Standard Variable rate
Standard variable loan is Australia's most popular loan. It offers the greatest choice across the home loan market and full repayment flexibility. There are a great number of features which a standard variable home loan can offer including repayment options, redraw, offset, variable repayment schedules and portability. However more features mean you might have to pay more fees compared to a basic variable loan.
Basic Variable
Basic variable loan is a simple easy to manage home loan with a low ongoing variable rate. If you don't need the bell and whistles that comes with many loans, then this is the loan for you. In return for a lower rate, basic home loans have few features when you need them. There may also fees and charges if you decide to switch loans or lenders, or pay off the loan sooner.
Fixed rate
A Fixed rate Loan is a loan where the interest rate is guaranteed not to change for a specified period, usually 1 to 5 years. At the end of the term, the loan will revert to a standard variable rate or you can re-fix the loan. By locking in your home loan, you are protected against any rate rise which means your monthly repayment will remain the same throughout the fixed term. However, you won't benefit if rates fall during the fixed period. Fixed loans are not as flexible as a variable with few features and are expensive to break and can attract a slightly higher interest rate.
Offset loan
The ultimate offset account is a versatile all-in-one home loan transaction facility that offers variable interest, is free from transaction fees, and gives you the opportunity to offset your income and savings against your home loan balance. The 100% offset account operates like a transaction account and typically has a cheque facility and a cash card. The interest savings on 100% offset accounts are higher than you would get on other savings and transaction accounts. Any extra money in your transaction account saves you interest on your loan, thus shortening the term of your loan.
Combination or split home loans
A combination or split home loan allows you to split your home loan into two or more portions and specify what percentage of your home loan is allocated to each product, usually a variable loan and a fixed loan. The portions are assessed together as a single total for approval and serviceability, but each part is treated as a separate loan for documentation purposes. Having part of the loan at variable and fixed rates can provide peace of mind. You can manage the variable portion as you would normally.
Construction Loan
Construction loans are really a version of a standard home loan which rolls out in stages as the different phases of your land purchase and house construction unfold. While you can readily get a loan for land purchase alone, if you are buying land with a view to construction and require funds for the land purchase, most lenders will try to set up the entire approval process for you from the outset.Your borrowing options are pretty much as broad as the home loan options available and your choices will naturally be driven by your personal situation.
Line of credit
Line of credit (LOC) or equity loans are secured by a registered mortgage over a residential property. These loans provide access to funds, when required, up to the original limit set. Normally, the minimum repayment required is the monthly interest only. Some lenders require that principal reductions begin to be made after a certain period of time.
Low Documentation
On a standard loan, you are required to show satisfactory evidence of income to prove serviceability of the loan amount you are applying for. However, if you are self employed and you may not be able to provide a full set of financials such as tax return at the time of applying for the loan. Therefore, depending on your circumstances and requirements, you may be able to apply for a Low Documentation Loan.
Low doc home loans have changed dramatically over recent times and there are now a variety of low doc home loan options available. We have highlighted some of these for you below:
- High lend low doc home loan up to 90% LVR
- Low doc home loan for investment purposes
- Low doc home loans for borrowers with credit impairment
Bridging
A bridging loan is designed to provide short-term finance for residential purposes. It is typically used by owner occupied purchasing a new home with the intention of selling their existing home shortly thereafter.
Trying to co-ordinate the sale of your existing home with the purchase of a new property can be difficult. If you can't achieve simultaneous settlement, bridging loans are often used to cover a finance gap between the purchase of a new property and the sale of an old property.
Many lenders offer bridging loans at standard home loan interest rates and sometimes even with the ability to capitalise interest until you sell. You do need to be very careful with the size of debt and cost of these kinds of loans, but they certainly do give you the flexibility to buy your new property before you have sold your existing one.
Reverse Mortgage
A reverse mortgage is a variable rate loan specifically designed to assist people 60 years or over who own their home but have little cash for everyday living or things such as home renovations, an overseas holiday or a new car.
The loan is secured against their owner occupied property and no regular repayments are required as long as borrowers live in the home. Because the amount you have borrowed and any interest and fees are capitalised back into your equity. This means that instead of making monthly repayments, they are simply added to your equity release total. The final amount does not have to be repaid until one of the three events listed below occurs (whichever occurs first):
- Repayment is deferred until all borrowers die.
- The property is sold.
- Borrowers are no longer living in the house.
