The Different Types of Home Loans
Whether you’re a first home buyer or a seasoned investor, there is always an element of excitement in buying property. Whilst finding the right property is the fun part, it is only the first of several steps in the buying process. Where the transaction involves a home loan and mortgage there are a number of additional considerations the buyer needs to act on.
The home finance market is extremely crowded with a sea of lenders offering different rates, products and features. It can be a confusing process, so you’ll need to think carefully before committing to a loan and ensure that the product will meet your needs now and into the foreseeable future.
Whilst there are many different loan products available to consumers they generally fall into a few main categories. These include Introductory Loans, Line of Credit Loans, Split Loans, Variable Loans and Fixed Rate Loans. (This list is not exhaustive.)
– A popular type of home loan that usually offers a lower interest rate for an introductory period, usually 6 or 12 months. It’s important to check out the ongoing rate as the products often revert to a much higher interest rate than a regular basic loan product.
Line of Credit Loans
– A product that provides access to credit using the available equity in a home. They often operate similar to a credit card arrangement. The Line of Credit has an available credit limit and users can access the funds as needed increasing the amount owed up to the maximum limit. Any deposits made into the account reduce the balance and free up available credit. These loan products require discipline to ensure the loan continues to reduce over time.
– Borrowers wanting the security of a fixed rate loan but with the flexibility of variable loan products may choose a Split Loan facility. The borrower can fix a portion of the loan and leave the remainder as a variable rate facility.
Variable Rate Loans
– The interest rate charged on variable loans move up and down according to movements in the market rates as set by the Reserve Bank of Australia. Variable Loans generally allow unlimited extra payments (without penalty) with the associated ability to redraw those additional funds if required (usually a small fee applies). Basic Variable products generally have a lower interest rate to the Standard Variable products but that is offset by fewer features.
There are many benefits, considerations, and other matters (e.g. taxation) to consider before committing to particular loan products, so it’s important to seek appropriate advice from your accountant or financial advisor depending on the circumstances.
Hewcorp Finance provides professional home, motor vehicle, truck, caravan, marine and asset finance services to customers in Redland Bay, Bayside suburbs, and the greater Brisbane region. You can follow Owen on LinkedIn, LIKE us on Facebook, or view details about the types of Home Loans on our website.
Written and Published by www.presentprofessionally.com.au