Your home loan will most likely be the biggest financial transaction you undertake in your lifetime so it makes sense to get some help from a professional mortgage adviser.

Home loans refer to loans which use residential property as security. There are hundreds of different types of home loans avaialable in the market from dozens of different lenders. It is our job to help guide you through the maze and find the home loan which suits your needs best.

Before deciding on a home loan consider some of the following?

• Do you want to make extra repayments?
• Do you  want to access those additional repayments?
• Are you eligible for an interest rate discount?

Some of the more common types of home loans are:

 Standard Variable Rate Loan

 A home loan which requires you to make regular monthly, fortnightly or weekly repayments which will reduce the loan balance and pay it off over the termof the loan (usually 25 or 30 years). Standard Variable Rate loans are usually the most flexible in terms of redraw. They are one of the most expensive types of loans and are usually sold as part of a professional package which discounts the interest rate.

Professional Package

 A professional package is the name given by the banks to a bundle of products which usually includes a loan, credit card and transaction account. Professional packages offer a discount off the interest rate in return for an annual fee. In most cases the bigger the loan the bigger the interest rate discount.

Basic Loan

 Basic Loans are generally Standard loans offered at a slightly lower interest rate. They are, as the name implies a “basic” or no frills product and not as flexible as standard loans with of the additional features such as redraw not available.

Fixed Rate Loan

A fixed rate loan means that the interest rate is set for a pre determined period (usually between 1 & 5 years). This means your rate and repayments will stay the same and will not move up or down if the lender changes their interest rates. Fixed rates do offer a level of security against rate rises but are generally quite inflexible and you will usually be hit with large penalties if you want to pay out your loan early or break the fixed rate period.

Honeymoon or Introductory Loan

 An introductory or honeymoon rate loan is generally promoted by lenders to attract interest rate sensitive customers. They generally have the same features as a standard rate but offer a low interest rate for a set period of time (usually 1 - 3 years) after which the interest rate will revert to the lenders Standard Variable Rate. Borrowers need to consider both the initial rate and the rate to which the loan will revert and compare this against the other Standard Rates in the market before making a decision as introductory or honeymoon loans can often end up more expensive in the long run than other products

 Line of Credit

 Most Line of Credit Loans are interest only . They are only available in with a variable interest rate. They offer you a high level of flexibility but you need to be budget conscious to operate these types of loans. If you are unable to budget or have a tendency to spend any money available then this may not be the loan for you.

 Bridging Loans

 Essentially a standard loan for people who wish to buy a new home before they have sold their old home. The lender will take both the old and new homes as security for the loan and reduce the loan once you have sold your old home.

Mortgage Reduction Programs

Mortgage Reduction Programs are run using a line of credit account  combined with a credit card. The idea being that you deposit all of your income into the loan account to minimise the amount of interest payable each month. You then use the credit card for all of your expenses and then once a month your credit card is automatically paid from your loan account. For people who are disciplined and who can afford to pay large amounts into the loan this can be an excellent way of minimising the amount of interest you pay on your loan and quickly reduce the term of your loan. For many people, however the temptation to spend more than you earn is available and it may end up as an expensive exercise since Mortgage Reduction Programs are generally sold at a higher rate than standard loans.

 

For more information or to make an appointment contact us today.