Anz

1. Credit Assessment of Housing
Loans in Australia
Data Compiled by
Dr. D. Sreenivasa Chary

2. TOPICS COVERED
• Understand the principles of credit (Cs of credit).
https://corporatefinanceinstitute.com/resources/knowledge/credit/5-cs-of-credit/ (Very important)
• Mathematical calculations questions based on Simple Interest calculations (Very important)
• What is the importance of ABN number in Australia?
• What is the Australian financial year?
• How does a basic Payslip look like in Australia?
• What is base income?
• What is gross income?
• What is YTD income?
• How is net YTD different from gross YTD?
• What is overtime, commission and bonus and how are these different from base pay?
• What are the most common documents used to calculate income (only salaried) in Australia?
• Uncommitted monthly income, debt to income ratio, loan to value ratio, understanding customer financial
position (assets, liabilities, income, expense, etc.,) and its applicability while assessing loans (Very important)
• Go through the website for basic understanding about Home Loan application process
• https://www.loans.com.au/home-loans/home-loan-application-
checklist?keyword_k=&gclid=EAIaIQobChMI1oTO_JDR8gIVjZZLBR293QJAEAAYASAAEgL6TfD_BwE

3. FINANCIAL YEAR IN AUSTRALIA
• The financial year is a time period of 12 months used for tax
purposes.
• The Australian financial year starts on 1 July and ends the
next year on 30 June.
• At the end of fiscal year small business owners wrap up their
books and begin finalising their tax time paperwork and
accounting.
• From 1 July through to 31 October individuals and
businesses submit their tax return to the Australian Taxation
Office (ATO), who use the information to determine how
much tax you owe.

4. Australian Business Number ( Source: Clear Tax)
1) What is an Australian business number used for?
An ABN is a unique 11-digit number that identifies your business to the government
and community. You can use an ABN to: identify your business to others when
ordering and invoicing. avoid pay as you go (PAYG) tax on payments you get.
2) Can any one have an ABN number?
Not everyone is entitled to an ABN. To be entitled to an ABN you must be carrying on
a business in Australia. This means that you must have started trading or have
undertaken business-like activities towards the commencement of trading.
3) Can you run a business without an ABN?
Yes you can start your business without an ABN. Its only compulsory if you hit the
$75k mark and are then required to register for GST. The only issue with not
registering is that the payer may be required to withhold PAYG for non disclosure of
ABN

6. Pay slip
Date of payment: ………………..
Pay period: ………… to …………
Employer’s Name: ……………………... ABN: ………………………………
Employee’s Name: …………………………….
Employment status: * e.g., full-time, part-time, casual …………………….
Name of Award/Agreement: ………
Classification under the Award/Agreement: * ……
Hourly rate: $00.00 Annual Salary: $00,000
Bank details: * employee’s bank details …………………………………
Annual leave entitlement: xx days/hrs as at last date of current pay period*
Personal/career’s leave entitlement: xx days/hrs as at last day of current pay period*
You should modify this table according to your employee’s entitlements. You can add extra
lines if required.
Entitlements can include loadings, penalty rates, shiftwork allowances, overtime,
allowances, incentive-based payments, termination entitlements and any other separately
identifiable amount.
Employer superannuation Contribution:
Account / Fund name (or name and number of fund)
Contribution $00.00
Note: Pay slips must be issued to employees within one working day of the day they are paid.
Entitlements Unit Rate Total
Wages for ordinary hours worked 00 hours $00.00 $00.00
Leave taken during the pay period> 00 hours* $00.00* $00.00
TOTAL ORDINARY HOURS = (No of hours) any leave taken should also be included here.
Name of entitlement 00 hours* $00.00* $00.00
Name of entitlement 00 hours* $00.00* $00.00
Gross payment $00.00
Deductions
Taxation $00.00-
Any other deductions. Each deduction needs to be listed separately. You can
add extra lines to this table if required.
$00.00-
Total deductions $00.00-
Net payment $00.00

