Home Loans with Variable Interest Rates

This is a common offer by banks and has been used by many people to buy their first homes. These loans have repayment periods of up to 30 years and are regularly used by home buyers today.

Don't be caught by start-up lures!

Often lending institutions will offer a discounted start-up period with lower interest rates to motivate you to choose the loan.

The benefits of this discount (or honeymoon period) are short-lived as the remaining years on your loan are charged at a standard variable rate.

Advantages

• Discipline - regular monthly, fortnightly or weekly repayments help you with budgeting.
• Redraw - most institutions will allow you (subject to terms and conditions) to withdraw additional repayments you have made over and above the minimum repayment.
• Offset - it may have the ability to offset credit balances held in other accounts at the same institution against the principal of the loan.
• Extra repayments - these are usually allowed at any time.

Disadvantages

• The interest rate is variable (apart from any start-up period) and the loan will be subject to interest rate fluctuations.
• The interest rate is always higher than Low Frills Home Loan rates

 Low Rate Home Loans - No Extras!

One of the most popular loans, the Low Frills Loan has the lowest running costs - and less extras - so you pay a lower interest rate. Before you choose this loan make sure that you don't need any extras (such as fee free credit cards and accounts etc) and compare the costs of getting them separately.

 Advantages

• Discipline - regular repayments help you with budgeting.
• The interest rate is always lower than traditional loans.
• Extra repayments are usually allowed.

 Disadvantages

• Money held in normal savings accounts with the same institution will not reduce your home loan rates.
• The interest rate is variable and you are vulnerable to interest rate fluctuation.
• Other facilities such as loan redraw may not be available.

 Fixed Term Home Loan with Fixed Interest Rate

This loan has a set interest rate for a period of time. This means you know exactly what your repayments will be for your fixed rate term.

If you are unsure about whether to take a fixed or variable rate - you should consider a Split Loan.

Advantages

• Fixing the interest rate for a period of time insures against future rate rises.
• It is easy to budget for the same regular repayment each month.

Disadvantages

• If interest rates fall you may pay more for your loan than borrowers on variable rates.
• Most lending institutions penalise you for making additional repayments.
• You may be penalised if you pay off your home loan before the due date.

Lo Doc Home Loans, for the Self-Employed

Today, more people are self-employed or employed on contract, so their income patterns are not as regular as PAYG earners.

With a Lo Doc Loan you can "self-certify" your income, which avoids the trouble of asking your accountant to provide up-to-date financials every time you wish to borrow money.

You pay a little bit more in interest and fees - but it saves you a lot of time and stress. Some lenders also offer Lo Doc Loans to investors and PAYG earners too.

Advantages

• There is no need to provide financials to the lender.
• You receive faster access to your loan and greater flexibility.
• Non-traditional and irregular income sources are considered.

Disadvantages

• You pay higher interest rates and fees.
• You may be at risk of over committing yourself if your income varies.

 Reverse Mortgage Loans, for Over 60's

As governments put more responsibility on individuals to fund their own retirements, many people find that their super and other income sources such as the pension don't provide enough money to support the lifestyle they want.
An obvious option is to sell their biggest asset - their home, but that too may be part of the way they want to live.

This is where a reverse mortgage may provide the answer. A reverse mortgage is available to residential property owners over 60. It allows you to release funds using the equity in your home. You can use these funds as an income stream or for personal lifestyle needs like travel, home improvements etc.

Like a traditional mortgage there's interest to pay, but you don't have to make monthly repayments. The interest is capitalised, which means it's added to the amount of the loan.

When your home is eventually sold you'll pay back the amount of the loan (the cash you received) plus the interest owing.

There are a range of reverse mortgage options available. Which one is the most appropriate for you depends on your individual circumstances and other factors.

This is where the knowledge and experience of your Choice Mortgage Consultant can be invaluable. They'll look at your total situation and work with you to explain all your options and the advantages and risks associated with each. Then they'll ensure you get the full benefits from the loan of your choice.

 Split Loans - Fixed & Variable Interest Rate

This loan is a way of hedging your bets. If you are unsure as to whether interest rates are going up or down, you can choose a Split Rate Loan.

With this type of loan, you nominate how much of the loan you would like to fix and how much you would like to put on a variable rate.

Advantages

• Having part of your loan at a fixed interest rate protects you against interest rate rises.
• Leaving part of your loan on variable interest rate leaves you less vulnerable if rates reduce.
• Additional payments are allowed on the variable portion of the loan.

Disadvantages

• You may not benefit greatly from any interest rate fluctuations.
• You may be charged set-up fees, account fees and discharge fees on both the fixed portion and the variable portion.
• You may be penalised for making higher repayments on the fixed portion.
• You may be penalised if you pay off your loan before the due date on the fixed portion.