Standard Variable 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.
Basic Variable 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
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.
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 substantial amount of interest if used correctly.
- Operates like a normal transaction account and has a chequebook, ATM card, etc. attached.
- May have higher monthly fees attached to the account.
- May require a minimum balance in the account
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.
Low-Doc & Credit Impaired Loans
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.
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.
Self Managed Superfund Loans
Many people with funds in superannuation have been enjoying the freedom of choosing how those funds are invested through self managed super funds. With the advent of the self managed superfund, managing your retirement funds is now fairly common as people shun large corporate public funds and opt to control their nest egg themselves.
There are significant rules and regulations in place to govern the management of your superannuation in order to protect your retirement savings. Until recently for instance it was not possible for a superfund to borrow funds for investment purposes. This ban has now been lifted and superfunds, including self managed superfunds, are able to borrow money to directly purchase real estate or shares in order to further the investment portfolio of the fund.
There are still some restrictions in place in structuring these transactions for example; specific entities need to be established in order to facilitate the borrowing/ownership of the assets. Plus there are complex issues involved in relation to stamp duty and capital gain tax and the loan products available. So it is important to speak to expert legal and accounting advisers as well as to mortgage brokers experienced in these sorts of scenarios, as we are.
The benefits of using your superannuation funds to invest with can be great. Wouldn’t you like to be paying off an investment property with the 9% super payments your employer makes on your behalf? Please give us a call to talk over your situation and to see if you could be enjoying the benefits of investing with a self managed superfund loan.
Self-Employed and Non-Conforming
Not all people seeking a home loan will fall into the typical category or mould that applies to the standard home loan.
You may be self-employed and have a more complex financial situation, with business and personal finances linked together.
You may have a poor credit history or be unable to provide the necessary documentation to support your application. Perhaps you need to borrow more than 100% of the property value.
Whatever your situation, Wealth Plus Lending has a range of products from different lenders that recognise that not all home loan applicants are the same. Call us on 08 9388 8700 to talk to us about your unique lending requirements.