Stepping into the Melbourne property market for the first time? Expanding your commercial portfolio? Maybe you’re breaking ground on a new development? Either way, securing the right finance is critical.
At Melbourne Finance, we believe you deserve clear, honest answers before you even pick up the phone. So we’ve put together this comprehensive FAQ guide covering the questions our clients ask us most, across residential home loans, commercial property, and development finance.
Got a situation that’s not covered here? Let’s talk.
RESIDENTIAL HOME LOAN FAQS
Buying or selling a house? Find out the costs involved using our House Buying and Selling Costs calculator.
How much deposit do I need to buy a house in Melbourne?
Most lenders prefer a 20% deposit to avoid Lenders Mortgage Insurance (LMI). But that’s not the only path into the market.
Many lenders offer home loans with deposits as low as 5% for eligible buyers, particularly through government schemes like the First Home Owner Grant or the Victorian Homebuyer Fund.
At Melbourne Finance, we can assess your savings position and map out your most realistic route forward.
What’s the difference between a fixed-rate and a variable loan?
In short, certainty vs flexibility.
A fixed-rate loan locks in your interest rate for a set period (usually 1 to 5 years), meaning your repayments stay exactly the same.
A variable-rate loan has an interest rate that fluctuates with the market and the RBA cash rate, which can work in your favour when rates fall. Variable loans often offer more flexibility, such as offset accounts and unlimited extra repayments.
Can a mortgage broker get me a better rate than my current bank?
Yes, often we can.
Banks generally only offer you their own products. As independent mortgage brokers, we compare hundreds of loan products from dozens of lenders on our panel to negotiate a competitive rate and find a loan structure that genuinely fits your financial goals.
What is Lenders Mortgage Insurance (LMI)?
LMI is a one-off insurance premium that protects the lender (not you) if you default on your loan.
It applies when your deposit is less than 20% of the property’s purchase price.
While it’s an added cost, LMI can actually be a useful tool: it allows you to enter the Melbourne property market sooner without waiting years to save a full 20% deposit. Depending on your situation, the trade-off can make sense.
What is an offset account and how does it work?
An offset account reduces the interest you pay on your home loan.
The balance in this account is “offset” against your outstanding loan balance when interest is calculated. For example, if you have a $500,000 mortgage and $50,000 in your offset, you only pay interest on $450,000. It’s a simple way to save money.
How is my borrowing capacity calculated?
Lenders look at your net income, living expenses, existing debts (including credit card limits, even if the balance is zero), and the number of dependents you have.
They also apply an “assessment rate” (a buffer of around 3% above the actual interest rate) to ensure you could still afford repayments if rates go up.
How does a family guarantor loan work?
If you don’t have a 20% deposit, a family member (usually a parent) can use the equity in their own home as security for a portion of your loan. This allows you to borrow up to 100% of the purchase price, plus costs, entirely avoiding the cost of LMI.
It requires careful structuring. We can give you advice.
What are the “hidden costs” of buying a house?
Beyond the deposit, Victorian buyers need to budget for:
- Stamp duty, which can be significant depending on your exemptions and property value
- Building and pest inspections
- Conveyancing and legal fees
- Building and pest inspections
- Loan application fees
- Moving costs
The good news: first home buyers in Victoria may be eligible for stamp duty concessions or exemptions. That’s something worth exploring before you assume the worst. You can chat to us about your eligibility.
Use our stamp duty calculator here.
How long does a home loan pre-approval last?
A formal pre-approval is typically valid for 90 days.
If you haven’t found a property in that time, we can usually arrange an extension with the lender by providing your most recent payslips to confirm your financial situation hasn’t changed.
The Melbourne property market moves fast, so it pays to have your pre-approval ready before you fall in love with a property.
When is the right time to refinance my home loan?
You should review your mortgage every 2 to 3 years.
It’s worth refinancing if your fixed rate is expiring, if your current lender’s variable rate is no longer competitive, or if you want to access equity to renovate or invest.
If you haven’t looked at your rate recently, there’s a very real chance you’re paying more than you need to. Our refinancing guide is a good place to start.
You can also use our Refinance Calculator to compare your current loans with other rates.
COMMERCIAL PROPERTY LENDING FAQS
How is a commercial property loan different from a residential home loan?
Commercial loans generally have stricter lending criteria, higher interest rates, and shorter loan terms (often 10 to 15 years, though up to 30 years is available in some cases).
Commercial LVRs are typically capped at 65% to 80%, requiring a larger upfront deposit.
What deposit is required for a commercial property loan?
For most standard commercial property purchases (warehouses, retail shops, offices), you’ll typically need a deposit of 20% to 35%.
The exact amount depends on the lender, the property type, and the strength of the lease agreement.
Can I use my Self-Managed Super Fund (SMSF) to buy commercial property?
Yes! SMSF lending is a popular strategy for Melbourne business owners.
