Home Loan Types
Standard Variable Loan
A standard variable rate loan, is a variable loan that will go up and down with the economy. The rate is normally aligned with the Reserve Bank of Australia cash rate, then the Lenders add on their loan margin. This loan is one of the most popular home loan types because of its flexibility and features. You can often make extra repayments and have loan features such as redraw and 100% offset against a savings account or multiple offsets. You can lower your repayment as interest rates reduce, but repayments will go up when interest rates rise.
Basic Variable Loan
This is a variable rate loan, sometimes called a “No Frills” loan. It is a low variable rate, but offers limited features and flexibility. The interest rate is often lower than the standard variable rate loan. Often this loan cannot be split with other various loan types.
Fixed Rate Loan
A fixed rate loan gives you the certainty of knowing that your interest rate will not change during the term you have chosen. Generally, you can choose from 1-5 years fixed rates, some lenders allow you to make extra repayments into the loan. These amounts are then available for redraw, if required (conditions may apply). Many lenders have restrictions on paying extra into these loans and if you wish to break the fixed rate loan term early, there can be high penalties incurred. You may also pay a fixed rate lock in fee to secure your interest rate for 90 days.
Split / Combination Loan
A split loan is a home loan type that allows borrowers to have a combination of variable and fixed rate loans. This option appeals to a lot of First Home Buyers as they get the flexibility and certainty of a variable & fixed interest rate loan, offering the best of both worlds. The fixed rate allows you to know the set repayment amount (which helps when budgeting), and the variable rate loan allows you to pay extra whenever you have additional money.
Bridging finance is often required when a client wishes to purchase a property prior to selling their existing home. The interest on a bridging loan either needs to be paid monthly or can be capitalised / compounded onto the loan debt. A bridging loan will require equity in your existing home to obtain this finance. It is recommended that you obtain pre-approval for a bridging loan prior to purchasing your new home as there are strict requirements for this loan.
Guarantor / Family Pledge Loan
Often parents or relatives would like to help their family in purchasing a property. Sometimes this can be a “gifted deposit” of money and/or are willing to put up their property to help as a deposit towards the loan borrowings. This allows the loan borrower to potentially borrow up to 100% loan finance and avoid paying Lenders Mortgage Insurance (LMI). It is often a requirement from the lender that the guarantors have the loan papers signed with an independent legal representative (Lawyer / Solicitor)