With so many home loan options available, it’s easy to get confused. Choosing the loan that’s right for you depends on many things including consideration of your financial and lifestyle needs. Each loan type offers different features and subsequent benefits. Our Home Loan Advisers can explain them all to you in detail, but here’s an overview of what’s available.
Variable, Fixed, or Split
If your home loan is variable, the interest rate (and as a result your payments) are likely to move in line with market shifts and the prevailing economic conditions.
Variable loans tend to allow for greater additional repayments, therefore giving you the ability to pay the loan off sooner.
Alternatively, should you fix your home loan for a set period your repayments will remain constant during the fixed period.
To maximise the benefit offered by both home loan types, you may be able to split your home loan. That is, you can choose which proportion of your home loan you would like to have at a fixed rate and what proportion remains at the variable rate. When you split your home loan, the fixed portion protects you against interest rate rises while the variable portion enables you to benefit from any fall in interest rates.
> Back to the top Discount Variable
A discount variable home loan is a simple variation of a standard variable home loan with the benefit of a reduced rate traded off against fewer features. The rate can be as much as 0.5%p.a. lower than the standard variable home loan rate, however minimum redraw amounts are typically higher and other restrictions may apply.
> Back to the top Introductory
An introductory loan offers a discounted rate for a fixed period at the start of the loan – typically of between six months and three years. This rate may be fixed or variable, but the variable rate will typically be lower than the standard variable or the prevailing fixed rate during the introductory period.
At the end of the introductory period, the loan reverts to the current market rate - normally the standard variable rate – but some lenders will also offer the option of swapping to a fixed rate for a fee. Some conditions may apply.
> Back to the top Line of Credit (All in One Account)
The greatest benefit of this loan type is the ability to access the equity you have in your home. This frees up funds for important purchases such as home improvements, holidays or even investments, as well as providing for your everyday transactions.
With a line of credit, you deposit all of your income into your loan thus reducing your loan amount and minimise the interest charged. Then by utilising a credit card for all your daily expenses and paying off the statement balance in full at the end of the month, by direct debiting from your loan account, means you pay no interest on the credit card.
Correctly utilised, a line of credit loan can be repaid in a much shorter time; however it requires the borrower to be disciplined to ensure that the principal is progressively paid off.
> Back to the top Professional Package
Despite its name, a professional package is not just for ‘professionals’ – it is available to all borrowers assuming they meet eligibility requirements (typically a minimum loan balance of $150,000). A professional package offers borrowers a substantial rate reduction (typically between 0.5% – 0.75%p.a.) as well as benefits on other products such as credit cards and transactional accounts.
> Back to the top Low Doc
Low doc home loans are designed for borrowers who may not be able to provide the usual verification documents required for home loans such as the self-employed. Typically this type of home loan will require a larger deposit and a clean credit history. Low doc loans are generally available across a number of loan types.
> Back to the top Bridging
A bridging loan is designed to cover the period between buying a new property and selling an existing one. You retain any current finance on the existing property and take ‘bridging’ finance on the whole amount for the new property. A bridging loan is typically available for a maximum period of six months and utilises interest only repayments, which may be added to the loan balance during the bridging period.
Once the existing property is sold, the original loan is paid out and residual funds are used to reduce the bridging loan. At this time, the loan typically reverts to principal and interest repayments.
> Back to the top Construction
Typically a construction loan is an interest only option whereby you progressively draw on borrowed funds as required to cover the costs of construction. Drawing only on what you need ensures you’re only paying interest on the smallest possible amount. Construction loans are generally available for a period of twelve months and are available in most loan types.
> Back to the top Family Pledge
There are a number of products in the market designed to provide assistance to help people into their own home. These type of loans assist by enabling family members to contribute to the loan. There are several options available and your Home Loan Adviser is able to discuss which would best suit your needs.
> Back to the top Low Deposit
If you have good cash flow but low equity, a Low Deposit loan may enable you to borrow above 95% of your property value.
> Back to the top A non-conforming loan is tailored for those who do not fit within a lender’s traditional credit risk policy. This is typically due to poor credit ratings or what is generically known as being 'credit impaired'.
With a non-conforming loan, lenders will generally look past an individual’s circumstances based on evidence of their ability to repay the loan. However, this type of loan normally requires a larger deposit than a standard loan and a higher interest rate may apply.
> Back to the top Reverse Mortgages
Also known as an ‘equity release loan’, this type of loan can be ideal for borrowers over 60 years of age who find themselves ‘asset rich but cash poor’. Borrowing against the value of your property, in most instances, interest, fees and charges are added to the loan and repayments are deferred until the property is sold – so no repayments are required throughout the life of the loan.
It is strongly recommended that you seek independent financial advice before applying for a reverse mortgage. It is a condition of the loan that independent legal advice is acquired before taking out a reverse mortgage.
> Back to the top
