Standard variable loans
Find out moreThis is Australia's most popular type of home loan. The interest rate can vary through out the term of the loan normally reflecting movement in the official interest rate set by the Reserve Bank of Australia. Loan term is usually around 25 to 30 years. Standard variable loans usual come with a range of features to help either repay your loan faster or give access to additional funds over the life of the loan.
- If interest rates fall, your repayments will also fall
- If you fully utilise the products features you can pay off you loan sooner with considerable savings
- If interest rates rise you will have to make higher repayments
- You may be paying for features and options that you don't use.
Basic variable loans
Find out moreBasic variable rate loans are the same as 'standard variable loans' but generally do not have any features the interest rate can vary throughout the life of the loan generally tracking the movement of the interest rates set by the Reserve Bank of Australia. The loan term is generally 25 or 30 years.
- Generally a lower interest rate than 'Standard Variable Loans'
- Repayments are usually lower than standard variable loans
- If interest rates drop repayments might drop
- If interest rates rise repayments might rise
Introductory/ honeymoon loans
Find out moreThese loans carry significantly discounted interest rates for a short period at the beginning of the loan, usually between 6 and 12 months. They are available with a fixed or variable rate and will normally revert to this rate when the 'honeymoon' period expires.
- Payments during the introductory period are much lower By making extra repayments during the introductory period you may be able to significantly reduce the life of the loan and total repayments If you are setting up a home the initial repayment saving may be better spent on the house itself (eg. new furniture).
- Payments will increase when the introductory period ends. Early repayment and exit fees may be higher affecting your ability to reduce your total repayments or the life of the loan You may be restricted to limited features and not have some that would usually be available with a 'standard variable loan' when the interest rate reverts.
Find out moreThe interest rate is fixed for a predetermined period - which can be anywhere between one and 10 years. Monthly repayments will remain the same for the duration of this period. They typically revert to a standard variable rate when the fixed period expires allowing you to choose whether to stay with a variable rate or fixing the interest rate for another period.
- Your monthly repayments will stay the same for the fixed period allowing you to budget more accurately
- If interest rates go higher than your fixed rate you will be paying less than someone with a variable rate mortgage.
- If interest rates fall during the fixed period you may end up paying more than someone with a variable rate mortgage
- May have higher exit fees
- May not allow extra repayments
Line of credit
Find out moreLine of credit is an interest only loan that is typically secured against equity in your property. This type of loan gives you the flexibility to move money in and out of your loan account as if it were a saving account or an overdraft. For this reason these loans are very popular with property investors and business owners.
- You can use the money as you need it with little notice
- It has no set term, so you can keep the loan indefinitely
- Interest rates tend to be lower than for commercial/ business loans, credit cards or personal loans
- Credit limits are usually higher than for credit cards or personal loans
- If used with great discipline you can save considerable amounts of interest compared to standard 'P & I' home loan repayments.
- It's possible to reduce the equity you have built up in your home
- If you are not disciplined in setting and meeting your budgets you may pay considerably more interest compared to standard 'P & I' home loan repayments.
Equity based loans
Find out moreThese are relatively new types of product to Australia in which a lender will take some stake in the equity of your property in return for either a reduced mortgage rate or allowing you to borrow more funds. The two main products in Australia at the moment are called Shared Appreciation Mortgage (SAM), or an Equity Finance Mortgage (EFM).
- You may be able to buy property sooner than if you had to save for a larger deposit
- Can allow you to buy a more expensive property than you might normally be able to afford
- If your property grows considerably in value you will not get all the benefits of the increase in equity
- If your property goes down in value you may be liable for the short fall in equity.
Find out moreProfessional Package (Pro pack) home loans generally offer a heavily discounted interest rate for taking a range of other banking products with a lender. These might include credit cards, savings accounts, the ability to switch between fixed and variable rates.
- Discounted interest rates
- Reduced fees on other banking products and services
- Convenience of all your banking 'under one roof'
- If you're not using the other products and services included with the Pro Pack the savings you make with the discounted rates may be offset by the annual fees.
- By banking with one lender you may not be able to take advantage of other lenders' products