Types of Home Loans

In today's growing market of mortgage products, it is important to understand what it is you are getting into, not only for today, but for your future. Set out below are general descriptions of some of the more common loan products. For more information on the right loan for you, talk to a mortgage broker .

Standard variable rate home loans

Standard variable rate home loans are the most popular type of loan in Australia because of their flexibility. The interest rate applied to a standard variable rate loan fluctuates over time depending on the official Reserve Bank interest rate and your bank’s interest rate settings.

Fixed rate home loans

Fixed rate home loans are where the interest rate and loan repayments are fixed for a set term, usually between six months and 10 years. If you require certainty of repayments, a fixed rate loan will suit you. At the end of a fixed term the loan will roll over into a standard variable rate home loan, unless you have negotiated something different with your bank.

Introductory or honeymoon rate home loans

Introductory or honeymoon rate home loans provide you with a percentage off the standard variable interest rate for a set period of time, usually one year. After this period the loan will usually revert to a standard variable rate home loan. Introductory rates are among the lowest available and are often used by first home buyers.

No deposit home loans – 100% home loans

Most loans require a deposit of five per cent or more. No deposit or 100 per cent home loans, however, remove the need to save for a deposit by providing you with 100 per cent of the purchase price of the property. Although no deposit loans are unavailable in the current economic climate, when they do make a return, first home buyers and people re-entering the property market will find this loan useful. A 95 per cent loan with Lenders Mortgage Insurance capitalised into the loan will also be suitable if you have a small deposit.

Combination or split home loans

Combination or split home loans enable you to take part of your loan as a variable rate loan and the remaining portion as a fixed rate loan. Use this loan to take advantage of the flexibility of variable rate loans and the certainty of fixed rate loans. Combination/split loans are ideal if you want some repayment certainty but the also the option to make additional repayments to reduce your loan balance.

Line of credit/equity loans

A line of credit or revolving credit home loan, also known as an equity loan, is a loan facility secured by a residential property, which allows you to withdraw funds up to a set limit at any time. Generally a line of credit is an interest-only loan, and in some cases you may be able to capitalise the interest payments. Investors often use this type of loan, particularly when expanding a property portfolio. Interest rates are usually higher than for a standard variable home loan.

Low documentation and no documentation loans

Low Documentation, or Low Doc, home loans require very little or no income documentation to secure approval. The less documentation you provide, the higher the interest rate on the loan is likely to be. They are ideal for self-employed borrowers.

Non-conforming loans

Non-conforming home loans are designed to meet the needs of borrowers who do not meet the criteria of mainstream lenders, including those who are credit-impaired, older borrowers, new residents and seasonal or casual workers.

More Information on Loan Market home loans

For more information on home finance in your best interest, simply fill in a contact form and we will have a home finance broker in contact with you within two business hours. Alternatively, call us at any time on 13LOAN or for overseas callers +61 2 90188417.