Loan Types Available & Interest Rates

loan information

Types of Loans

What the ‘best / most suitable home loan’ means for you

The “best” home loan is a very individual proposition. To decide what the best home loan for you might be, you need to consider your individual circumstances now and proposed in the future. Some things to take into account might be:

Your “current” financial needs

What sort of repayment options are best suited to your current situation? Your interest rate and your loan term will impact your monthly repayments. Making “Interest Only” repayments is also an option usually popular with investors, because interest repayments are tax deductible and over the course of the year investors can claim this and recently the government has forced most lenders to increase “Interest Only” & “Investment” rates. You may also be paying only “interest” repayments during a construction loan if you are building a new house, as these repayments are lower than regular “principal and interest” repayments. This allows you to make smaller monthly repayments because you are probably still paying rent until your new house is built.

Your “future” financial needs

A home loan is a long term, financial tool that will help you buy one of the biggest assets you will own. To find a home loan that grows with you, you’ll need to think about your needs and wants for now and the future. For young professionals for example, a no-frills home loan with a fixed interest rate could help you get used to repayments. When the fixed rate period ends, you have the ability to refinance to a more flexible (variable) home loan as you become a parent or have bigger, financial goals or go for another fixed term…or a mix of both.

The purpose of the home loan

Whether you are buying a property as an investment or as your own home can affect grants you are eligible for, stamp duty costs and interest rates etc, and how you manage your repayments and interest at tax time. There can also be some BIG rate differences between “home loans” and  “investment loans” so make sure you are comparing the right type of loan where your needs are being met.

Difference between “Offset” & “Redraw”

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01.

Variable

Standard variable “Principle & Interest”  loans are the most popular home loan in Australia. Interest rates go up or down over the life of the loan depending on the official rate set by the Reserve Bank of Australia and the lenders funding costs. Your regular repayments pay off both the interest and some of the principal. and they allow you to make extra repayments to reduce the balance quicker…any “extra” repayments are usually available as “redraw” ie accessible if you need the money.

You can also choose a basic variable loan, which offers a discounted interest rate but has fewer loan features, such as a redraw facility and repayment flexibility.

02.

Fixed

The interest rate is fixed for a certain period, usually from one to five years of the loan and some up to 10 yrs. This means your regular repayments stay the same regardless of changes in interest rates. At the end of the fixed period you can decide whether to fix the rate again, at whatever rate lenders are offering at the time, or move to a variable loan OR move into a mix of both? ie a variable & fixed “split”.

03.

Split loans

Your loan amount is split, so one part is “Variable”, and the other is “Fixed”. You decide on the proportion of variable and fixed. You enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan. May set your mind at ease.

04.

Interest Only

You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. But recent government pressure has resulted in higher rates for “Interest Only” loans.  Because you’re not also paying off the principal, your monthly repayments are lower. At the end of the “Interest Only” period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold or when planning to retire and live of the rent, or sell having achieved capital growth. You can pay off extra if you want to anyway – if variable.

Any Questions? Ask Away!

Residential Loans

Full Doc

You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. But recent government pressure has resulted in higher rates for “Interest Only” loans.  Because you’re not also paying off the principal, your monthly repayments are lower. At the end of the “Interest Only” period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold or when planning to retire and live of the rent, or sell having achieved capital growth. You can pay off extra if you want to anyway – if variable.

Low Doc

For “self-employed” people, these loans require less and different forms of documentation or proof of income than standard loans, but usually carry higher interest rates or require a larger deposit because of the perceived higher lender risk. In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a low doc loan may be your best opportunity to borrow money. These require different forms of income proof AND can be swapped or refinanced in the future into a FULL DOC loan when “satisfactory income proof” is available.  Low Doc rates from @ 3.59% pa

Construction

Several types of “construction” loans  available.

Home loans – Owner Occupier & Investment

Commercial loans  – to build factories, houses ,units , high rises etc.  

Large development funds available  – rate & fees vary depending on the development and borrowers equity and final “Gross Realisable Value – GRV). If good equity no income proof may be required as the lender will capitalise the interest.

 

 

 

 

Commercial Loans

Full Doc

You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. But recent government pressure has resulted in higher rates for “Interest Only” loans.  Because you’re not also paying off the principal, your monthly repayments are lower. At the end of the “Interest Only” period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold or when planning to retire and live of the rent, or sell having achieved capital growth. You can pay off extra if you want to anyway – if variable.

Low Doc / Lite Doc

For “self-employed” people, these loans require less and different forms of documentation or proof of income than standard loans, but usually carry higher interest rates or require a larger deposit because of the perceived higher lender risk. In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a “Low Doc/Lite Doc” loan may be your best opportunity to borrow money. These require different forme of income proof AND can be swapped or refinanced in the future into a FULL DOC loan when “satisfactory income proof” is available. Income proof  is a mix of an Accountants Declaration letter (in the lenders standard format we will supply), copies last of 6 mths BAS, recent business banking statements showing income.

Lease Doc

Solely based on the lease amount / term of the investment property (usually commercial security)

No Doc

Not allowed for PERSONAL home/investment loans when the property is in personal names as they come under the “NCCP” Act  _ National Consumer Credit Protection Act– must be in a company name and usually quite expensive but often solves problems.

Car Loans

Full Doc

You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. But recent government pressure has resulted in higher rates for “Interest Only” loans.  Because you’re not also paying off the principal, your monthly repayments are lower. At the end of the “Interest Only” period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold or when planning to retire and live of the rent, or sell having achieved capital growth. You can pay off extra if you want to anyway – if variable.

Low Doc

For “self-employed” people, these loans require less and different forms of documentation or proof of income than standard loans, but usually carry higher interest rates or require a larger deposit because of the perceived higher lender risk. In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a low doc loan may be your best opportunity to borrow money. These require different forme of income proof AND can be swapped or refinanced in the future into a FULL DOC loan when “satisfactory income proof” is available.

Non-Resident? We have options!

interest rate information

Interest Rates

Lower rates now…

 From 1.84% (fixed) upwards depending on Type of loan, LVR, Credit history etc.

Vary greatly according to many factors and obviously “the lender”

Lender – a bank, a major or otherwise, versus non-bank – there is a GREAT variation here – many lenders are MUCH cheaper than the major banks – eg  variable “home” loans from 2.34% variable and  1.84% fixed 2 yrs (< 80% LVR – Loan to value Ratio) or a mix of them both …as at Juky 2021

Type of loan

– “Home Loan” v “Investment Loan” or a mix of the 2 – rates differ depending on loan type ie “home ” v “investment” loan

– “Full Doc” with income proof, or “Low Doc” with alternative sources of income proof

–  “Principle & Interest” v “Interest Only”

– “Variable” v “Fixed” rates – or a mix of the 2 often a good idea

Other loans also available – development, business equity, machinery, bad credit etc.

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