What type of home loan would suit me?
When selecting a home loan, it’s important to consider what your individual needs not just the interest rate. Fortunately you have a wide range of homes loans to choose from and all with different interest rates, product features and fee’s. It pays to shop around and find the right loan that suits your needs and circumstances.
The better the fit – the happier you will be and it could also result in more savings over the life of the loan.
Some features you should consider include:
- Should I split my home loan – for example my home loan amount is $300,000 and I would like 1 portion of $150,000 fixed and another $150,000 portion variable
- Ability to make additional repayments above my interest
- An offset account or a redraw facility
- Linked savings account or credit card facility
What type of home loans are available?
Fixed Rate Home Loan
Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However you won’t benefit if rates go down during the fixed term.
- Guaranteed rate, if interest rates rise your repayments won’t
- Enables you to budget more effectively because you know exactly how much your monthly repayment is per month
- Reduced flexibility as you might be charged if you leave within the fixed rate timeframe
- Extra repayments may incur a fee or be limited
Variable Home Loan
The rate charged on a variable home loan moves up or down according to the reserve banks decisions, it is subject to change from time to time.
- Repayments decrease when the official interest rates a decreased
- Often standard variable loans offer you more flexibility and product features
- Allows the customer to move around to different lenders without a penalty for breaking a fixed contract
- Your repayments will increase when the official interest rates increase
- Usually the standard variable product rates are slightly higher because you have access to more features
Interest Only Home Loans
Means that you pay only the interest amount her repayment cycle and you are not paying your loan balance down. Lenders generally offer interest only periods for 1 – 5 years and after the period ends your loan will automatically change to principle and interest.
- Allows you to pay the minimum amount and you can make additional repayments at your leisure
- Reduces your repayment amount
- You are not decreasing your home loan balance for the interest only period
- Increase in repayments at the end of the interest only period
Line of Credit Home Loan
Allows you to utilize the equity in your existing property and access your funds when needed without getting another loan approval. Property investors find these sorts of facilities useful as it allows for easy access to their funds up to a pre-arranged limit. This facility allows the customer to not make regular repayments as the balance can be reduced by the repayments.
Self-employed customers also find these types of products useful especially those with irregular income deposits.
- Offers you flexibility with your repayments
- Allows you to access funds quickly and without a second approval process
- If not managed correctly the product can reduce you’re the equity in your property
- In some cases the interest rate can be higher to compensate for the flexibility
Low-Doc Home Loans
Are usually catered towards investors or self-employed borrowers as in some cases the income from the income derived from these types of employment can be difficult to evidence.
- Income evidence in minimal and your full financials are not required for the approval
- Access to normal products and features
- In some cases the interest rate can be higher than that of a full documentation loan
Is a loan that assists borrowers who have a poor credit rating to obtain a home loan approval. It allows a borrower to re-enter the market for whatever specific reason – in most cases these types of loans can be refinanced into a normal conforming loan at a later date.
- Assists clients who would not normally be eligible for a home loan
- Higher interest rate compared to a conforming home loan
Contact First Choice Mortgage Brokers on 1800 111 455 for more information on which loan suits you.