Mortgage expert answers your silliest home loan questions

Look, we’ve all had a moment wondering something bonkers, bizarre, random – you name it. And nothing can be more confusing than the wide world of property and home loans. 

So let’s look at some of the silliest and awkwardly-phrased mortgage questions asked on Google, seriously answered by an expert writer.

"How home loan works"

Want buy house. Not enough money. What do? Ask bank nicely. Bank let you borrow money. If it think you good for it. Then you buy house. Or unit. Pay bank back. It take long time. You give bank extra money, too. This called interest. That how home loan works.

Other stuff too. Less important. 

"Is home loan same as mortgage"

Sort of? Mostly? Yes. Ish. A home loan is the financial product banks and lenders offer. Your mortgage is a home loan that you are currently paying off. 

However, finance writers will often use terms like “home loan borrowers” and “mortgage borrowers” interchangeably, since when you’re making repayments, a home loan and mortgage are functionally similar. 

So yes, a home loan is basically the same as a mortgage. (Unless you’re pedantic and write about them for a living).

"Is home loan interest tax deductible in Australia"

Yes! If you’re a property investor in Australia, you can claim the interest from your home loan on your taxes. In fact, landlords get a whole bunch of tax perks. Lucky them! 

(Just make sure you talk to a tax expert before filing). 

"How is home loan interest calculated"

Good question! Home loan interest is calculated and compounded daily. Your monthly mortgage repayment therefore incorporates interest from the last 30 - 31 days.

This is actually why making more frequent home loan repayments can sometimes save you interest in the long run. By shortening the number of days included in your repayment (fourteen instead of thirty) while keeping your principal in consistent chunks, you can pay off your mortgage faster with less interest over time.

However, this hack will depend on how your lender calculates a fortnightly vs. monthly payment size. If your fortnightly repayments pay less than half of the principal amount you would in a monthly repayment, it actually slows down how fast you pay off your mortgage. (Math involved, but that’s how the sausage sizzles).

"Does home loan include GST"

GST, or the “Goods and Services Tax”, is a government charge applied to most transactions in Australia. From lattes to Uber, most things you buy will have GST built into the final price. Financial services and bank products, however, do not include GST – therefore, neither will your home loan.

But: this doesn’t mean buying a home is tax-free. When you first purchase a property, you may have to pay stamp duty or an annual land tax. Later when you sell your home, you may also have to pay capital gains tax. 

Always seek help from a tax professional and financial advisor.

"Home loan spouse has bad credit"

Ruh-roh. Spouse buy too many things on Amazon. Maybe get screwed with BNPL. Whoops. Work on credit score together. (But don’t control their money – that financial abuse). 

Also. Could apply for home loan as just you? Think about joint tenancy vs. tenancy in common. Talk to financial planner.

Remember: team work make dream work.

"Do home loans look at TransUnion or Equifax"

TransUnion and Equifax are credit score reporting bodies, along with Experian and Illion. Whenever you apply for a home loan, lenders will run a credit check to assess your risk as a borrower. If your credit score isn’t good, they may reject your application. 

Equifax, Experian, and Illion are the main credit bureaus in Australia, so your lender may check with one, two, or all of them when assessing your borrowing power. 

Before applying for a home loan, send for a free credit report from one or more of these agencies so that you can see your score for yourself. Not happy with your results? Give your application a boost by improving your credit score. 

"Can mortgage be paid with credit card"

NO! Technically, yes – but don’t do this! BAD IDEA. A credit card may buy things in the short term (and have more money on it than your debit card), but you’ll still have to pay it back with interest – and the interest rates on credit cards are much, much steeper than those on home loans.

By using a credit card to make mortgage repayments, you’re doubling down on the interest you’re paying overall. This could also potentially hurt your credit score and ability to refinance, because if you miss either a mortgage payment or a credit card payment, it goes down on your credit report. 

