate with principal and interest repayments.
- If you’re not sure whether to switch to a fixed or stay on a variable rate, you can even split your home loan so part of it is fixed and the other part is variable.
Still wondering ‘what happens when my interest only mortgage ends’?
With all these options, it can be a little confusing to figure out what’s right for you. But don’t worry, we’ll get in touch with you before your interest only term expires (around 30 to 60 days prior) with more information about the options you can consider and the steps you’ll need to take.
Fixing or Splitting your Home Loan
Fixed or variable? When it comes to home loans, it’s a big question. And it can be a tough decision. Find out what fixing or splitting can do to your home loan.
Fixed rate vs
Variable rate
Choosing between fixed or variable interest rate really depends on what suits you best.
- Fixed rates give you certainty so you know exactly what your repayments are going to be during the fixed period, the rate may be a little higher than the variable rate.
- With a variable rate you are affected by the Reserve Bank and market changes, so your rate could go up...and it could also come down.
With a variable rate you get to use more home loan features like the offset facility, unlimited extra repayments and redraw if you need.
Visit our rates & fees page for more information.
Fixing your home loan
Fixing home loans is a good way to take control of your budget. When you fix your home loan with us, you’re able to lock in a rate for a nominated period of 2 to 5 years. Your repayments are also set during that fixed rate term and won’t change, providing you with greater certainty.
But it’s not for everyone. Fixing your home loan means you miss out on the benefits of a variable loan, like an easing on your family budget when interest rate fall and greater flexibility with your money.
Not sure if a fixed rate or a variable rate is more suitable for you? Here are some things to consider.
| Fixed Rate Home Loan | Variable Rate Home Loan | |
| When might I consider it? |
|
|
| Can I make additional repayments? | Only $10k per annum (penalty costs may apply when exceeding this threshold). | Yes. |
| Can I access redraw? | Not during the fixed rate term. | Yes. |
Break costs
Breaking a fixed home loan: the deal with fixed rate break costs.
Sometimes life happens and circumstances change. As a result you may find that you need to ‘break’ your current fixed rate term. In other words, you’ll no longer be making your fixed payments for the remainder of your fixed period.
This can happen when you:
- discharge your loan when paying it out, selling your property or refinancing or make payments in excess of $10,000 per annum during the fixed rate term (with the first one-year period starting on the first day of the fixed rate period)
- make a change to your loan such as switching to a variable rate, changing your repayment type (Principal and interest or Interest only) or changing your loan purpose (Owner Occupied or Investor).
While breaking a fixed home loan isn’t a problem, you should expect to pay break fees.
What’s the cost of breaking a fixed rate mortgage?
The amount of this fee varies and depends on a number of factors, like your fixed interest rate, how much longer you have left on your fixed rate period and the current balance of your loan.
For further details on how break cost calculations work, check out our break cost fact sheet.
Why are break costs charged?
We get it, fees are never great. But they’re there for a reason. Let’s explain.
When you lock in your rate for a specified term, we enter into a contract with you to fix the rate for that specified term. At the same time, we also enter into a contract with a third party to lock in our funding costs at a fixed rate over the same period.
When you break your fixed rate term and wholesale rates have fallen from when you initially fixed your loan, we will have incurred a loss. This is because funding costs are now lower compared to the rate at which we initially locked them in with the third party. Break costs are charged to cover this financial loss we incur.
Fixed rate expiry
What happens after your fixed rate home loan expires?
At the end of your fixed rate term, your home loan doesn’t magically disappear (as nice as that would be). Your loan simply changes to a variable rate home loan with principal and interest repayments. As a result, your repayment amount may change from what you are paying during your fixed rate term. But you do have other options.
Depending on what’s important to you, you can:
- Refix your home loan for another fixed rate term
- Get a split home loan with fixed rate and variable rate portions
- Just stay on a variable rate.
But if you forget or don’t know what to do, don’t worry. We’ll get in touch with you prior to your fixed rate term expiring (around 30 to 60 days before it ends) with further detail around options you can consider and the steps you’d need to take for them.
Splitting your
home loan
A split home loan can help you structure your home loan in the way that suits you best.
Splitting your home loan means exactly what it sounds like – for part of your loan you pay a fixed rate and for the other part you pay a variable rate. Splitting your home loan into fixed and variable rate portions can give you both the certainty of a fixed rate and the flexibility of a variable rate. And the great part is, you get to choose how much of your loan you portion to each.
So for example you fix a portion of your home loan so that you've got some certainty about your repayments, and have another portion in a variable home loan account with an offset facility that your salary gets paid into (which would let you drive down a portion of your interest by putting your salary to use before you spend it).
Plus you can choose between principal & interest and interest-only repayment options (conditions apply). Important to know that if you split your home loan into two or more separate accounts, each will be charged the monthly account fee.
If you like the benefits that both fixed rate loans and variable rate loans provide, you can actually get a split home loan. It’s the best of both worlds. Let’s get the skinny on how a split home loan works.
Split home loan pros and cons.
Split home loans appeal to borrowers who like to hedge their bets. Depending on your personal situation, splitting your borrowings into fixed and variable rate portions can give you certainty over a portion of your repayments that are fixed, while giving you the opportunity to benefit from a favourable market with the other portion of your home loan that is variable.