7. YTD Payroll Amount
• Year-to-date payroll is the amount of money spent on payroll from the
beginning of the year (calendar or fiscal) to the current payroll date. YTD is
calculated based on your employees’ gross incomes.
• Gross income is the amount an employee earns before taxes and deductions
are taken out.
• Your year-to-date (YTD) total balance (the amount of payments made by
your employer since the start of the financial year) is located on the right
side of your payslip:
• The YTD taxable gross total shown on your last payslip can sometimes be
different from the gross amount shown on your income statement.
• The year-to-date payroll lets employer compare their employee payroll
expenses to the annual budget for those costs. And, you can determine the
amount that goes toward payroll compared to Company’s total expenses

8. Base Pay, Overtime Pay and Bonus
1) What is a Base pay?
Base pay is the initial salary paid to an employee, not including any benefits, bonuses, or raises. It is the rate
of compensation an employee receives in exchange for services.
2) What is Overtime Pay?
The amount of overtime pay due to an employee is based on the employee's regular rate of pay and the
number of hours worked in a work week regardless of whether the employee is paid on a piece rate,
day rate, commission, or a salary basis. An amount equivalent to overtime may be paid to an
award/agreement free employee as a discretionary benefit in consideration for the employee working
reasonable additional hours in excess of the maximum 38 hours.
3) What is Bonus?
Bonus is a payment made in addition to the employee's regular earnings. Recognising the hard work of
employees is important to ensure morale remains high in the workplace and that quality workers are
retained in your business. One of the easiest ways to reward employee excellence is through the
payment of employee bonuses.
4) What are Ordinary Time Earnings (OTE)?
It is the amount employers pay employees for their ordinary hours of work, including things like
commissions and shift loadings.
5) Explain Salary and wages?
They are payable to work out the super guarantee charge. Employer only need to do this if they missed
paying the minimum super guarantee contribution by the due date. Salary and wages are similar to OTE
but also includes any overtime payments

9. OVER TIME PAYMENT Salary or
wages OTE
Overtime hours over and
above the ordinary hours
stated in an award or
agreement
Yes No
Overtime where the
ordinary hours of work are
not stated in an award or
agreement, or not
separated from other hours
Yes – all
hours
worked
Yes – all hours
worked
Casual work, piece work and
commissions
Payment
Salary or
wages
OTE
Casual
employee shift
loadings
Yes Yes
Casual
employee
overtime
payments
Yes No
Piece-rates – no
ordinary hours of
work stated
Yes Yes
Commission Yes Yes
BONUSES
Payment Salary or
wages OTE
Performance bonus Yes Yes
Christmas bonus Yes Yes
Bonus in respect of
overtime only
Yes No

10. PAYMENT OF WAGES :AUSTRALIAN OMBUDSMAN
• Paying wages : Learn about the minimum obligations for paying employees in Australia
• When and how to pay wages : Employers need to pay employees at least monthly for the
work they do. Employees can be paid in a number of different ways including in cash, by cheque
and directly into their bank account by electronic funds transfer (EFT).
• Pay slips and record-keeping : Employers need to follow certain rules about giving
employees pay slips and keeping pay records.
• Pay slips : Employees need to be given a pay slip within 1 working day of being paid. Pay slips
can be given electronically or in hard copy. Pay slips need to include certain details about an
employee’s pay. Penalties apply for providing false or misleading information on a pay slip.
• Record-keeping : Employers have to keep accurate and up-to-date records about their
employees. This includes information about an employee’s pay, leave and hours of work. Records
also need to be kept about any changes to working arrangements or ending employment.
• Payment summaries : Payment summaries, also known as income statements, need to include
payroll information required by the Australian Tax Office (ATO). Most businesses are covered by
Single Touch Payroll, which impacts the way employers need to report payroll, tax and
superannuation information to the ATO.

