Types of Home Loans

Buying a home is one of the biggest and  most important decisions you’ll make in life. Buying property can be exciting and daunting at the same time, as there are so many types of home loans, all with different rates and features. It is vital that you always check the terms of your loans. Our role as your mortgage broker is to provide you with comparisons of options from a panel of lenders, and assist you with choosing the right loan for your circumstances.

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FIXED RATE

These loans are locked at a fixed rate for a specified period – usually one to five years. Repayments do not rise or fall with interest fluctuations throughout the specified period. These loans may have limited features and lack the flexibility of variable loans. There may be early exit fees and limited ability to make extra payments.

VARIABLE RATE LOANS

The standard variable rate loan offers more flexibility than a fixed rate loan. As the name suggests, your repayments will vary as interest rates fluctuate. The extra options available (eg redraw facility, the option to split between fixed and variable, extra repayments and portability) should be taken into account when choosing your type of variable loan.

PROFESSIONAL HOME LOAN PACKAGE

These loans are offered to provide an all-in-one home loan package, with transaction and credit cards included. They offer lower interest rate and fee savings on your home loan, credit card and transaction accounts. An annual fee of approximately $300 is usually applicable on these loans. Professional packages can also offer amazing flexibility, with some banks willing to waive product switching fees when changing from a variable to a fixed rate or converting a principal and interest type loan to an interest only loan.

BUILDING AND CONSTRUCTION LOANS

If you’re building a new home or planning major renovations to your existing home, a construction loan is generally the most appropriate funding option. The difference between a construction loan and other types of loans is that a construction loan is drawn down in stages and not paid as a lump sum. The draw downs enable the builder of a home to finance the various stages of the construction process, from the acquisition of land to the various stages of building.  It also means that you are not paying interest on the total of the loan, only the stages that have been drawn down.

SELF EMPLOYED

With changing work practices, more and more people are self employed, which can make looking for a loan not always easy. Taxable income declared by self-employed people is often reduced as accountants look for as many tax deductions as they can achieve. Self-employed people may also have irregular income.

Another problem is the sheer volume of paperwork the self-employed person must present to meet evidence requirements. They may need to provide a copy of their passbook or all statements of savings account(s) held with other banks or financial institutions over the last three months; tax agent income statements and income tax returns; profit and loss statements certified by a registered accountant for the past two years; memorandum and articles of association and copy of trust deed; copies of personal income tax returns and their most recent financial year’s Assessment Notice.

Take advantage of our comprehensive service. We fully explore and explain all loan options available to you.

LO DOC LOAN – SELF DECLARED INCOME

Contractors and the self-employed don’t always have the same financial structure or income patterns as PAYG earners, this means you may need the flexibility and convenience of our lo doc home loans. The greatest benefit to these types of loans is they provide non-traditional income earners, the opportunity to get into home ownership, or to take out a loan to upgrade. Being able to self-certify income for the loan approval application, rather than providing full financial details to the lender, will give you faster access to your loan plus greater flexibility without needing to go through your accountant.

DEBT CONSOLIDATION/REFINANCING

Debt consolidation is a process where all of your debts are rolled together into a single loan.

Debt from personal loans and credit cards can be incorporated into your mortgage, reducing your interest rate overall, therefore saving you money. Consolidation of your debt into your existing mortgage is most effective for larger amounts of money and should reduce the amount of your monthly payment. It also has the advantage of only having to make one payment per month.