home loans - choosing a Home Loan - answers to common questions

 1. What are the different home loan options available to me?

Many people are surprised to learn that there are literally thousands of home loan products available. Australia's lending market is very competitive with a seemingly endless choice of home loans available from local and international banks, building societies, credit unions and specialist lenders. Depending on what is most appropriate for you and your borrowing power you can choice from Standard variable loans, Basic variable loans, Discount Variable/Honeymoon, also known as Introductory loans, Fixed rate loans, Combination/ Split loans, Line of Credit/Equity Loans, Low Documentation loans, No Documentation loans, Non-conforming Home Loans and No deposit Home loans. more about home loan options

 2. What is Variable Interest loan?

The interest rate on this loan moves up and down in line with the market interest rate fluctuations. This means that through the course of your loan the interest rate will vary in line with market rates. Different lenders offer different features and rates on a standard variable loan depending on amount borrowed. This is the most flexible loan available in the market.  more about variable interest rate home loans

 3. What is fixed interest rate home loans?

As the name suggests fixed rate loans are where the borrower's repayments are fixed term, normally 3 - 5 years. These loans commonly revert to the standard variable rate at the time the fixed- rate period has expired, unless "rolled over" for another fixed-rate term. This loan gives you certainty of repayment amounts even if the interest rate fluctuates. A fixed interest rate loan does however reduce your flexibility and generally has exit fees for early termination, but is great for certainty of payment amounts and budgeting. more about fixed interest rate home loans

 4. What are combination/split loans?

This kind of loan is a combination of both the fixed and variable interest rate loans. Split loans allow borrowers to take part of their loan at variable interest and the other part as fixed-rate interest. While the overall loan amount is considered "a total", each part is treated separately for loan contract purposes. This loan offers borrowers a chance to hedge their bets in times of rising interest rates and gives a blend of repayment flexibility and interest rate security. The variable rate allows you to repay extra or redraw some of the loan, and the fixed rate amount allows you to make predictable payments. more about combination and split loans

 5. What are Honeymoon/ Introductory loans?

Honeymoon loans are variable rate loans with a discounted interest rate off the standard variable rate (commonly 1%), lasting a certain period of time, usually a year. After this period, they normally revert back to standard variable rates. more about honeymoon and introductory home loans

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 6. Are Honeymoon rates good Value?

Rates on the loan are fixed or capped depending on the lenders. These loans are among the lowest rates available in the market and additional repayments made during introductory rates can reduce principal and save significant interest, so in that sense they are certainly good value. Repayments do of course increase after the introductory period, normally reverting to the standard variable rate.  Bear in mind that Lenders can only offer cheap interest rates by limiting your options which of course gives you less flexibility. more about the value of honeymoon and introductory home loans

 7. What is a Home Equity Loan?

Line of credit or home equity loans allow borrowers to borrow up to a specified limit which is secured by a registered mortgage over a residential property. These loans provide access to funds, when required, up to the limit set. Normally, the minimum repayment required is the monthly interest only. Some lenders require that principal reductions begin to be made after a certain period of time. These loans can be used for pretty much anything. They are a creative way to generate funds for investment purposes, funding businesses, other properties, loans to children to help them buy property, etc. more about home equity loans

 8. What are 100% Home Loans?

If you haven't got deposit, but have a good income, you can often borrow 100% of the purchase price provided you have some money saved for all the legal and transfer fees, stamp duty, insurance and other initial costs. In the no deposit or 100% home loan category, you may well get a loan, but there is less choice in terms of products. more about 100% home loans

 9. Are Up to 95% Home loans suitable for me?

Provided you can make the payments, you can typically finance up to 95% of the property value from a lender on their normal competitive terms. A lot of lenders these days are willing to lend you 95% of the property value on their normal competitive terms. Some may then offer to add the mortgage insurance costs to your loan as well, therefore lending you up to 97% of the property value. With the cost of real estate these days, it is not unusual for 1st home buyers to have less than 20% deposit. Investors might simply want to minimize deposit and maximise gearing benefits. more about 95% home loans