Rate Types

Variable Rate Home Loan

The interest rate charged on a variable rate home loan is dependent on the official cash rate set by the Reserve Bank of Australia. As it is a variable rate loan, your interest rate will usually move up or down in accordance with general interest rate movements. A Basic Variable Rate Loan often carries less loan features than a Standard Variable Rate Loan and is best suited for homeowners looking to pay off a consistent amount over the full loan term, but not necessarily the best option if you are looking to pay off your mortgage quickly. Whilst variable rate loans can be the cheapest options on the market, they may not be the best fit for you. It is important to consider all home loan products first, before signing up to your loan.

Fixed Rate Home Loan

A Fixed Rate Loan is one that locks in a specific interest rate, ensuring your loan repayments remain the same. The time period of a fixed rate loan varies, however a general range is between 1 and 5 years. Although the fixed rate period may be 3 years, the total length of the loan itself could be 25 or 30 years. At the end of the fixed loan period you can decide whether to fix the loan again at current market rates, or convert the loan to a variable interest rate for the remaining time left of the loan.

Split Loan

You may choose to split your home loan rate, which means that one portion of your loan remains fixed, whilst the other portion becomes variable. A Split Loan allows you this flexibility and means you can make extra voluntary payments on the variable portion of the loan to help pay your loan off sooner, whilst being protected against interest rate rises on the fixed portion of the loan. With a Split Loan you are also in control of how much you select as your fixed and variable portions.

Interest Only Loan

When you take out an Interest Only Loan, you will only repay the interest on the principal during the term of the loan. Therefore your loan repayments will be lower than with a standard principal and interest loan. At the end of the interest only period, generally 1 to 5 years, you must start making principal and interest repayments for the remaining term of your loan.

Introductory Rate Home Loan

An Introductory Rate Loan offers a lower interest rate, usually to attract borrowers and is particularly popular with first homebuyers. Also known as a honeymoon rate, the introductory rate is offered at the beginning of the loan and generally lasts only for about 12 months, after which it reverts back to the standard variable rate.

Professional Package Loan

A Professional Package Loan can offer substantial discounts and special benefits, but is only available to those who meet specific criteria. The main criteria for most professional packages are that the home loan be in excess of $150,000. The benefits vary between lenders, but in general can include interest rate discounts of between 0.50 and 0.9 per cent for the life of the loan, lower fees and discounts on other bank products.

Deposit Bonds

A Deposit Bond or deposit guarantee acts as a substitute for cash and can be used when exchanging contracts and when purchasing at auctions. It gives you the freedom to concentrate on finding the right property and keeps your savings earning interest right up until the day of settlement. There are a few advantages when obtaining a Deposit Bond which include:

  • No need to break your fixed term investments, which may incur fees
  • Secure your new home without using your savings or bridging finance
  • Purchase with confidence at auctions and private sales

Line of Credit Loan

A Line of Credit Loan concentrates on the equity built up in your property and allows access to this equity as cash when funds are needed. Similar to a credit card, your lender will assign a credit limit against your home. As long as there is consistently more cash coming in than going out, a Line of Credit Loan can work well. Generally there is no set term and this type of loan can be suitable for home renovations or investment purposes. However, it can also be very costly as it usually attracts a higher interest rate and requires an interest only payment as a minimum each month, which can add up to a substantial amount of interest over the long term.

Low Deposit Loan

If you’re looking to buy your first home or upsizing to your next but don’t have enough for a deposit, a Low Deposit Loan could bring your purchase to within your means. With deposits starting from as little as 5% of the purchase price plus associated fees and charges, this type of loan is perfect for first homebuyers. To get started, you need to demonstrate a good savings history, that you can afford your repayments and have funds available (whether your personal savings, a gift from family or another source) to cover the transaction costs and a deposit bond, if required. If you are an eligible first homebuyer, we can help you apply for the Federal and State Government Grants to put towards your transaction costs.

Low Doc Home Loan

A Low Documentation (Low Doc) Home Loan refers to the amount of paperwork that is usually required when applying for a loan. With a growing number of self-employed workers, a Low Doc Loan allows you to obtain finance with little documentation, meaning you are not required to produce as many financial statements, tax returns and general paperwork as with other loans. However, compared to loans that require full documentation, a Low Doc Loan may mean a greater deposit is required, along with mortgage insurance to cover the risk of borrowing. Generally the interest rate will also be higher than compared to full doc loans.

Non-Conforming Loan

If you have previously struggled with credit rating, you may have had trouble securing a home loan. Many lenders now offer a Non-Conforming Loan, introduced specifically to assist borrowers with bad credit or a poor credit history. If you are in this situation, you can approach a lender that is willing to overlook your prior credit problems, however they will need to see evidence of your ability to repay the loan. Usually a Non-Conforming Loan also requires a larger deposit and possibly extra fees and charges.

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