You can use your superannuation to purchase a commercial premises and lease it back to your own business, offering significant tax advantages.
Check out our SMSF Lending page for more info.
What documents do I need to apply for a commercial loan?
Lenders focus heavily on the property’s yield and your business’s cash flow.
You’ll generally need:
- Two to three years of business financials (tax returns, profit & loss, balance sheets)
- A summary of personal assets and liabilities
- The commercial lease agreement for the property
Get this documentation in order and you’ll speed up approval.
What is a “Lease Doc” commercial loan?
A Lease Doc loan is a type of commercial finance that relies primarily on the rental income generated by the property to service the loan, rather than your personal or business tax returns.
This makes it ideal for investors buying highly tenanted properties.
Can I get an offset account on a commercial loan?
Offset accounts are common on residential loans but much rarer in commercial lending.
Some lenders do offer them. Others offer line-of-credit facilities that function similarly for business cash flow management.
What is a WALE and why do commercial lenders care about it?
WALE stands for Weighted Average Lease Expiry.
It measures the average time period until the leases in a commercial property expire.
Lenders love a long WALE because it represents lower risk and guaranteed income. For example, a secure tenant on a 5+ year lease is far more attractive than a property with multiple short-term tenants rolling over annually.
What is a Director’s Guarantee?
When you borrow money under a company or trust structure for a commercial property, the lender will usually require the directors of the company to provide a personal guarantee.
This means if the company cannot repay the debt, the directors are personally liable. It’s a standard commercial lending requirement, but it should always be clearly understood before you sign.
Can I borrow money to buy the business as well as the building?
Yes, but the two are often treated as two separate credit applications.
Lenders assess the “bricks and mortar” (the property) differently from the “going concern” (the business itself, which carries higher risk).
Get in touch with us, and we’ll structure a total finance package to cover both.
PROPERTY DEVELOPMENT FINANCE FAQS
How does property development finance actually work?
Unlike a standard mortgage, development loans are paid out in stages, not all at once.
As you complete stages of the build (laying the slab, framing, lock-up, etc.), the lender releases funds in “progressive drawdowns” to pay the builder. Interest is charged only on the amount drawn down, helping to manage costs during construction.
Do I need pre-sales to get a development loan in Melbourne?
Major banks often require enough off-the-plan pre-sales to cover 100% of the debt before they’ll lend.
However, we work with private and non-bank lenders who offer “no pre-sale” development finance, allowing you to start construction faster without being held back by presale conditions.
Learn more about development finance options here.
What’s the difference between TDC and GRV?
- Total Development Cost (TDC): The total cost to buy the land and build the project (including hard costs + soft costs).
- Gross Realisable Value (GRV): The estimated end-value of the project once all units/townhouses are completely finished and ready to sell.
Lenders base their LVR maximums on these two metrics.
What’s the difference between “Hard Costs” and “Soft Costs”?
- Hard Costs: Physical construction costs (materials, bricks, timber, labour, builder’s contract).
- Soft Costs: Pre-construction and holding fees (architects, council permits, town planning, engineering, interest).
What’s the maximum loan-to-value ratio (LVR) for development loans?
Lenders typically fund up to 70-80% of the Total Development Cost (TDC), or roughly 65% of the Gross Realisable Value (GRV).
The right structure depends heavily on the specific project, lender, and your experience as a developer.
Do I need a fixed-price building contract?
Yes. Lenders require a signed, fixed-price contract with a licensed and reputable builder before approving development finance.
This protects both you and the lender from cost blowouts mid-construction.
Can I pay the interest at the end of the project?
Yes. This is called ‘capitalised interest’, and it’s a common feature of development loans.
Rather than making monthly interest repayments out of your own pocket during the build, the interest is added to the total loan amount and repaid when the completed properties are sold.
It preserves your cash flow throughout the project, which can be critical during a development.
What is mezzanine finance?
If a primary lender will only cover 70% of your development costs and you don’t have the remaining 30% in cash, mezzanine finance acts as a secondary loan to bridge the gap.
It carries higher risk and therefore comes with a higher interest rate, but it can get a project off the ground. It’s a tool best used with experienced advice.
What is a contingency buffer and do I need one?
A contingency is an extra cash buffer (usually 5% to 10% of the hard construction costs) built into the loan.
It covers unexpected expenses, like finding rock during excavation or material price hikes. Lenders require this buffer to ensure the project doesn’t stall halfway through.
Can I get finance for land banking?
Yes. If you buy a site but plan to wait a year or two before getting permits or starting construction, you can get a commercial investment loan (often referred to as land banking finance).
The LVR is usually lower (around 50-60%) because vacant land doesn’t generate rental income. But it’s a useful strategy for developers playing a longer game.
Have a specific scenario not covered here?
Every property transaction is unique, and the best finance solutions rarely come from a one-size-fits-all approach.
If you have a specific residential, commercial, or development project in mind, our team of accredited Melbourne Finance brokers would love to look at the numbers with you.