WHAT TYPES OF HOME LOANS ARE AVAILABLE?

VARIABLE (PRINCIPAL AND INTEREST) HOME LOANS

A Variable Rate home loan has in the past been the most common product among Australian borrowers. This product has the most features and advantages of all loan products giving it the most flexibility for your ongoing needs. However, on most occasions, you will pay a higher interest rate for this because of features that you may not necessarily need.

Best use is as part of a Professional Package wherein you can get access to all the features but still obtain a discounted interest rate.

BASE RATE HOME LOAN

The Base Rate Home loan is a no frills version of the Standard Variable Rate Home Loan.

The majority of the features offered under the Standard Variable Rate Home Loan have been reduced from this product which in turn reduces the interest rate payable by you.

> Although the features have been removed from this product, some of them are still available under the Base Rate Loan however a cost for using these features is generally incurred.

HONEYMOON LOANS

A honeymoon loan, or introductory rate home loan as it is sometimes called, is a product that offers a reduced interest rate for the initial period of the loan. The reduced rate may be for 3, 6 or 12 months at which time the product switches to the Standard Variable Rate Home Loan.

These loans are promoted by the lenders in an attempt to attract those clients that are sensitive to Interest Rates and base their loan decision solely on this. This product is not a preferred option as whilst you may get the benefit of a reduced interest rate of 1% for the first 12 months, you will then pay the standard variable rate for the remaining life of your loan.

Comparatively, having a Base Rate loan with a reduced interest rate of 0.5% for the life of the loan, can most times work out cheaper.

FIXED RATE HOME LOANS

A fixed Rate Home Loan allows the client to FIX their loan for a pre determined period of time up to 10 years.

When fixing a loan, you have a fixed repayment at a fixed interest rate for a fixed period. The target market for these loans is clients that are on a fixed income and want the certainty of knowing what their repayments will be for a certain period of time.

The disadvantages of these loans are that a lot of lenders will not allow lump sum reductions to your loan without incurring a penalty.

If lump sum repayments are permitted, they are usually capped to a certain amount.

Penalties also apply for paying out a Fixed Rate Loan prior to the expiry of the fixed rate period.

INTEREST ONLY LOANS

An Interest only loan is one in which you have a reduced repayment because you are paying interest only with the principle portion of your loan to be paid out at the end of the loan period.

These loans are predominately popular with investors in the residential property market due to the taxation benefits that they can sometimes attract.

INTEREST IN ADVANCE LOANS

An Interest in Advance Loan is another type of Fixed Rate loan in which the borrower pays a full twelve months' interest at drawdown of the facility. 

This product is used by property investors that are looking to bring next year's tax deductible interest payments into this year's tax considerations.

LINE OF CREDIT FACILITY

A Line of Credit Facility has become increasingly popular with Borrowers throughout Australia because of the continued flexibility it can bring to one’s financial situation.

Most borrowers with this facility have their entire wages paid into the loan and live off their credit card for their day to day living expenses. When the credit card payment is due, they simply redraw funds from the loan to pay out the card balance and then start again for the following month.

Whilst this can have many advantages, you need to be very disciplined in ensuring that your monthly credit card spend is less than your monthly income.

FOREIGN CURRENCY HOME LOANS

A Foreign Currency Home Loan is a flexible option for borrowers who have their main income streams outside of Australia.

Payments for these loans can be made quarterly or half yearly and the loans are available in US Dollars, Hong Kong Dollars, New Zealand Dollars, Great British Pounds, Singapore Dollars or Euro Currency. Normal loan assessment criteria applies.

A flexible option for borrowers who have their main income streams outside of Australia.

BRIDGING LOAN

A Bridging Loan is utilised for those borrowers who have an existing loan and need short term finance to purchase their new property prior to their existing one selling.

Sufficient equity is required in your existing property to enable access to this facility.

LOW DOC/NO DOC LOANS

Lo Doc and No Doc loans are predominately for the self employed borrower that for one reason or another, is unable to substantiate their income.

These loans only require a self declared income statement to be signed by the borrower in order for the lender to assess their application.

> Due to the higher risk nature of these facilities, they generally incur a greater interest rate and a larger percentage of equity contribution is required.

CREDIT IMPAIRED LOANS

Specialist lenders are available in today’s market to assist those people that have had past credit impairment.

The interest rate is determined by the level of credit impairment.

These loans also attract greater interest rates due to the greater risk associated with this type of lending.