Home Loans
Types of Home Loans
There are several different types of home loans and your Mortgage Broker will assist you in choosing the right one for your specific needs.
Fixed-Rate Home Loan
A fixed-rate simply means that the interest rate is guaranteed for a certain amount of time – commonly between 1 year to 5 years. The benefits of a fixed-rate loan are that you know what your repayments will be over a specific time frame and you can budget accordingly. The interest rate is not going to go up (or down)
over that period.
The disadvantage however is that fixed rates loans are not very flexible. There will be a limit to the amount extra you can pay off over the fixed term and fixed-rate loans rarely allow you to redraw any surplus funds or have an offset account.
The other thing to be aware of is that if you have to sell the property during the fixed-rate period, you may incur break costs which could run into the 1000’s of dollars Interest Only Home Loan An interest-only loan is where the borrower only has to pay the interest accrued each month on the loan, rather than paying down the principal balance. Usually, it is associated with investment properties in line with a strategy from the accountant or financial planner.
The benefits are that the repayment is reduced, thus freeing up cash for other purposes however, the principle will still need to be repaid and once the interest-only period is over you will be paying off the principal at higher repayments than you would if you started paying the principle off from the beginning.
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Variable Rate Home Loan
A variable rate means that the interest rate will rise and fall with the market over the period of your home loan. This can be in line with movements in the official cash rate by the Reserve Bank or it may be a decision by your financial institution to vary their rates.
The main advantage of a variable rate loan is flexibility. While you must meet your minimum monthly repayment, you can usually pay more if you want to. There is also no cost penalty if you decide to sell your property and move. You also generally can have access to an offset account, redraw or both.
The main disadvantage of a variable rate loan is that your minimum repayment amount may rise or fall at any time in line with either the Reserve Bank or a business decision by your financial institution. This can make it hard to plan especially for those on a tight budget.
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Split Home Loan
A split loan offers the best of both, offering the certainty of a fixed rate and the flexibility of a variable rate.
1.
Discuss your existing situation, your lending needs, requirements and obtain all necessary information pertaining to your lending application.
2.
Explain the types of loans available to you from a range of banks and specialist lending institutions.
3.
Based on the information provided by you and utilising specialist lending software, match your lending requirements to a selection of loan
products offered by a diverse range of lenders.
4.
Provide an overview of the relevant costs associated with your loan application.
5.
Provide an in-depth overview of the
loan product or products you select.
6.
Act as an intermediary between you and the lender by completing and packaging your loan application.
7.
Liaise with your solicitor, real estate agent, accountant and any other related party to ensure a smooth and timely settlement.
8.
Assist with any future lending requirements, whether you wish to check, change or top-up your loan.
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