Home Loan Products
Which Loan Suits You?
The following loan types are available for both residential
owner-occupiers and investors:
Variable rate loans
The Cash Rate set by the Reserve Bank of Australia. Two common
types of variable rates offered by lenders are:
Basic Variable - the budget choice:
This loan has a low rate with limited features or flexibility.
It gives you an ongoing lower rate with the option to use limited
features for a fee when you need them. This is ideal for borrowers
who are unlikely to use features.
Standard Variable Rate Loans - when flexibility is the key
Take advantage of the features and flexibility of a loan that
has all the "bells and whistles" such as flexible repayments
Tip: Review whether the
additional features are really beneficial to you, including
the interest rate discounts, as the cost of these loans can
be higher than a basic variable.
Fixed Rate Mortgages - lock in security
Play it safe by knowing exactly what your interest rate and
repayments will be for the fixed rate term which can be from
1 year to 5 years. Some lenders offer longer terms.
A fixed rate loan may suit you if you:
When the term concludes, the loan usually reverts to a standard
variable rate and you may have the option to roll the loan over
into another fixed term. If you pay out the loan during the
fixed rate period, it is important to note that you may incur
"break costs", which means you will be charged the economic
cost to the lender if rates drop for the remaining term of the
- are on a limited income
- need the security of knowing that even if interest rates
rise, your repayments will remain the same
- have the peace of mind in having a consistent repayment
: Note that the fixed
rate offered may vary at the time of settlement of your loan.
Check the "rate lock" options that some lenders offer if you
want to fix the rate at the time of your application.
Take advantage of a lower interest rates for an initial period
giving you a head start. These rates can be variable or fixed
with the most common term being for 12 months. These loans usually
roll over into a Standard Variable Rate.
Tip : Set your repayments
at the ongoing roll-over rate so that there is no adjustment
when the loan does roll over. The extra payments are principal
repayments which reduce your loan in the first year and save
you interest in the following years.
Line of Credit
A flexible interest only variable rate loan giving you all the
freedom you need, including salary crediting, atm access and
a credit card attached to the account. This loan is frequently
used to assist in minimising interest costs and is an interest
only loan. You decide when you will use the available credit
and you are only charged when you use the credit.
Tip : This loan can work
well for disciplined borrowers. It does not work well for
borrowers on a limited income who may find it difficult to
pay the loan off or those who have difficulty controlling
Because you combine your mortgage with your banking, your money
not only works more effectively, it also makes managing your
finances simple. This style of loan is similar to a Standard
Variable Rate Loan with a transaction account bundled together.
Income from wages and salaries, investment and rental income
is directly credited to the one loan account. Expenses are credited
from the account using ATM, cheque books, direct debits and
credit cards. Unlike a Line of Credit (see above) which maintains
an approved credit limit, this is an amortising
loan, meaning that the principal amount of the loan will be
paid off over the loan term.
By using the equity in your property, you can raise a loan for
any worthwhile purpose at residential rates rather than the
higher personal loan rates. Examples are to buy a new car, pay
for your children's education or for investment purposes such
as purchasing shares or financing an investment property.
Try to set up the
repayments over a shorter term so that you are not paying
for that new car for the next 20 years.
Manage your interest rate risk by splitting your mortgage into
two or three different types of mortgages and terms.
Choose a combination of products that best suit your needs.