11. UN COMMITTED MONTHLY INCOME (UMI)
• At ANZ the assessment of a customer's ability to repay is determined by
calculating an Uncommitted Monthly Income (UMI).
• If the UMI is positive, then the customer is considered to have the capacity to
repay.
• UMI is determined as follows.
NET INCOME
LESS
✓ All the borrowers personal living expenses; and
✓ All credit commitments, including credit commitments for the credit facility
being applied for; and
✓ Any other regular fixed commitments the borrower may have

12. LOAN TO VALUE RATIO
• LOAN + MARGIN = VALUE OF THE SECURITY / PROPERTY TO BE ACQUIRED
• LVR represents, Bank’s loan in the total value of the Asset / Property.
• Higher the LTV , lower the borrower’s contribution for acquiring the asset. It
implies lesser the borrower’s stake in the asset and high risk for the Bank
• The Maximum LVR is 80% or less depending on the property type
• It indicates that Margin is 20% and above
• Lenders Mortgage Insurance (LMI) is a product that is required by ANZ when a
loan is over 80% LVR due to the greater risk of loss it represents.
• LMI applies when the maximum loan to value ratio (LVR) is exceeded. LMI is
payable when the LVR is greater than 80% to a maximum of 97%*.

13. DEBT TO INCOME RATIO
Why DTI Ratio?
• Debt to income ratios are used to identify highly leveraged customers.
• A customer with a high DTI has a lower proportion of disposable income as a large
proportion is committed to servicing debt obligations.
• This makes a high DTI customer more vulnerable to adverse changes in circumstances or
loan conditions.
What is ANZ’s DTI policy?
• Applications will no longer be accepted where the combined applicant’s debt to income
ratio is greater than or equal to 9 times.
How is DTI Calculated?
• At a high level, the DTI calculation is based on the Total Debt/Total Annual Gross Verified
(pre-shaded) Income at application level.
• If a customer’s DTI is greater than or equal to 9, can we still consider the application?
• No. Applications that have a DTI greater than or equal to 9.0 will be declined. In these
instances, the customer will be required to either reduce the loan amount sought or
verify further income in order to reduce application DTI below 9.0.

14. Common Documents required for filing Income Return
1) Statements relating to income, such as a payment summary from each employer,
2) Statements of interest received from banks or other financial institutions,
3) Dividend statements from companies, and statements of shares sold.
4) Information about allowable deductions.Work-related expenses are expenses you may incur in the course of
earning income. To be an allowable deduction, Documents that give proof must include the:
(a) name of the supplier
(b) amount of the expense
(c) date on which it was incurred
(d) nature of the expense
(e) date of the document.
5) Electronic funds transfer You will need to provide bank account details to receive a refund using electronic
funds transfer (EFT).
6) Tax file number (TFN) A TFN is required to lodge a tax return. If you don't have a TFN, you need to apply
for one

15. BANKS : PROFIT EQUATION
PROFIT = SPREAD MINUS BURDEN
SPREAD = INTEREST ON LOANS MINUS INTEREST ON DEPOSIT
BURDEN =
EXPENDITURE
OTHER THAN
INTEREST ON DEPOSIT
MINUS
INCOME OTHER THAN
INTEREST ON LOANS

16. CARDINAL PRINCIPLES OF LENDING
• SAFETY
Bank is a financial intermediary. It does not lend it’s own funds. It lends the funds
borrowed by it from public, which are required to be repaid by the Bank as and when
demanded by the customer. Hence, it is the fist and foremost duty of the Bank to
ensure that , the depositor’s funds are safer in the hands of the borrower.
• SECURITY
The loans given by the Bank, are backed by either primary or collateral security, which
acts as a fall back, in case the borrower defaults to repay the loan.
• LIQUIDITY
Bank has to repay the deposits accepted by it from public on demand. But the loans
given by the Bank are not repayable by the borrowers on demand.they are repayable
as per the repayment schedule. Liquidity refers to repayment of the loan installments
on due dates.
• PROFITABILITY
A Bank should be commercially viable to survive. Despite social obligations, a Bank
should earn profit. A Bank should earn profit , and maintain capital of it’s own which
is sufficient to absorb the probable loan losses.

