Standard Variable Loan • Basic Variable Loan • Intro Rate 'Honeymoon' Loan • Fixed Rate Loan • 100% Offset Loan Account • Line of Credit Loan • Low-Doc & Credit Impaired Loans • Construction Loans
Standard Variable Loan
Standard variable loans are Australia's most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.
Advantages:
- Flexibility
- Lump-sum payments can be made without incurring a penalty
- If interest rates fall, your repayments will fall
- Often offer extra features
Disadvantages:
- If interest rates rise your repayments will rise
Basic Variable Loan
Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.
Advantages:
- Relatively low interest rate
- Lower repayments
Disadvantages:
- Many of these loans do not have the same features or flexibility as other variable loans
Fixed Rate Loan
Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won't rise. However you won't benefit if rates go down during the fixed term.
Advantages:
- Guaranteed rate, if interest rates rise your repayments won't
Disadvantages:
- Reduced flexibility
- Extra repayments may incur a fee or be limited
100% Offset Loan Account
A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% 'offset' against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.
Advantages:
- Can save you substantial amount of interest if used correctly
- Operates like a normal transaction account and has a chequebook, ATM card, etc. attached
Disadvantages:
- May have higher monthly fees attached to the account
- May require a minimum balance in the account
Line of Credit Loan
A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only.
Advantages:
- You can use the money when you need it and pay it back when you can
- Rates are generally lower than a personal loan or credit card
Disadvantages:
- Unless care is shown it is possible to reduce the equity you have built in your home
Low-Doc & Credit Impaired Loans
A low documentation (or no documentation) loan is suited to investors or self-employed borrowers who do not meet the 'standard' lending criteria. This may include; those with an impaired credit history, those who are unable to provide the required documentation in support of their loan application, or those who wish to borrow more than 100% of the property value.
Advantages:
- Simple income declaration form
- No tax returns
- No financial statements
- Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only
Disadvantages:
- Generally a higher interest rate