There’s a huge choice of home loans available, but to find your right match you’ll need to do a bit of homework.
Making yourself familiar with a few of the popular products available will give you a strong head start when discussing your loan options with your broker. Here’s a summary of some of the product types you’re sure to come across. See below for more information!
Basic home loans
Basic home loans or ‘no frills’ loans offer borrowers a loan with a low interest rate. This interest and principal repayment loan is a popular choice among first home buyers. A basic home loan’s interest rate can be half to one per cent below the standard variable rate, which is sometimes combined with minimal ongoing fees. Potential drawbacks can include limited features, less flexibility, and additional charges if you decide to switch loans or pay the loan off sooner.
Standard variable-rate home loans
A popular mainstream choice, standard variable-rate interest and principal home loans allow you to borrow money for a set period of time, during which you make regular repayments. The interest rate can vary depending on fluctuations in the official cash rate, so it is likely to go up or down depending on the market cycle. These loans can be further discounted under lender professional packages that make them similar to the basic loan, but with more flexibility and features, for an annual fee.
Fixed-rate home loans
Worried about rising interest rates? A fixed-rate home loan will allow you to fix your interest rate for a specific period, usually from one to five years. It can be a sound option when interest rates are on the rise, or in times of economic uncertainty. Should interest rates plummet, however, you’ll still have to pay off your mortgage at the fixed-rate until the end of the agreed fixed-rate period. Additionally, keep in mind that you may be charged a fee commonly called a break cost or economic cost, should you decide to break your fixed term or switch to another product. You may also be limited in making extra repayments.
Split-rate home loans
Want the best of both worlds? A split-rate home loan offers both flexibility and security. A good product for both first time and existing borrowers, split loans allow you to customise your loan’s interest rate as you see fit: fixing a portion of your interest rate to give certainty to your monthly repayments during the fixed-rate term should rates increase, but also flexibility through taking out a variable-rate portion.
Interest-only home loans
Interest-only loans offer borrowers lower repayment options, while maintaining many of a traditional loan’s features. This type of loan allows you to pay only the interest component on a mortgage; it does not reduce the principal component. They are a popular choice for investors seeking good capital appreciation on their investments.
Low-doc home loans
If you’re self-employed, a contractor or a seasonal worker and do not have a regular income, a low-doc loan may be a solution.
Are you still confused? Don’t stress, that’s very normal. With over 10 years in the industry, SFE Loans is well equipped to help you decide. To get a clearer idea of which home loan is best suited to you, call us today!