If you’re really struggling with your mortgage repayments, talk to your lender. You may be able to negotiate a lower interest rate and work out a repayment plan that works best for your situation. 

Recent law changes also mean that it’s far, far better for your credit score to declare financial hardship than skip payments altogether. You actually get rewarded for asking for help. Huzzah!

Just whatever you do: don’t put your home loan on credit. 

"Can I pay an auction deposit with a credit card"

NOOOO! If you’re paying a housing deposit at auction, do not put it on your credit card. Not only will vendors not accept this as a valid form of payment, but putting a deposit on your credit card defeats the whole purpose of a deposit.

A deposit is a down payment: your home loan will cover the remaining cost of the property. Your deposit is therefore the only part of your home loan you don’t pay interest on (besides money in your offset account). By using your credit card, you create interest on the only interest-free part of your loan – and at a much steeper rate than mortgage interest. 

TLDR: Don’t put your home loan on credit. 

"Is mortgage a liability or an asset"

A financial liability is something that drains your finances, such as debt, while an asset is something that improves or holds your wealth. A mortgage is therefore a liability, because it is a kind of debt. 

However, the property you own, i.e. your equity, is an asset, since it can provide a source of wealth and security. Your equity can be unlocked to do many things for you, like refinance your mortgage or finance another property. 

"Does mortgage cover stamp duty"

Stamp duty is a government charge for transferring property from one owner to another. For those who have to pay it, stamp duty can cost tens of thousands of dollars.

Your mortgage, however, won’t cover stamp duty, so when budgeting to buy a home, you’ll need to factor it in as an extra cost, on top of any conveyancing, agent, settlement, and valuation fees. 

"Does mortgage mean death grip"

Fun fact: sort of! The word “mortgage” comes from the Old French mort + gage, meaning “death” and “pledge”. In mediaeval times, land that was mortgaged was fully pledged to the lender until the borrower fully paid it off or died. 

So, same as today – basically.

"Whose property am I on"

Depends, but the safest answer is, “Whoever owns it.” Not sure who owns it? Follow this handy flowchart.

"Have interest rates gone up"

Yes – due to high inflation, the Reserve Bank of Australia has tightened its monetary policy and made 4.25% worth of increases to the official cash rate since May 2022, which in turn drives up the interest rates on home loans, term deposits, and savings accounts.

"Do interest rates rise in a recession"

No, interest rates do not rise during a recession. In fact, the opposite is true. Whenever the economy enters a recession, the central bank will cut interest rates to encourage people to spend money.

As a result, home loan interest rates will fall, making financing a property cheaper, while savings accounts and term deposits won’t be as attractive, so people will be less inclined to park their money. 

Interest rates rise whenever there is high inflation, and high inflation is not the same thing as a recession. High inflation (usually) means demand is out of control and consumers are driving up prices, thus raising the cost of living.

To discourage spending, the central bank will raise interest rates, therefore making savings accounts a better place to stash cash while mortgage repayments become more expensive. 

"Who owns the Reserve Bank of Australia"

Australia.

"Can you bank with the Reserve Bank of Australia"

No. The Reserve Bank of Australia , also known as the RBA, is a central bank in charge of monitoring the Australian economy and setting Australia’s monetary policy. Unless you are the Australian government or a bank, the RBA cannot manage your finances.

If you are in the market for a new bank, however, you can compare bank accounts using our hub page.

"Will housing prices drop"

While the housing market may experience temporary dips and falls, studies show that long-term, property prices will always rise. This is primarily due to inflation, but increased competition doesn’t help, either.

"How buy first home"

Try government help. Move away from big city. Maybe buy unit instead? Cry. But no give up.

In all seriousness, first home buying can be a daunting task, but there are still plenty of ways to break into the housing market – even with the odds stacked against you.

You’ll need to navigate the hurdle of rising interest rates, outrageous prices, and the cost of living, but with careful planning and research, these can all be managed. 

For more information on how to get started, head over to our first home buyer hub.

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