Types of Home Loans

Fixed and variable rates might be the greatest differentiation between mortgage types, but there are a whole host of specialised products designed for different circumstances. While first-time buyers might not need all of these – it’s difficult to see why they might require a reverse mortgage, for example – it’s worth knowing the details for when you come across them during your research.

After all, the number of different types of mortgages available, when combined with the ‘industry speak’ used to describe them, can confuse even the most astute home loan rookie. By dealing with one of our mortgage brokers all this jargon can be simplified, they can compare and contrast the many different home loan products from the lenders on our panel to find out which type of home loan would be the best suited to you.

Standard Variable Loans

Currently the most popular choice with Australian borrowers. Whilst being subject to interest rate fluctuations, variable rate home loans offer the most flexibility.

Non-conforming Loans

These kinds of loans are suitable for people who may have an adverse credit history. They are designed to accommodate those who do not meet the normal criteria.

SMSF Loans

These loans allow your Self Managed Super Fund to borrow money to purchase an investment property.

Fixed Rate Loans

Although offering much less flexibility than standard variable rate loans fixed rate loans offer a greater degree of security as the interest rate payable does not fluctuate with interest rate rises. Interest rates can generally be set for up to 10 years depending on the individual product.

Low-doc Loans

Low Doc Home Loans are suitable for people (most commonly self-employed or casual workers) who can afford to take out a home loan, but are not in a position to prove their income, have variable income, or do not have tax returns or financial reports.

Lines of Credit

This kind of loan is popular with property investors, and operates much like an overdraft facility, where the borrower can withdraw extra funds (up to an agreed ceiling) at any time. This credit is secured by the borrower’s proportional ownership of their property.

Vacant Land Loans

Vacant land loans enable customers to borrow in order to purchase land, with the intention of building a home on that land at a later stage. In some cases this can be considered business lending, depending on how the land is zoned.

Construction Loans

Suitable not only for the construction of new homes, but also for major renovations to an existing home. Whilst a standard home loan necessitates a lump sum payment at agreement signoff, construction loans are usually drawn down in stages.

Split Loans

These loans can be split in terms of a proportion of the loan being based on the variable rate of interest, and part of the loan being a fixed rate interest. A split between principal and interest payments, and interest only payments, is also possible.

Bridging Loans

A short-term loan (usually 6-12 months) that covers a financial gap between the purchase of a new property and the sale of an old property. In many cases, vendors (sellers) putting their homes on the market will be selling with the intention to purchase another property, or buyers may be waiting for completion of the sale of an existing property prior to buying a new one.

Professional Packages

Most of the major lenders will offer special packages for borrowers taking up $250,000 or higher, although some form of discounts are available on mortgages from $100,000. Originally designed for higher income earners or borrowers in a specific profession, however most of these rates are offered to all these days.

100% Offset

A 100% offset account for a home loan is a simple feature that enables you to pay off your loan sooner without even thinking about it. An offset account is a regular cheque account that has ATM, cheque book and internet access that is linked to your home loan when your loan is setup. Instead of earning interest on the money in your offset account, instead you save interest on your home loan!

SMSF Property Loans

The restriction to buy property without borrowing has now been removed on smsf. Small to medium sized Self managed superannuation funds can now borrow money to purchase property.

NRAS Loan

The National Rental Affordability Scheme (NRAS) is an Australian Government initiative, delivered in partnership with the State and Territory governments, to increase the supply of affordable rental housing. These properties need non standard loans.

Reverse Mortgages

Reverse Mortgages are offered to those clients who are above the age of 55, and who already have considerable equity in their homes. Reverse mortgages allows these applicants to withdraw some of their equity either through a lump sum payment, or through continued and on-going monthly payments.