THIS IS GENERAL INFORMATION ONLY AND NOT TO BE USED AS ADVICE.

To find a home loan that could suit you?
You should be aware the home loan market is in a constant state of change. New products are launched regularly.
To find which loan or combination will suit you and your goals, our associated finance broker can compare the various different home loan products from the lenders. (Get the right loan from start or it could cost you maybe 10's of thousands.)
You should also use our mortgage calculators as a guide to how much you can borrow and what your repayments will be.
When you're ready to discuss your options in more detail make an appointment to speak to a finance broker.

Types of home loans are available?

Variable (Principal and Interest) home loans

The rate charged on a variable loan moves up or down in accordance with movements in interest rates, as set by the Reserve Bank. Basic variable loans generally have fewer loan features than a standard variable loan. Basic variable loans are suitable if you are looking to pay off a consistent amount over the full term of the loan, but are not suitable if you are looking to pay off your mortgage quickly.

Pros:
Repayments fall when official interest rates fall
Standard variable loans offer flexibility and additional features, such as the ability to make additional payments, such as a redraw facility (take out any extra money that you have put in), low introductory or honeymoon rates
Allows careful borrowers to pay off the mortgage quickly by not having any penalty for advance payouts

Cons:
Higher interest rate is higher for standard variable loans than basic loans because they usually offer additional features
Repayments rise when official interest rates rise

Fixed Rate (Principal and Interest) home loans
A fixed rate loan is a loan that has a fixed interest rate and therefore fixed loan repayments. The time period of these loans can vary, but you can usually "lock in" your repayments for between 1-5 years. Although the fixed rate period may be 3 years, the total length of the loan itself may be 25 or 30 years. At the end of the fixed loan period you can decide whether to fix the loan again for another period of time at the current market rates or convert the loan to a variable interest rate for the remaining time left of the loan.

Pros:
Repayments do not rise if the official interest rate rises
Provides peace of mind for borrowers concerned about rate rises
Allows more precise budgeting

Cons:
Repayments do not fall if rates fall
Allows only limited additional payments
Penalties on early payout of the loan

Split Rate (Principal and Interest) home loans
A split rate loan is a loan that has one portion of the loan fixed and one portion variable. You can select how much to allocate to each.

Pros:
Provides some peace of mind for borrowers concerned about rate rises
Provides more certainty in budgeting than full variable loans
Can make additional payments on variable portion

Cons:
Allows limited additional payments only
Repayments will rise with rate rises

Interest-Only home loans
You repay only the interest on the principal during the term of the loan; therefore, repayments are lower than with a standard principal and interest loan. At the end of the interest only period - usually one to five years - you must start making Principal and Interest Repayments over the remaining term of the loan.

Pros:
Lower repayments initially so you have more money to renovate/improve the property.
Cuts the cost of buying a residential investment property in the short-term, which could allow you to make greater contributions to your principal place of residence.

Cons:
There will be sudden increase in repayments at the end of the Interest Only period and the loan converts to Principal and Interest repayments.
Lenders will assess your ability to repay the loan only on the principal and interest repayments. This can reduce your borrowing power, as these repayments will be higher than a loan on Principal and Interest for the full term.

Line of Credit home loans
This type of property loan revolves around equity built up in your property and allows access to funds when needed. These products are creative ways to raise funds for investment by providing cash up to a pre-arranged limit. Each month the loan account balance is reduced by the amount of cash coming in and increased by the amount paid on the credit card or withdrawn in cash. As long as there is consistently more cash coming in than going out these accounts can work well. However, they can be very costly if the balance of the line of credit is not regularly reduced. It requires an interest-only payment as a minimum each month, which can add up to a lot of interest over the long term.

Pros:
Use the money you need and pay it back when you can
Home loan interest rates tend to be lower than credit cards or personal loans
Offers flexibility

Cons:
Possibly reduces equity in your residential property
Usually higher interest rates
Need to be disciplined to make principal payments regularly
Can be very expensive if not used carefully

Low-doc home loans
A low-doc or no-doc mortgage is ideally suited for investors or self-employed borrowers looking to refinance, purchase or renovate. No tax returns or financial reports are required.

Pros:
Simple income declaration form
No tax return or financial records required
Fully serviceable loan options, redraws, line of credit, variable or fixed rates
Principal & Interest or Interest-only loans

Cons:
Generally a higher interest rate

Introductory home loan
The interest rate is usually low to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for around 12 months before it rises. Rates can be fixed or capped. Most revert to the standard rates at the end of the honeymoon period.

Pros:
Usually the lowest available rates
When payments are made at the introductory rate, the principal can be reduced quickly
Some lenders provide an offset account against these loans

Cons:
Payments usually increase after the introductory period

Non-conforming home loan
People with poor credit ratings often have trouble sourcing a home loan. Many lenders now offer what are known as 'non-conforming loans' for people in this type of situation. While lenders are willing to overlook prior credit problems, they will want to see some evidence of your ability to repay the loan. A larger deposit than is required for traditional loans will generally be required also.

Pros:
Overlooks poor credit rating

Cons:
Higher interest rate than traditional loans

Offset Facility
There is a lot of confusion regarding offset accounts. They are often confused with all-in-one accounts or accounts where you salary is paid into the loan. While in this aspect the functional outcome is the same there are other important differences which can have vital tax implications.
However anyone who tells you that an offset account will let you pay off your mortgage more quickly, is peddling a half truth. Apart from important tax implications in one very specific area, there is no intrinsic advantage of an offset account over an all-in-one account, a line of credit or even a basic account with salary crediting and unlimited free redraw.

In fact in some circumstances these types of loans can have the opposite effect. For example:
• if you pay a higher interest rate or high monthly or annual fees the benefit may be reduced or nill.
• If you lack discipline these facilities give you easy access to your funds and when linked to a credit card can easily erode your equity.
• Of course if you are on a low income your modest dicscretionery balance is unlikely to make any significant contribution.

So how does it work?
In addition to your home loan, you have a linked transaction account usually with cheque and ATM access. You deposit your income into the transaction account and use it for all your daily expenses. Any money in this account is offset against the amount owing on your home loan and you only pay interest on the outstanding net balance. So say, for example, that you have a home loan of $350,000 and you have a balance of $20,000 in your transaction account, you only pay interest on $330,000. Interest is calculated on a daily basis.
The major and most significant difference is in the way the ATO treats an offset account - and if think you may at some time in the future consider renting out your primary place of residence - get this right before you start or it will cost you maybe 10's of thousands.

This is general information only and not intended as advice. This is a quick overview of the different types of home loans available.
You should not take any action without seeking appropriate advice.
Your specialist finance broker will review the available home loan products against your specific requirements to help you find the loan that suits you.