Loan types…
Choosing the right home loan is often just as difficult as choosing the right home. With so many different home loans now on offer, it is not easy to know which is the right one for you. When you are selecting your home loan, consider what features you want in the loan. Some features you may want to consider are:
- Do I want a fixed or variable rate home loan, or a combination of both?
- Do I need flexible repayments?
- Ability to make repayments via direct debit, ATMs, Internet and phone banking services.
- Will I be charged for additional repayments?
- Will I need a redraw facility?
- Are there any monthly fees?
- Will a cheaper interest rate mean I pay more fees?
- Will I need a 100% mortgage offset facility, allowing me to offset funds in an account against the home loan?
- Can I restructure the loan further down the track?
The right home loan for you will be one which meets your needs and provides a balance between how you want to repay the loan and the interest rate and charges that are associated. Give us a challenge to SAVE you heaps of money….We love doing it!
Standard Variable Rate Loans
Interest rates on these loans vary with the economic climate of the time. The variance is generally a reflection of the official Reserve Bank rates. As one of the most flexible loan types, it can apply to a wide spectrum of loan situations. In most cases, Variable loans will enable you to offset your loan, make additional repayments and redraw, which may help you to finalise your loan earlier and on most occasions is less likely to incur penalties.
Basic Variable Rate Loans
A very popular loan, similar to a Standard Variable but generally offered without the extras that come with a standard variable loan, such as credit card sweep, offset account etc; Interest rates are normally lower and are favoured by borrowers who are confident that they don’t require additional features.
Fixed Rate Loans
Fixed rate products are for a set term, generally 1-5 years, although some lenders offer up to 15 year fixed rate terms. At the end of this set term the fixed rate generally reverts to a standard variable rate and depending on the terms of the loan, you may have the option to renegotiate another fixed term. Fixed rate loan products offer the certainty of a fixed loan repayment amount and for the budget conscious consumer, especially in a time of rising variable interest rates, can provide peace of mind. Generally, fixed rate home loans, do not offer the same flexibility as variable rate home loans, say for example the ability to make unlimited extra repayments, or have a redraw facility. Also if you repay a fixed rate loan in full during the fixed period, a break cost penalty may also apply.
Introductory Loans
Introductory loans (sometimes known as a Honeymoon loans) generally enables you to commence with a lower rate for a fixed period “normally 6-12 months” and then revert to a higher rate (usually a standard variable loan rate) for the remaining loan period. These loans can be either a fixed or variable rate and on most occasions have a deferred establishment fee for the first three years.
Split Loans
Allows you to nominate what portion of your loan will be fixed and what portion will be variable. The variable component enables you to make additional repayments while the fixed component provides the comfort of protecting this portion against rate rises whilst in the fixed rate time period.
Line of Credit Loans
A flexible loan facility, secured by residential real estate, that enables you to access funds as you need them, up to a pre-approved credit limit. They are essentially an overdraft facility where monies paid into the loan can be withdrawn up to the original limit. Technically an Interest only loan, however most people make higher repayments enabling them to finalise the loan quickly and redraw for investment purposes up to the original limit. The main risk attached with a line of credit facility is that irresponsible borrowers may erode all of the equity in their home. However for most home owners it provides a cost effective lending facility when correctly structured.
Mortgage Offset Loans
A Mortgage Off-Set Account is a savings account linked to your home loan, which when structured correctly can significantly shorten the term of your loan. However not all offset accounts are the same and the beneficial effects for you, can vary dramatically, as some offset accounts only offset the interest earned whilst others are 100% offset.
Low / No Doc Loans
The Lo Doc Home Loan is available to assist borrowers up to 95% of a property valuation, who are self employed and are unable to provide the normal income documentation for a loan. You need to complete an Affordability Self Assessment form and in most cases provide your A.B.N. Some lenders will also consider P.A.Y.G. applicants in special circumstances. The No Doc Home Loan in some circumstances does not require income to be declared, an A.B.N or a statement of Financial Position. It is generally referred to as an asset lend and can be available up to 80% of a property valuation.
Construction Loans
With a Construction loan, money is drawn down as per the building contract via a series of progress payments to the builder and closely follows a progress schedule requiring regular inspections by the lender. Usually repayments are made on an interest only basis during the course of construction, reverting to principal and interest repayments when construction is complete.
Professional Packaged Loans
The Professional Package is designed to give you a helping hand to reach your financial goals. There are a number of rewards from interest rate discounts to fee reductions on a competitive range of products. The Professional Package has been designed with flexibility in mind. You can have the choice of a variable rate loan, fixed rate loan or the convenience of a line of credit and/or combinations of each. Combine the special discounts with the ability to pay extra and the benefit of a 100% offset account and you have a loan that helps you to own your home sooner.
Family equity / Guarantor Loans
The Family Equity option allows family members (e.g. parents, grandparents and siblings) with equity in their own property, to help home buyers bridge the deposit gap and cover upfront borrowing expenses, by providing a limited guarantee in support a loan application. You will be able to maximise the amount you can borrow to purchase a property, due to the additional limited guarantee and still be eligible to receive the First Home Owners Grant. The guarantee is to be supported by a registered first or second mortgage over the family member's property.
NOTE: The release of the security property will not be an event which is initiated by the bank, or which occurs automatically or at a predefined time during the loan term. It will occur at the borrower's or guarantor's request, and will be subject to the bank's consent at that time.
Redraw
A redraw facility on a loan allows you to access additional repayments that you have made into your loan account. This provides you easy access to extra monies that you have paid. Some lenders place conditions on the minimum amount that can be redrawn at any one time and generally, redraws will attract a fee.
Interest Only
These loans do not require principal reductions to occur; you are only required to pay the interest portion of the loan. You cannot have a balance outstanding higher than the original loan, so repayments have to keep the balance lower or equal to the original loan amount. It is commonly used for investment loans where interest is allowed as a tax deduction.
Client Testimonials
The explanation regarding the types of mortgages was understandable and good information. You made it easy for us rather than us shopping around at each institution.
Prior to the information we were renting now own our own home.
J Charlton