17. FIVE Cs OF LENDING
• CHARACTER
A person having character and integrity, would repay the loan. He may delay the repayment of
loan installments on account of bonafides reasons, but never becomes an intentional defaulter.
• CAPACITY
A person having the capacity to run the business/ industry , would earn enough profit and get
capacity to repay the loan
• CAPITAL
Capital is the owner’s contribution in the business. Capital determines owner’s stake in the
business. A Bank shall have enough capital to absorb its probable loan losses.
• COLLATERAL
Primary security is the security created out of the bank loan proceeds. Any security, taken in
addition to the primary security is called collateral security. Securities are taken as a fall back for
liquidation of a loan if the borrower defaults repayment of the loan.
• CONDITIONS
Environmental conditions and compliance of the terms and conditions of a loan are very
important in credit management.

18. FOUR P’s OF LENDING
• PERSON
Ascertaining the character and integrity of the borrower, is very important in
the credit appraisal process.
• PURPOSE
A loan for productive purpose, helps generate income , and enables the
borrower to repay the loan. Hence purpose is very important in appraising a
loan account.
• PROSPECTS
If the activity for which the loan sought has demand, and is likely to thrive in
future, it would yield profits and enables the borrower to repay the loan.
• PROFITABILITY
A loan account should yield income to the lender, other wise it would become a
drag on the capital and profitability of the Bank

19. BASIC CONSIDERATIONS IN A PROPOSAL
1) Whether the borrower is competent to enter in to a contract.
2) Whether the purpose of the loan is legally valid?
3) Whether the funds of the depositor would be safer in the hands of the
borrower?
4) Whether the borrower earns sufficient income to repay the bank dues?
5) Whether the borrower is offering adequate primary security, secondary
security and third party guarantee.
6) Whether the documents obtained are capable of charging the assets given
as security and bind the borrower and the guarantors / sureties.
7) Whether the amount of the loan installment and the periodicity of
repayment commensurate with the income generation period of the
borrower.

20. MODEL APPRAISAL OF LOAN PROPOSALS
01 Name of the borrower
02 Father’s Name
03 Age
04 Occupation
05 Place of Working
06 Annual Income
07 Guarantor for the loan
08 Purpose of the Loan
09 Cost of the Vehicle
10 Margin (%)
11 Loan to Value Ratio (%)
12 Amount of Margin for loan
13 Amount of the Bank Loan
14 Period of Repayment
15 Rate of Interest
16 Equated Loan Installment(EMI)
17 Primary Security for the Loan
18 Secondary Security for the Loan
19 The nature of charge to be created on the primary security
20 The nature of charge to be created on the secondary security
21 The charge over the vehicle to be registered with…………
22 Documents to be taken
23 Post Sanction follow up
24 Periodical Inspection

21. EMI CALCULATION
M = Loan period in months
I = (Interest rate per Annum / 12) / 100
L = Loan amount
^ = To the power

22. Example.1.Suppose Ram has borrowed Rs. 5 lakhs
from a bank on the interest rate of 12 per
cent for 10 years. Calculate EMI
M (Loan period in months) : No of Years X 12 = 10 X 12 = 120
I (Interest rate per Annum / 12) : ( 12/100) / 12 = .01
L (Loan amount) : Rs. 5 ,00,000
EMI that Ram has to pay is Rs. 7174
Total payment made by Ram to the bank in 10 years (EMI X Total tenure in months
(7174 X 120) is Rs 8,60,880
The total interest rate payable will be (Total payment – loan amount) Rs. 3,60,880

23. EMI CALCULATION
Mr. Amar wants to avail Car loan of Rs
10 lakhs, from the Bank repayable in 5
years, at an interest rate of 12%PA
L = Loan Amount = Rs 10,00,000
I = Interest rate per = 12% / 12=
0.12 / 12 = 0.01
M= Loan period in month = 5 years
=60 Months
1000000 *0.01[(1.01)^60]
[1.01^60] -1
[10000 *1.8167] /0.8167
18167 / 0.8167
22244
EMI = Rs 22244