But what kind of benefit can a split home loan really give you?
The easiest way to find out is to put some numbers to it. As an example, suppose you have a $450,000 home loan and you split this into two separate loan accounts. One being a $250,000 variable rate split and the other being a $200,000 3-year fixed rate split.
- The fixed rate split will have a rate locked in for 3 years with set repayments.
- The variable rate split may change as market interest rates vary.
In this scenario, almost half of your loan is fixed, meaning you know exactly how much your monthly repayments will be on that portion for 3 years. This reduces the variability you need to allow for in your budget.
On the other hand, you are able to make unlimited additional repayments into the variable rate split, access redraw and offset funds against the loan to save on interest costs.
Topping up your home loan
If you need to spend some money but don’t quite have the cash at hand (or want to hang on to your savings), you might be thinking about getting a new loan. But did you know you could get a top up on your existing home loan rather than get a new loan? This home loan top up is effectively an increase to your home loan. And it can come in very handy.
Top ups
What is a home loan top up and how does it work?
A top-up is a way to borrow more money on top of your existing home loan, when you need some extra funds. What you borrow that money for is up to you, whether you’re looking to renovate your property, buy a new car or even consolidate some other debts.
What are the benefits of a home loan top up?
A home loan top up can be a cost-effective way to borrow if you need to access some extra funds but don’t want to dip into your hard-earned savings or don’t have the cash available. Because the borrowings are a top up on your existing home loan, the interest rate may be lower than that of a credit card or a personal loan.
Eligibility
Home loan top up eligibility and criteria.
A top-up can only be used for a personal purpose such as renovating your home or buying a new car for yourself. It cannot be used for business purposes. To access a home loan top up, your existing loan must:
- Be a variable rate loan
- Not have any Lender’s Mortgage Insurance (LMI) on it
- Have been open for at least six months
- Have had repayments made on time in the last six months
Top up process
Home loan top up process.
Just like any other loan, there are still a few steps you have to take to access a home loan top up. And remember, if you don’t think a home loan top up is for you, you can always apply for another loan independent of your home loan.
Credit assessment.
We will likely need to conduct a full credit assessment for a top-up, which involves:
- Checking that you’re eligible
- Reviewing your current financial situation
- Potentially re-valuing the property.
Fees.
There are also a few fees involved. Fees could include:
- a $150 top-up fee
- a property valuation fee if you need a new valuation (charged by the valuer)
- a Mortgage Stamp Duty on the increased loan amount, depending on the property’s state.
Limits.
Lastly, with Virgin Money there are some limits you should be aware of:
- You can top-up once every 12 months
- Top-ups are not available on fixed rate loans.
To discuss your home loan and if we can offer you a top up please give us a call on 13 51 81.
Making your home loan repayments
You can make repayments a number of ways. Let us do the work and debit or transfer your repayments for you. You can nominate a Virgin Money account as your repayment account. The type of home loan you have with us will determine how you update your repayment account.
Direct Debit
This is where you authorise us to deduct the repayment amount automatically from your nominated account held with another Australian financial institution.
The type of account you have with us will determine how you set up a direct debit on your account.
Visit our FAQ support page to learn how to set up a direct debit.
Important: To avoid any Dishonour Fees from your other financial institution, make sure you have enough money in your nominated bank account when repayments are due.
Payment frequency
For principal and interest loans consider making your repayments, fortnightly or weekly. We calculate fortnightly repayments by dividing your monthly repayment by two and weekly repayments are your monthly repayment divided by four. So each year you are making an extra monthly repayment, and this can save you in interest and cut years of your loan.
Even increasing your regular repayments by a small amount can save you in the long run in the interest you need to pay and the length of the loan term.
Visit our FAQ support page to learn how.
Reward Me home loan customers will need to give us a call on 13 81 51 to update repayment frequency.
Extra repayments
Dreaming of a mortgage-free life? Consider making extra repayments on your loan on top of the minimum repayment amount. This will reduce your loan balance, so you’ll pay less interest and pay off your loan sooner.
Put spare cash to good use by making ad hoc home loan repayments whenever you can, you can redraw extra funds should you need them at a later date. If you are a variable rate customer, you can also make extra deposits whenever you like into your offset facility or home loan to lower your interest charges.
Use our repayment calculator to see what difference extra repayments can make to your loan
Visit our FAQ support page to learn how.
Reward Me home loan customers will need to give us a call on 13 81 51 to update their repayment frequency.
Important: There's no limit to the amount of extra repayments you can make with a variable rate loan (plus you can redraw if you need the money for something else). If you have a fixed rate loan you can make extra repayments up to $10,000 each year (you do not have access to redraw and please be aware that a fee applies if you go over the $10,000 yearly limit).
Banking calculators & tools
We love making things easy! Our tools and calculators help you work out all the important home loan stuff.
CALCULATORS & TOOLS
How much can I borrow?
Calculate how much you may be able to borrow based on your income and expenses.
CALCULATORS & TOOLS
How much can I save?
See how increasing or making extra repayments could help you pay off your home loan sooner.
CALCULATORS & TOOLS
How much are repayments?
Calculate what your minimum mortgage repayments could look like with the amount you plan to borrow.
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