Types of Mortgage Products
Posted in First Home Buyer's Guide, Mortgage Tips on July 16th, 2008 by adminStandard Variable Rate Home Loan
This is a fully flexible loan that usually allows additional repayments without penalty and often comes with extras such as a redraw facility or offset account. The interest rate is variable which means that it can go up or down depending on the bank. It also possible to split this type of loan with a fixed interest rate, allowing you more flexibility should an interest rate rise occur.
Similar to the standard variable rate home loan but usually doesn’t come with any extras. Also, there may be penalties for making additional repayments. However, the best thing about this type of loan is that it comes with a significant discount off the interest rate. If you intend to make a lot of additional repayments or pay the loan off early, then this loan is probably not best suited to you.
This type of home loan has a fixed interest rate that can not go up or down even when the Reserve Bank increases or decreases their rates. The fixed period is usually for 1 to 5 years but some major banks offer a fixed rate loan up to 15 years. If you are on a strict budget and can not afford an interest rate rise, then a fixed rate home loan can certainly save you from potentially losing your home should consecutive interest rate rises occur like they have over the past couple of years.
Professional Package Home Loan
Despite the name, the Pro Pack home loan is not just for professionals. Just about anyone can qualify for a professional package mortgage. There is usually a minimum loan amount that you must borrow to be eligible and there is an annual fee that has to be paid each year. A professional package home loan is fully flexible and comes with many extras that may include a redraw or offset account, credit card, nil monthly transaction fees, and a lifetime discount off the interest rate.
This is a savings account that is linked to your mortgage. Any balance in your savings account offsets the amount of interest you pay on your mortgage. Your salary can be paid directly into this account which minimizes the amount of your monthly interest.
A non-conforming home loan is for people who do not meet a bank’s traditional lending requirements. You may need a non-conforming mortgage depending on your work situation, your past credit history, the security property you intend to purchase or refinance, or your residence status.
A low doc home loan is usually for self employed people who do not wish to or can not substantiate the amount of their income. There are however, low doc PAYG home loans now, for people who earn a PAYG income but can not substantiate or prove it.
This is finance that is arranged if you are selling your existing home and wish to make a new purchase prior to the settlement of your existing property. The loan can be for up to 12 months and is usually interest only.
This type of loan is when a lender approves a set credit limit that is secured against your property. The borrower is able to draw down as much funds that they need up to the approved credit limit and they will only get charged interest on the amount that is drawn. The interest rate is usually a little higher than normal home loans.
This type of home loan usually appeals to first home buyers who have access to the First Home Owners Grant, however many property investors have been utilizing this type of loan so that they do not have to access their available funds. The lender will normally lend up to 97% plus LMI (Lenders Mortgage Insurance) which brings the total lend up to 100%. The customer still needs to come up with a 3% deposit plus Government fees, stamp duty and bank charges, but this can often be covered with the help of the First Home Buyers Grant or a personal loan.