24. Example. 2: Principal amount of loan taken = Rs 100000,
Rate of interest = 12% PA. Period of Loan is = 2 years .
Calculate EMI.
p = loan taken = 1,00,000
r = interest rate per month = 12% /12 = 1% = 0.01
n= tenure in months = 2 Years = 24 months
EMI = 100000*0.01*(1+0.01)^24 /((1+0.01)^24 -1)
= 4707

25. Documents required for housing Loan
(1)Personal Identification:
One Primary IDs or TWO Secondary IDs
primary IDs (ONE) Secondary IDs (TWO)
• Passport • Birth certificate
• Driver’s license • Medicare card
• State or Territory-issued photo ID
card such as a Proof of Age Card
• Citizenship certificate
• Utility bills with name and current
address
• Tax assessment notice
• Debit/Credit card with your name

26. Documents required for Housing Loan
(2) PROOF OF INCOME
Source Documents to be submitted
Employment a) Two of your latest payslips and employment contract. OR
b) A letter from your employer that contains the details of your
employment such as the basic salary, allowances, and length of
employment. OR
c) Three months’ Bank statements proving your income.
Self-employed a) Two years personal and business tax returns
b) Australian Taxation Office (ATO) assessments for the past two
years.
Income from
Rental property,
a) A letter from a real estate agent confirming your rental income.
b) copy of your current Residential Tenancy Agreement
c) Bank statements that indicate the rent payments.
Other sources Income can be your dividends, superannuation, foreign income,
and other government income sources

27. Documents required for Housing Loans
(3) List of Assets
a)Vehicles you own,
b)Bank account details that show
your savings, term deposits,
high interest savings accounts,
c) Share investments, and
d)Superannuation details.
(4) List of Liabilities
a)outstanding debts from your
credit cards (Three months
statements),
b)Other ongoing loan
repayments such as car
loans and personal loans
(.three months statements)
Note: First Home Owner are eligible form Grant (a one off payment)).

28. TYPES OF HOUSING LOAN BORROWERS
1) Owner Occupier: A person buying a home to live
2) Investor: A person Buying a home as an investment property
Note: Owner Occupier will pay a slightly lower interest rate than investors because they are seen
as being more likely to make their repayments.
3) Refinancer: A person having a loan and want to switch to a new loan, you are a refinancer.
The reason for switch may be (a) Fixed to a variable rate, (b) Borrow extra money to renovate
your property, (c) Take out a loan with a lower interest rate.
4) First home owner: A person buying a property for the first time, ( May be Owner Occupier or
Investor). The Owner occupier may be eligible for the first home owners’ grant or a stamp duty tax
exemption.
5) Renovator or builder: A person, who plan to buy some land and build a home on it. OR a person
who wants to do a major renovation on his own home or a newly bought property. Such type of loan
is called Construction loan. Such loans are released in stages like Slab, Frame, Lock Up, Fixing and
completion. The interest is added to the principal only after completion of the construction work.

29. Factors influencing the price of a Loan
• Fixed vs variable home loan rates
• Principal and interest repayments
• Interest only repayments
• Your Loan to Value Ratio (LVR)
• Whether you are buying a property to live in or as an investment

30. TYPES OF INTEREST RATES
In the Australian market, there are three main types of rates you can
choose from:
1. Fixed rate loan
2. Variable rate loan
3. Split loan

31. FIXED INTEREST RATE
A fixed rate home loan means your loan repayments will be charged at the same
interest rate for an agreed period of time
Pros
• You are protected from any rate increases
• Easier to budget because you know what your rate will be
Cons
• Typically have a slightly higher interest rate
• You won’t save any money if rates go down
• No offset
• More expensive to refinance – usually incur a break fee

32. Variable Interest Rate
A variable home loan, is one in which the lender can vary the interest rate at , when a
change in the lender’s cost of funds, or when there a change in the Reserve Bank of
Australia’s official cash rate etc.
Pros
• Typically have a lower interest rate
• Potential to pay less if rates fall
• More features like unlimited repayments
• Less cost to refinance
• Offset sub-account available
Cons
• Costs you more if rates go up
• Harder to budget

