HOME LOAN SUMMARY
standard variable loan
This is the traditional style of home loan in which the interest rate is variable, meaning it can be lowered or raised by the lender at their discretion. The rate changes normally reflect changes in the market and official rates set by the Reserve Bank. The borrower can usually make additional payments with this type of loan without penalty and can often obtain offset and fee free accounts.
Notes: Suitable for all types of borrowers. Receives other benefits that may be available from the lenders. Borrow up to 100% of the property value.
basic or no frills variable loan
This is the similar to the above loan in which the interest rate is variable, however the loan is at a lower rate than the standard variable rate. The borrower can usually make additional payments with this type of loan without penalty. Basic loans have little in the way of added features or flexibility.
Notes: Suitable for all types of borrowers requiring the lowest rate. Receives little other benefits from lenders. Borrow up to 100% of the property value.
fixed rate loan
The institution lends funds at a set interest rate for a specific period. If rates rise, your investment is protected; however, if they drop, you are paying interest at a higher rate. These loans generally have penalties attached if the borrower wants to make extra payments or repay them in full.
Notes: Suitable if you want security to know what your repayments will be in the future. Borrow up to 100% of the property value.
split or combination loan
This is ideal if you want to bet each way. By splitting the loan, the borrower can set a portion at a fixed rate and the remaining portion at a variable. In this way, you are hedging your bets both ways as you get flexibility while maintaining security.
Notes: It is good for people who want to average out their rate. It makes a lot of sense if you think interest rates may rise. Borrow up to 100% of the property value.
honeymoon / introductory rates
The lender offers a lower interest rate, usually for a set time such as 12 months, to get the borrower in the door. However, after the honeymoon period is over, the rate usually reverts to the standard variable rate.
Notes: People who want a lower start-out rate and pay off as much of their loan as possible in the first 12 months. Borrow up to 100% of the property value.
construction loans
Some lenders are unable to complete construction loans on their normal products as above and so have a specific loan designed for construction only. Usually a standard variable rate with the ability to switch to the desired loan on completion of the home.
Notes: People who want to build a home with a specific lender and are unable to choose the required loan initially. Borrow up to 100% of the property value.
loan packages
This is where a lender will offer you interest rate and fee discounts if you borrow over a certain amount with them (or are in a higher income bracket or in a professional occupation) with minimum loan amounts varying from $150,000 to $250,000 plus. They provide a discount off the standard variable rate from 0.20% to 0.70% depending on the amount you borrow and often provide accounts and credit cards without any fees in conjunction with this discount. They can give you the benefits of significant interest and fee savings if you are borrowing larger amounts.
Notes: It is a good loan for borrowers who are looking at larger loans for either their own or investment homes and also intend having their accounts and credit cards with the same lender. Borrow up to 100% of the property value.
line of credit / home equity / all-in-one
This is where you have the one loan/savings/transaction account into which all your money is paid. Your salary goes into this account, reducing the loan for the time it is in there and reducing the interest and loan term. You can have access to the original amount borrowed at all times. Taking it one step further you can pay for daily purchases on a credit card, leaving your whole salary on the loan for 55 days.
Notes: This is for the disciplined borrower. Borrow up to 80%-90% of the property value. Great for access to the equity in your home.
100% interest offset
This is similar to the all-in-one account, but there are actually two accounts. The interest earned in the second account is offset against your mortgage account. A 100% offset account is where you earn the same rate of interest as you pay on your loan and it is tax free. The 100% offset account has the effect of all your savings sitting in your loan and so reducing the interest and loan term. You can also use the credit card in the same manner as above.
Notes: It is a good loan for borrowers who are good at saving money. If you have savings sitting in an account, it may as well be in an offset account. Borrow up to 100% of the property value.
non conforming / credit impaired
These are lenders that specialise in clients that do not fit ‘normal' lending criteria due to past credit problems, job history, casual employment, previous bankruptcy and start up business. Generally a higher interest rate based on the risk.
Notes: Generally for borrowers that do not fit the traditional mould. Borrow between 70% to 100% of the property value.
low / no documentation loans
The Lender offers finance with no proof of income. This is usually restricted to self employed borrowers and not all lenders offer this facility. It is usually a higher rate than the standard variable, but this does vary depending on the lender.
Notes: Generally for self employed that have difficulty providing tax returns. Borrow between 65% to 95% of the property value.
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