Home Loan Types Available In Australia
Australians enjoy a competitive lending market with access to local and international banks, building societies, credit unions and an array of specialist lenders. Some of the home loan types available to Australian borrowers include variable rates, fixed rates, low deposit options and professional packages.
Choosing the right home loan type from this list of options will depend on your circumstances, interest rates, your chosen lender’s policy and your home finance goals. If you for instance want to pay off your home loan faster, then you may need to look into a mortgage management structure that incorporates a cheaper interest rate and extra repayments.
More product information on home loan types
Your local mortgage broker can help you determine which home loan type and mortgage management structure is suitable for your home finance goals. Simply call us on 13 LOAN (+61 2 9249 3739 direct line) or submit the form on this page and we will contact you within 2 business hours.
Standard Variable Home Loan
Standard Variable Home Loans are considered the most popular home loans in Australia becuase they are flexible with the added benefit of extra home loan features. The interest rate is also not locked in as it moves up and down over time, loosely in line with theReserve Bank of Australia’s interest rate fluctuations and market funding costs.
Basic Variable Home Loan
Basic Variable Rate Home Loans are sometimes referred to as ‘no frills’ loans and tend to offer a lower interest rate than Standard Variable Home Loans. However, Basic Variable Home Loans offer fewer features and less flexibility than standard variables. In general, if you require extra flexibility (such as a redraw facility) you may have to pay for it.
Fixed Rate Home Loan
The security of having set loan repayments irrespective of interest rate fluctuations is why some Australians opt for Fixed Rate Home Loans. Variable rate products are still more popular in Australia, but fixed rates are a useful home loan structure to consider. Fixed Rate Home Loans are based on a fixed rate for a set term, usually between six months and 10 years.
Combination or Split Home Loan
Combination or Split home loans offer security from potential rate rises by allowing borrowers to take part of their loan as a variable rate and the other as a fixed rate. While each part of the loan is treated separately when the loan contract is drawn up, the overall loan amount is still considered your “total”.
No Deposit -Low Deposit Home Loan
If you have good cash flow (a good income) but low equity (deposit), you may want to consider getting a home loan that requires only a small deposit. There are some loans available that enable eligible applicants to borrow up to 95% of the purchase price, with the deposit coming from a range of sources.
Introductory or Honeymoon Rate Home Loans
Introductory or Honeymoon rate home loans offer a low interest rate for an introductory period, usually for the first year. An introductory rate may be as much as one percentage point below the standard home loan rate and could be fixed or variable.
All-In-One Home Loan
If you are looking to decrease your interest charges by combining all your banking transactions with your home loan, then you should consider an All-In-One Home Loan. These Loans are essentially a transaction account and a home loan combined. They allow you to directly credit your salary or other income to the account and then withdraw your funds via ATM, EFTPOS, linked credit card or cheque book, as you need it.
Line of Credit/Equity Home Loans
Line of Credit (LOC), also known as Equity Lines or Revolving Credit, works more like a credit card and provides increased flexibility. The lender assigns you a credit limit secured against your property, and when you need cash you draw against that limit, usually by writing a cheque or using a special debit card.
Low Doc Loan
Typically used by the self-employed or borrowers with no financial reports, Low-Documentation (Low-doc) and No-Documentation (No-doc) Home Loans require very little or no documentation to get approval. Rather than produce payslips, tax returns or other proof of income, the lender would ask that you state your income – a process called self-verification. The requirements surrounding no and low doc loans are continuously changing so it is essential to check what you will need to supply prior to submitting an application.
Bridging Home Loan
Coordinating the sale of your current home with the purchase of a new property can be complex, and for some people the process creates considerable pressure. One way you can minimise pressure, including not being forced to sell your existing home at a lower price, is to use a Bridging Home Loan. This is a temporary loan providing financial cover which allows you to buy or build your new property before you sell your current home.
Non-conforming Home Loan
Qualifying for a home loan can be difficult, particularly if you are close to retirement, are a seasonal or contract worker, non-resident, small or no-deposit holder or have a bad credit history. If you fall under any of these categories, you may want to consider a Non-Conforming Home Loan.
Professional Package Product
If you are borrowing more than $150,000 you might be able to get a discounted interest rate with a Professional Package. The amount of the discount will usually be dependant on the loan amount – the bigger the loan amount, the bigger the discount.
Reverse Mortgages
Reverse mortgages allow retired home owners above a certain age borrow cash against the value of your home. No repayments are required during the term of the loan, instead the interest and other charges you would ordinarily pay are added to the loan balance, which becomes payable either by the estate of a deceased borrower, when the borrowers leave the property and move into care, or when the borrowers sell the property.
Construction Loans
A Construction Loan will usually help you purchase land and build a home, or construct a home on land already owned. Construction loans may also be taken out to effect extensive structural renovations on existing properties. The loan is drawn down in installments to pay the builder, and during construction the repayments are interest only, payable on the amount of loan that has been drawn down.
More information and home loan help
For more information on how and where to find a better home loan deal from an extensive panel of Australian banks and secure mortgage lenders, or to speak to your local area mortgage expert, contact us on 13 LOAN (direct +61 2 9249 3739)