33. SPLIT LOAN.
A split loan means that a portion of the loan is subject to fixed home loan rates and a portion is
subject to a variable interest rate. For instance, you might fix 50 per cent of the loan, and leave
50 per cent variable. This means that if rates go up, your repayment will only increase on the
variable portion, while the other half will remain the same. A split loan is a compromise
between the pros and cons of fixed and variable interest rate loans.
Pros
• If rates rise, you will only pay more on the variable portion
• You still retain the flexible options of a variable rate loan including an offset and extra
repayments.
Cons
• If rates fall, you only get a reduced rate on the variable portion
• You will incur break frees if you refinance during the fixed term

34. Principal & Interest vs Interest Only
“Principal and interest Loans” : The principal and interest is repaid in equal instalments repayments.
Pros
• Pay off your loan faster
• Less total interest on the loan
Cons
• Repayment will be higher than interest only
Interest Only Loans:
• The borrower is given the option of making ‘interest only’ payments for a limited amount of time. This means that
during the agreed interest-only period, you are only paying the interest on the loan and not repaying the
principal.This will have the effect of lowering your repayments during the “interest-only” period.
• However, the borrower will still need to repay the outstanding amount before the loan terms ends, which means the
repayments during the remainder of the term will actually be higher. The total amount of interest you pay will also
be higher because the balance outstanding will be higher for longer.
Pros
• Lower repayments during the interest-only period
Cons
• Higher repayments when the interest-only period ends
• More interest in total over the life of the loan

35. Offset Sub-account
• Some lenders offer a mortgage offset account and others offer an offset sub-account. Either way, having
an offset home loan lets you pay off your loan faster and with less interest.
• Whenever you put money into an offset account or offset sub-account, that money is 100% "offset" against your
home loan.
• So, if you had a loan of $400,000, and $5,000 in your offset, you would only pay interest on $395,000.
• Your monthly repayments won’t change but you will pay more off your home loan principal each month, so you
will pay off your loan faster and with less total interest.
• Best of all, whenever you need the money back, you can withdraw it at no charge. For this reason, many people
choose to use their offset as their transaction account, and have their pay put into it each month, then
progressively draw it down as they spend i
Pros
• Pay off your loan faster and with less total interest
• Use the offset sub-account as a fully featured transaction account
Cons
• Pay a small interest premium compared to a loan with no offset sub-account
•

36. Home loan application process
1. WHAT DO YOU NEED TO APPLY FOR A HOME LOAN?
(A) IDENTIFICATION DOCUMENTS
• Primary ID: Passport, driver's license, state or territory-issued photo ID card (such as Proof of Age card).
• Secondary ID: If you can't provide any primary IDs, you can present two forms of secondary ID. These may be
your birth certificate, Medicare card, citizenship certificate, utility bills in your name and current address, tax
assessment notice, and debit or credit card in your name.
(B) PROOF OF INCOME
• Your proof of income will be a major factor in your loan eligibility. As we have all different sources of income,
the documents you provide will vary from person to person and to some extent from lender to lender. They
will typically include:
• If you're an employee, you need to provide two or more of your most recent payslips, employment contract or
a letter from your employer containing the details of your employment such as salary, length of employment,
etc. You can also present three months worth of bank statements which prove your income.
• If you're self-employed, you will need to present two years worth of business and personal tax returns and
Australian Tax Office (ATO) assessments from the last two years.
• If you earn income from a rental property, you need to provide a letter from your real estate agent confirming
your rental income. You will also need to provide a copy of your current Residential Tenancy Agreement and
bank statements that indicate the rent payments.
• Other sources of income can be your dividends, superannuation, foreign income or other government income
sources.

