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Which home loan best suits you?
The home loan industry never stops changing. New home loan products are launched from banks almost daily. Vogue financial solutions consultants search over 1500 loan products faster then you make a cup of coffee to which loan product best suits you and your needs.
What type of loans are available to you?
Introductory Home Loans Interest rates on these types of loans is usually lower then a standard loan to attract borrowers. This low interest rate generally lasts for the first twelve months of the loan. The interest rates can be either fixed or variable. After the twelve month period the interest rate revert back to the standard interest rates applicable to that lender at that time. Advantages: Usually the lowest interest rates available. When payments are made at the introductory rate the principle can be reduced quickly. Some lenders provide an offset account to this loan Disadvantages: Interest rates usually increase after the first twelve months.
Variable (Interest / Principle) 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.
Advantages: Repayments fall when general interest rates fall Redraw facility (you can take out any extra repayments you have made) Allows careful borrowers to pay off the mortgage quickly by not having any penalty for advance payouts. Disadvantages: Repayments rise when official interest rates rise Higher interest rates.
Fixed rate (Interest / Principle) Loans A fixed loan is a home loan with a fixed Interest rate for a period of time usually 1-5 years. Giving you fixed mortgage repayments. Although you may only lock your interest rate in for 3 years you have the option to again lock the interest rate for another 1-5 years
Advantages: Repayments remain the same even in the RBA official interest rate rises. Allows for more accurate budgeting provides piece of mind to borrowers Disadvantages: Repayments don’t come down if the RBA interest rates fall. Penalties apply for early payout of the loan Limited additional repayments.
Low-doc home loans A low-doc or no-doc mortgage is best suited for investors or self-employed borrowers looking to refinance, purchase or renovate. No tax returns or financial reports are required.
Advantages: Simple income declaration requires for application Principle and interest or interest only loans available No financial documents required Disadvantages: Usually a higher interest rate applies to this type of loan.
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.
Advantages: Offers flexibility Use the money you need and pay it back when you can Home loan interest rates are generally lower then credit cards or personal loans. Disadvantages: Usually higher interest rate then the standard home loan. Can be very expensive if not used correctly possibly reduced the equity in your house.
Interest only home loans You repay the interest only on the principle of the loan. Repayments are much lower then a standard variable home loan. At the end of the interest only period usually one to five years, you must start making principle and interest repayments for the remainder of the loan
Advantages: 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. Disadvantages: 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.
Split rate (Principal and Interest) home loans A split rate loan is a loan that allows the borrower to fix part of the loan and keep the other portion of the loan variable.
Advantages: 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 Disadvantages: Allows limited additional payments only Repayments will rise with rate rises.
Non Conforming loans Have a bad credit rating? Then this loan is right for you. The non conforming loan is designed for people that have had a bad credit history in the past. Our lenders understand that you deserve a fair chance and not be penalized for something that may have happened years ago. They will want evidence that you have the ability to pay the loan back. A larger deposit is also generally required also.
Advantages: Overlooks poor credit ratings. Disadvantages: Higher deposit required and a slightly higher interest rate then the traditional loan.