Different Types of Home Loans and Their Explanations

Choosing to buy a house is an easy decision to make. However deciding on a suitable home loan is a different ball game altogether. When you begin the hunt for a good mortgage plan you will soon discover that Australia has a huge variety of home loans that can leave you feeling puzzled. In order to make it easier for you we have outlined the different types of home loans available, however its always easier to just give us a call and we can take you through this in much easier fashion.

Variable Rate Loans

If you are looking for a flexible loan with attractive features that can lower your interest rates then you should consider a variable rate loan. Selecting this home loan means that your repayments will vary at certain times. Also if you are not satisfied with your lender it gives you the option of switching to another lender without incurring a break fee. However, on the con side you are not protected from an increase in rates due to market forces. 

Fixed Rate Loans

Another favourite in the Australian mortgage market is the fixed rate loan. With this loan your interest rate is locked for a period of 1-5 years. This means that your repayments are not subjected to market forces. Therefore if you are on a budget or a first home buyer you will find this loan helpful. However you are charged an exit fee if you switch lenders during the fixed period.

Split Rate Loans

If you cannot decide between variable and fixed rate loans why not have both of them?

With split rate loans part of your home loan is set at a fixed rate while the other part is kept as a variable rate. This means you are protected from rising interest rates and at the same time you benefit from variable rate cuts.

Low Deposit Loans

If your savings are minimal  this is the loan for you, with just 5% deposit you can still purchase your dream home. However these loans have a lenders mortgage insurance on them, especially when your deposit is under 20%. This means that if you are unable to repay the loan the insurance will only cover the loss of the lender and not your own loss.

Interest Only Loans

If you are looking for a way to lessen the amount you repay monthly this loan is best for you. This type of loan allows you to pay only the interest on the loan for an average period of 5 years. After this period is over you will start paying both the principal and the interest.

Low Doc Home Loans

If you do not have all the documents to prove your income source then this home loan is perfect for you. The loan can either be variable or fixed and the rates are slightly higher however, if you make your repayments on time the rates can be reduced.

Conclusion

As you can see when it comes to the search for the perfect home loan a lot of choices are available. The best way to begin your search is by comparing the pros and cons of the loans before you make your choice.

However it is much easier to just give us a call and we can present you with the best options for your personal circumstances.