Choosing a home loan
Choosing a mortgage has become more and more difficult as the lending industry becomes increasingly competitive and complex.
Home loans are available in many different variations. There are introductory rates (AKA honeymoon rate), fixed and variable rates offered by hundreds of lenders. Repayment types with interest-only (I/O) or principal & interest (P&I). The fees and features offered by each lender differ and there is a multitude of variations available to suit your needs.
First-time buyers have to go into the process armed with the knowledge, in terms of repayments and features, of what will suit their circumstances. They should also know how to compare loans and where to look to get an overview of the market.
Your Home Loan Consultant has access to over 25 lenders and over a hundred different loan products to choose from.
Standard Variable Loan
Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.
- Lump-sum payments can be made without incurring a penalty.
- If interest rates fall, your repayments will fall.
- Often offer extra features.
- If interest rates rise your repayments will rise.
Basic Variable Loan
Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.
- Relatively low-interest rate.
- Lower repayments.
- Many of these loans do not have the same features or flexibility as other variable loans.
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.
- Reduced flexibility.
- Extra repayments may incur a fee or be limited.
Members of certain professions are as seen as favourable candidates for lending by some banks. As such these lenders may extend to you what is known as a professional package. This may include features such as reduced interest rates, no or reduced fees and so on. Typically this type of package was offered to doctors and the like but they are now more prevalent. You may find you are eligible for a professional package and it’s benefits. Talk to one of our consultants to find out.
100% Offset Loan Account
A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.
- Can save you a substantial amount of interest if used correctly.
- Operates like a normal transaction account and has a cheque book, ATM card, etc. attached.
- May have higher monthly fees attached to the account.
- May require a minimum balance in the account