When selecting a loan there are usually many different options and features to choose from. I can make the whole process simple by showing you which features and products will really benefit your situation, and which options you really don't need.
With variable loans your interest rate, and therefore your payments, move up and down with the Reserve Bank rate movements. They generally offer more flexibility but less certainty than fixed rate loan.
If you are thinking along the lines of "half variable/half fixed" make sure you ask my opinion before committing to that option.
Generally you can lock in a fixed rate for between 1 to 5 years. Fixed rate offer some level of certainty regarding repayments, and generally the trade-off is less flexibility in paying the loan off faster and redrawing those extra payments. There can also be penalties for paying a loan off early so you need to fully understand the product before you lock in your loan.
Interest Only vs Principal and Interest
With Principle and Interest loans the balance of the loan is reduced over time. This is the loan people generally use when their aim is to finally pay off the loan and own their property.
Interest Only loans are generally used by investors to leave the balance of their investment loan static while they pay off their home loan.
There are exceptions to these rules and either can be used for Investment or Owner Occupied loans. Which option we choose will depend on your objective that we will discuss when we set up your loan.
An Offset Account is similar to a transaction or savings account that is linked to your home loan. Money in this account offsets against your loan balance to reduce your interest, and this in turn can help you pay off the loan faster.
Extra Repayments and Redraw
These two go hand in hand because you generally have to make extra payments before you can redraw that money.
These are packages put together by lenders that combine features like an Offset account and credit card with your home loan. There is usually an annual fee associated with professional packages but this is not always the case with all lenders. Lenders also offer discounts off their interest rates depending on how much you borrow.
Generally medium to larger loans work better with Professional Packages because the interest savings make up for the costs involved.
These loans are not nearly as basic as they used to be and often have most of the features of the Standard Variable and Professional Package loans. Generally smaller borrowing amounts are better off with basic loans.
Line of Credit
When I was buying my first home these were all the rage. These days they are far less common but most lenders still offer them as a choice. Sometimes they have slightly higher rates compared to standard loans and usually we can achieve the clients objectives with an offset account. But they are still available if needed.
Low Doc Loans
Low Doc loans have changed substantially in recent years. In the past Low Doc loans had an income declaration as their sole documentation of a client's income. These days lenders usually ask for some other form of indication of a client's income that may include sighting BAS statements or bank statements. You would probably call them semi Low Doc these days. If you are looking at a Low Doc option please feel free to contact me and we can work through your options.
These loans involve a family member providing additional security over the loan. Generally they are used for parents helping their children get into the real estate market, but they do have other uses.
Using another family members home as security allows you to get a loan with less deposit and usually means you can get a loan without having to pay mortgage insurance.