NAB Lending and Credit 2 — Questions and Answers
Question 1: What does LVR stand for in NAB's home lending context?
- Loan Viability Rating
- Loan to Value Ratio (Correct answer)
- Lender Valuation Ratio
- Leveraged Value Risk
Correct answer: Loan to Value Ratio
LVR stands for Loan to Value Ratio, calculated by dividing the loan amount by the property's assessed value.
Question 2: At what LVR does NAB typically require Lenders Mortgage Insurance (LMI)?
- Above 70%
- Above 75%
- Above 80% (Correct answer)
- Above 90%
Correct answer: Above 80%
NAB generally requires LMI when the LVR exceeds 80%, protecting the lender against potential default losses.
Question 3: Which NAB home loan feature allows borrowers to access extra repayments they have already made?
- Offset account
- Line of credit
- Redraw facility (Correct answer)
- Interest capitalization
Correct answer: Redraw facility
A redraw facility lets borrowers withdraw additional repayments they have made ahead of schedule on their home loan.
Question 4: In NAB's credit assessment, 'serviceability' primarily refers to:
- The quality of customer service during the loan term
- The condition of the security property offered
- Whether the loan amount matches the property's market value
- The borrower's ability to meet loan repayments from their income (Correct answer)
Correct answer: The borrower's ability to meet loan repayments from their income
Serviceability measures whether a borrower can comfortably meet repayments based on their income, expenses, and existing debts.
Question 5: What is the key difference between a fixed-rate and a variable-rate NAB home loan?
- Fixed-rate loans are only available for investment properties
- Fixed-rate loans lock in an interest rate for a set period; variable rates fluctuate with market conditions (Correct answer)
- Fixed-rate loans never require LMI; variable-rate loans always do
- Fixed-rate loans allow unlimited extra repayments without any penalty
Correct answer: Fixed-rate loans lock in an interest rate for a set period; variable rates fluctuate with market conditions
A fixed-rate loan maintains the same interest rate for the agreed term, while a variable rate can rise or fall based on market and lender decisions.
Question 6: Which documents does NAB primarily use to verify the income of a PAYG employee applying for a home loan?
- Six months of personal bank statements
- A statutory declaration from the borrower
- Recent payslips and an annual PAYG payment summary (Correct answer)
- A letter of employment from an HR department only
Correct answer: Recent payslips and an annual PAYG payment summary
NAB requires recent payslips and PAYG payment summaries to confirm the borrower's salary, employment status, and consistency of income.
Question 7: What does NAB's credit scoring system primarily assess?
- The market value of the security property
- The profitability of the lending product for NAB
- The likelihood that a borrower will repay their debts as agreed (Correct answer)
- The length of the borrower's banking relationship with NAB
Correct answer: The likelihood that a borrower will repay their debts as agreed
Credit scoring evaluates a borrower's creditworthiness based on repayment history, outstanding debts, and financial behavior patterns.
NAB Lending and Credit 2
What does LVR stand for in NAB's home lending context?