Standard variable rate loan
Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.
· Lump-sum payments can be made without incurring a penalty.
· If interest rates fall, your repayments will fall.
· Often offer extra features.
· If interest rates rise your repayments will rise.
100% offset loan account
A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.
· Can save you a substantial amount of interest if used correctly.
· Operates like a normal transaction account and can have a chequebook, ATM card, etc. attached.
· May have higher monthly fees attached to the account.
· May require a minimum balance in the account.
Fixed rate loan
Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However you won’t benefit if rates go down during the fixed term.
· Guaranteed rate, if interest rates rise your repayments won’t.
· Reduced flexibility.
· Extra repayments may incur a fee or be limited.
Basic variable rate loan
Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.
· Relatively low interest rate.
· Lower repayments.
· Many of these loans do not have the same features or flexibility as other variable loans.
Intro rate "Honeymoon" loan
An introductory rate loan generally offers a guaranteed low rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable.
· Usually the lowest rates on the market.
· Some lenders provide offset accounts on these loans.
· Opportunity to reduce the principal quickly during the ‘honeymoon’ period.
· Payments will increase after initial introductory/’honeymoon’ period
If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed. A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a ‘fixed price building contract’ and ‘council approved plans’.
· Competitive variable interest rates.
· Facility to draw money when necessary whilst building.
· Interest only payments during the building period.
· Additional payments can be made.
· Requires a fixed price building contract leaving little room for change whilst building.
· Some lenders charge a fee for every time you draw money whilst building.
· Given it is a variable loan, loan repayments will increase if interest rates go up.
Low-doc & credit impaired loan
A low documentation (or no documentation) loan is suited to investors or self-employed borrowers who do not meet the ‘standard’ lending criteria. This may include; those with an impaired credit history, those who are unable to provide the required documentation in support of their loan application, or those who wish to borrow more than 100% of the property value.
· Simple income declaration form.
· No tax returns.
· No financial statements.
· Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only.
· Generally, a higher interest rate.
Line of credit loan
A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only.
· You can use the money when you need it and pay it back when you can.
· Rates are generally lower than a personal loan or credit card.
· Unless care is shown it is possible to reduce the equity you have built in your home.
At 2 finance we understand that being your own boss means your time is at a premium and having up-to-date financials is a constant struggle. Not to mention how cash flow can often be unpredictable. So we’ve simplified the home loan application process for you. Our special range of low doc home loans mean you can still enjoy a great interest rate without endless paperwork. Quite simply, we don’t believe you should pay a higher rate, just because you’re self-employed and can’t provide full financials!
Understanding stamp duty & other purchasing costs
As well as the cost of obtaining your home loan, there are fees and charges associated with buying a property. Below is a general guide to property purchasing costs.
Transfer Duty is the State Government duty charge based on your property purchase price.
Mortgage Duty is a State Government duty which is payable based on your loan amount. It is generally charged at settlement. This stamp duty doesn’t apply in NT and the ACT. Some exemptions are available in WA if you are refinancing.
Transfer Fees are charged by some states. Check with your legal representative.
First Home Owners Grant: are generally given some relief on duty costs. In some cases, you may be eligible for a total duty exemption.
These are government fees applied to each document that is lodged for registration on the property title. Typically there is one transfer document and one mortgage document that you’ll need to pay for at settlement.
You’ll have to pay for solicitors or legal representative services such as reviewing the purchase contract and advising you on your mortgage documents. The cost of this service varies widely and it’s best to ask what it is up front.
There are also extra fees associated with property inspections.
It is in your interest (but not compulsory) to get a pest or building inspection completed on the property.
Sometimes property surveys and searches can be required.
Your legal representative can arrange these or you can arrange them yourself.
Depending on what your deposit is, you may have to pay Lender’s Mortgage Insurance (LMI).
This protects the lender if you default on your loan.
LMI does not cover the borrower.
Generally, you will be required to pay LMI only if you have a deposit that is less than 20 per cent of the purchase price of the property.
Most application fees cover the approval, set up, valuation and solicitor’s costs of preparing the loan documentation and attending settlement. This depends on the lenders who provide you with the loan.
Home Loan for the Credit Impaired
Got behind in servicing loans, credit cards and other unplanned debts
Your Tax Returns are not prepared yet and a bank will not give you a loan.
Unpaid defaults or judgments or even recently discharged from bankruptcy
Short term employment history and cannot get a loan