37. Home loan application process
(C) ASSETS AND LIABILITIES
• A lender will also want to see your assets and liabilities to get a clearer picture of your full financial position.
Put simply, assets are anything you own (cars, share investments, term deposits, etc), while liabilities are
anything you owe (credit card debt, other ongoing loan repayments).
(D) EXTRA DOCUMENTS
• These documents will vary depending on the type of buyer you are.
• If you are a first-home buyer, you may be able to benefit from the First Home Owner Grant. If so, ensure your
First Home Owner Grant application is completed.
• If you're applying for a home loan with a guarantor, your guarantor will need to provide all documentation for
their identification, income, assets and liabilities.
• If you already have insurance on the property, you will want to provide a copy of the insurance policy.
2. PRE-QUALIFYING
• Before you even start checking out the online property advertisements, you should pre-qualify with a
lender to get a general idea of how much you might be able to borrow based on your income.
• With loans.com.au you can do this by filling out a short online form which takes a couple of minutes. You
will get an onscreen answer plus an email. Remember that you haven't spoken with a lending specialist at this
stage, or submitted an application, so this is just the first step towards finding out what you can actually
borrow.

38. Home loan application process
3. PRELIMINARY APPROVAL
• You don't need to have a property in mind before you apply for a loan. It is a good idea to start your application
before you even begin inspecting properties. Then, you can progress through the approvals stages, each of which
saves you time once you come to finally purchase the property.
• To get preliminary approval from loans.com.au, you just need a 20-40 minute phone call with one of our lending
specialists, during which time an application will be submitted to the lending manager. No supporting documents
are submitted at this stage. You will receive an email confirming preliminary approval subject to us receiving
supporting documents that confirm the financial information you have supplied.
• Preliminary approval indicates that you have a good prospect of being approved for a home loan up to a specified
dollar limit. Preliminary approval isn't a guarantee you will be approved for a loan, however, once you've
received preliminary approval for a home loan, you can do some realistic house hunting.
4. CONDITIONALAPPROVAL
• For your loan application to progress past preliminary approval, you will need to provide documentation on your
assets, income, expenses and liabilities. The lender will conduct a credit check to assess your credit record.
• They will look at your ability to borrow funds and service the debt. If you are successful, you will then receive
conditional approval. This is still subject to a property valuation and no changes in your financial circumstances.
5. PROPERTY VALUATION
• After conditional approval (also known as pre-approval) has been granted, the lender will get a valuation of the
property you wish to buy. The bank has to make sure your home loan is not too large compared to the value of the
property. This is because the home becomes collateral for the home loan.

39. Home loan application process
6. LENDERS MORTGAGE INSURANCE (LMI)
• Depending on the size of your deposit, you may be required to pay LMI. If your loan to value ratio (LVR) is
over 80%, the application will then be passed on to a mortgage insurer and is subject to further credit checks.
7. FINALAPPROVAL
• Final approval is when the lender has everything they need and can confirm they are willing to approve your
loan. If so, they will issue a letter confirming their approval.
8. LOAN OFFER ISSUED
• Once you have been unconditionally approved for the loan, your loan offer will be issued to you. Typically, the
lender will send you the loan contract that you will need to sign to accept their offer. You can go through this
contract with a solicitor if you want to receive legal advice.
• Once you've signed off on the contract, return it to the lender as soon as possible with any requirements needed
to settle the loan. The sooner you do this, the fewer delays at settlement.
9. SETTLEMENT
• The settlement stage is where all the financial and legal loose ends are tied up, and the property ownership is
transferred from one owner tobuyer.
• The bank then withdraws the money from the buyer's nominated account and pays the seller.
• The title office then receives the signed documents and registers the new owner of the property (you!). After
settlement occurs, you can pick up the keys to your new home. A month after settlement is when you will
typically begin making your home loan repayments.

