LOAN TYPES
There are thousands of different home loans on the market, all with different rates, fees and features. The following might help you choose the type of loan that's best suited to your situation. The following briefly summarises the major home loan types:
- Standard Variable Rate
- Basic Variable Rate
- Fixed Rate
- Introductory Loans
- Combination or Split Rate
- No Deposit Home Loans (100%)
- 100% Offset Loans
- Lo-Docs Loans (including Non-Conforming Loans)
- Line of Credit / Home Equity Loans
Standard Variable Rate loans typically offer maximum flexibility and great features, including the option to fix or split your loan, the ability to make additional repayments, and the option to redraw these funds for any purpose when you need to.
Basic Variable Rate
Basic Variable Rate loans generally offer a lower interest rate, but with fewer features. However, you usually have the option to pay for additional flexibility and features when you need them (ie redraw).
Fixed Rate Loans
Fixed rate loans protect you against interest rate changes for an agreed time, so you have peace of mind knowing your repayments won't increase. However, you won't benefit if rates go down during the fixed term. Fixed Rates are generally less flexible with extra repayments limited and redraw usually not available.
Introductory Loans
The interest rate is usually low to attract borrowers. Also known as a honeymoon loan, this rate generally lasts only for 1 or 2 years before it rises. Rates can be fixed or capped. Most revert to the standard variable rate.
Combination or Split Rate
Combination or Split Rate loans combine the flexibility of a variable rate and the certainty of a fixed rate, so you benefit when rates drop, and are protected when they increase.
No Deposit Home Loans (100%)
A No deposit home loan allows you to borrow up to 100% of the purchase price whilst still providing a full range of home loan features. This type of loan is available for either owner occupied or investment, and is ideal if you have good cash flow but minimal or no equity.
100% Offset Loans
A 100% offset account is a savings account linked to a loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.