Road Test
The Age
Monday February 7, 2000
What is Platinum+?
A home loan that allows you to borrow more than 100 per cent of a property's value. Users can borrow up to 105 per cent loan-to-value ratio (LVR) for home purchases and up to 115 per cent for refinance and debt consolidation. Liberty says this product is the first of its type in Australia.
What is Liberty Financial?
A niche (self-described "non-conforming") lending house that has operated in Australia for three years.
Why do lenders traditionally lend to a maximum 95 per cent of property value?
To minimise risk. An LVR is generally between 75 and 95 per cent - the greater the LVR, the greater the sum borrowed in relation to the value of the property.
Isn't it a little dangerous for the Liberty to have no initial deposit?
The risk of default is higher, but Liberty says it will use more stringent and lengthier credit screening than for other loans.
How do you qualify for the loan?
Liberty says it will prefer professionals on higher incomes who are experienced borrowers, have stable job and income histories and have a good credit record.
What are the advantages of Platinum+ compared with other home loans?
No deposit is required - you can borrow the full amount of the property value. Liberty says another plus is access to funds at home loan rates, with potential savings on repayments and interest if you consolidate your borrowing into the one Platinum+ home loan to include personal or credit card debt, with "the ease of dealing with one lender".
What sort of interest rate is on offer compared with other home loans?
The Platinum+ variable interest rate is around 9 per cent, so is higher than conventional home loans. It may be subject to rises as a result of last week's official Reserve Bank rate rise. For every year of meeting payments on time under Platinum+, the rate will drop by 0.5 per cent for 10-year loans and by 0.25 per cent for five-year loans.
What fees are there?
An establishment fee of 1 per cent, mortgage insurance, an initial cashflow fee and a valuation fee.
How do you apply?
By phoning Liberty on 13 11 80, for an initial assessment followed by a face-to-face consultation. A response can potentially be given in 24 hours.
What are the possible drawbacks for the borrower with a product of this type?
Australian Consumers Association financial policy spokesman Dan Coyne says debt consolidation can be a legitimate tool, but in a time of rising interest rates we should be wary of a product that exposes us to higher levels of debt than currently on offer.
Mr Coyne says home loans are usually our most significant and complicated financial transaction, so proceed with caution. "Look at all your choices, look at all alternatives, and make sure you are getting the best deal for your circumstances," he says.
© 2000 The Age