40. How to get approved for a home loan
Step 1: Start your application
• If you are borrowing from loans.com.au, you should start by filling out an online application. This only takes a few minutes to complete.
After that, a loan specialist will contact you to discuss the information you provided and lodge your application.
Step 2: Speak with a lending specialist
• Talking to a lending specialist will help you choose the most appropriate loan product for your needs. This will be based on your income,
expenses, assets, and liabilities, and your financial goals. A lending specialist will then give you access to our onTrack application portal to
proceed with your loan application.
Step 3: Log in and upload your documents
• With your on Track log in, you will then need to upload supporting documents to your application checklist. Your documents will help
confirm and verify the information you provided.
Step 4: Order a property valuation
• A property valuation is an estimate of the value of the property. There is a fee associated with ordering a valuation.
Step 5: Loan approval
• You can visit your onTrack application at any time to see your application status. Your loan application is likely to be approved if your
documents are in order and the valuation falls within the expected price range.
Step 6: Delivery of your loan documentation
• When your loan receives final approval, you will be notified through on Track that your mortgage documents and loan agreement pack
will be delivered to you. You will then need to complete the loan documents and send them back to your lending specialist.
Step 7: Settlement
• You must arrange the necessary deposit to complete settlement of the property purchase. Your conveyancer will then arrange a meeting
to book settlement.
Step 8: Accessing your account online
• After the payment has been made, you’ll receive your login credentials for Online Services to manage your loan online. A Customer Care
team member will call you to help set up your Online Service profile. You can also order a visa debit card if you want to link your offset
account to it

41. Interest Rates on Mortgage loans in Australia ( November 2021)
Average variable mortgage interest rate 3.93%
Lowest variable rate available on Finder 1.85%
Average 3-year fixed mortgage interest rate 2.93%
Lowest 3-year fixed rate available on Finder 1.79%
Average interest rate of a Finder app user 3.30%

42. Income thresholds Rate Tax payable on this income
$0 – $18,200 0% Nil
$18,201 – $45,000 19% 19c for each $1 over $18,200
$45,001 – $120,000 32.5% $5,092 plus 32.5c for each $1 over
$45,000
$120,001 – $180,000 37% $29,467 plus 37c for each $1 over
$120,000
$180,001 and over 45% $51,667 plus 45c for each $1 over
$180,000
Australian income tax rates for 2020–21 and 2021–22 (Residents)
Note: These rates do not include the Medicare levy of 2%. Source: ATO

43. AUD AUD
Assessable income
Gross salary 1,10,000
Australian sourced rental income 11,700
Australian sourced interest income 500
Australian sourced dividend income:
Fully franked (net) 700
Gross up for franking credits (700 x 30/70) 300 1,000
Foreign sourced dividend income (gross of
WHT of AUD 200)
2,000
Net capital gain on disposal of property:
Proceeds 1,80,000
Cost base -1,50,000
Gross capital gain (proceeds less cost base) 30,000
50% CGT discount -15,000 15,000
Total assessable income 1,40,200
Allowable deductions
Protective clothing -300
Interest and repairs on investment property -5,250
Charitable contributions -150
Total allowable deductions -5,700
Total taxable income 1,34,500
Tax on taxable income (29,467 + 37% x 14,500) 34,832
Medicare levy (134,500 x 2%) 2,690
Foreign income tax offset -200
Franking credit -300
Total tax payable 37,022
Tax calculation for Individuals

44. DOCUMENTATION & POSTSANCTION FOLLOW UP
• Once the proposal is found to be bankable, letter of sanction is to be issued to
the borrower, and his consent shall be obtained for the terms and conditions
of the sanction.
• Appropriate documents to bind the persons ( Borrowers and Guarantors/
sureties) and the properties offered as securities shall be obtained.
• The loan documents are to be adequately stamped.
• The documents are to be registered at the appropriate authority where ever
required
• The documents are required to be identified / witnessed wherever required.
• The end use of the loan proceeds is to be ensured.
• Inspection of the security offered as security is to be done periodically.
• Periodical valuation report of the property are to be obtained periodically.

45. FINANCIAL MATHEMATICS
1. Present Value of Single cash flow
2. Future Value of Single cash flow
3. Present Value of Annuity
4. Future value of Annuity
5. Doubling of Amount ( Rule 69 and 72)
6. Effective Rate of Interest