HOME LOANS

STANDARD VARIABLE LOANS

The standard variable loan is the most common home loan product for Australian borrowers. The interest rate is subject to market conditions and as a result can go up or down. With a standard variable interest rate there is more flexibility than a fixed rate. Generally you can pay unlimited extra amounts without any penalty, redraw excess repayments, fix all or part of the loan and repay the loan in full at any time without penalty.

BASIC VARIABLE LOANS

A basic variable loan generally provides lower rates than standard variable loans. These loans are usually “no frills” and do not have the features that the standard variable rate offers. They typically do not offer the extra features like redraw, lump sum payments, portability, etc. Most of these loans do not allow the interest rate to be fixed without incurring fees, which can be costly. There may also be penalties if the loan is repaid, or discharged early.

FIXED LOANS

A fixed interest rate loan allows the interest rate to be fixed for a period of time, typically between one and five years, and in some cases seven to fifteen years. At the end of the fixed term the loan generally reverts to the standard variable rate or you can, in most cases, choose to re-fix the loan for a further term. The main benefit of these types of loans is the certainty of the monthly payments during the fixed period as the interest rate will not vary from the rate it is fixed at. A disadvantage is that many lenders will not allow you to make extra repayments without incurring a penalty fee, or the extra payments are limited. If you do break the fixed term (to sell your home) whilst on a fixed interest rate, a penalty will generally apply, which can be costly.

INTRODUCTORY RATE LOANS

Introductory rate loans offers a substantially lower interest rate for a set introductory period of around six months to three years. After the initial term is completed, the interest rate generally reverts to the standard variable rate offered by the lender. The length of the introductory rate, the introductory interest rate itself and the interest rate you pay once the initial period ends, depends on the lender.

HONEYMOON RATE LOANS

A honeymoon rate loan offers a substantially lower interest rate for a set honeymoon period of around six months to three years. After the initial term is completed, the interest rate generally reverts to the standard variable rate offered by the lender. The length of the honeymoon rate, the introductory interest rate itself and the interest rate you pay once the initial period ends, depends on the lender.

LOW DOC LOANS

Low doc loans are designed specifically for self-employed borrowers who are not able to disclose their income. Borrowers can sign a form stating their income instead of providing tax returns or considerable financial statements. Low doc loans are offered as fully featured home loans or lines of credit but may be at a higher rate than standard loans.

EQUITY LOANS

Equity loans allow you to borrow money by using your home’s equity as the collateral. The home’s equity is the difference between the value of the property against what you owe on your existing home loan. The home equity loan allows you to use the funds for multiple uses including deposit for investment property, home improvement, weddings, holidays, or other types of expense.

BRIDGING LOANS

Bridging loans may be used to manage the transition between buying and selling properties. These are used when you are not able to sell your existing home before you’ve bought a new one, or while you are waiting for a new home to be built.

DEBT CONSOLIDATION LOANS

Debt consolidation loans are used to replace some or all of your debt with a single debt generally over a longer term and a much lower interest rate. A single regular payment is easier to manage. Consolidating debt into a home loan will generally result in lower repayments. However you should be aware that extending the length of the loan from the standard credit card or personal loan term of 5-11 years will dramatically increase the total amount you repay.

BAD CREDIT LOANS

Bad credit home loans are typically suited for people who have black marks on their credit file generally caused through default payments. Home loans can be offered in most cases from a non-conforming or specialist lender that can consider all situations.

PROFESSIONAL PACK LOANS

A professional pack loan is typically for loan sizes over $250,000. This product can save you certain fees and interest. Professional packages can also offer you many of the features offered by other loan types in one package, for example, you can ‘split’ your loan into one portion fixed, another variable, offering you the flexibility to use to your advantage and requirements.

CONSTRUCTION LOANS

A construction Loan is ideal for when you are planning to build a property, purchase land with the intention to build within 12 months, or make improvements to your current home. The funds available for construction will be drawn down progressively and will be paid directly to the builder so that only the interest on the funds used is charged.

SPLIT LOANS

A split loan combines the benefits of variable and fixed interest rates into a single home loan. It provides the ability to customise the loan and add features as required. The loan can be split multiple ways, for example 60% variable, 40% fixed.

INVESTMENT LOANS

Investment loans are typically Interest only loans and are popular with investors because they offer lower repayments and allow borrowers to maximise the tax benefits associated with an investment property through negative gearing. Unlike a principal and interest loan, repayments only cover the interest component. At the end of the loan term, the investor can choose to pay off the loan in full or refinance.

REFINANCING

Refinancing involves taking out a new loan to pay out your current loan. The most common reason for refinancing is to get a better deal with a different lender and put money back in your pocket. Other reasons include taking advantage of additional features offered by other lenders and loan types, debt consolidation and the ability to draw on equity in your current home.