Home Loans
Type of Home Loans
Variable Rate
Variable rate loan offers a competitive interest rate and you can choose from a number of great features, such as 100% offset sub-account along with a linked Visa debit card that could help you save money.
Fixed Rate
Fixed rate loans give you the certainty of knowing what your repayments will be for one, two, or three years, safeguarding you against any increase in interest rates. This does mean that if the RBA decides to reduce the cash rate, you may miss out on the reduction.
Construction Loan
A construction loan can be used to provide finance when you are building a house, completing a major renovation or demolishing and rebuilding. It allows you to progressively draw down on the loan in stages, so you only pay interest on the amount drawn during the construction period.
Home Loan Jargon
Introductory Rate or Honeymoon Rate
An introductory rate offered to entice borrowers with a low advertised rate for the first few months of the loan. After the honeymoon period, the loan reverts to the Standard Variable Rate offered by the lender.
Lenders Mortgage Insurance (LMI):
Insurance that the loaning institution takes out in case of default from the borrower, which the borrower must pay for. Usually applies to home loans with a higher LVR (more than 80%).
LVR (Loan to Value Ratio):
This is the maximum proportion of the value of your home that can be loaned out to you. For example, a bank may approve your loan for 80% of the property value, in which you must pay the remaining 20% as your deposit.
Stamp Duty:
The state or territory government’s tax calculated on the borrower’s loan amount.
Negative Gearing:
When the income from an investment property is not enough to pay the interest on the home loan for that property, negative gearing is currently available as a tax deduction against that income.
Offset Account
A savings account linked to your loan to offset the interest charged on your loan. The money (or credit) in your account is offset daily against your loan balance, which reduces the daily mortgage interest charges.
Pre-Approval
An initial approval process where the bank provides a borrower with an estimate of how much they could borrow based on information they have provided to the bank.
Redraw
A home loan feature that enables the borrower to withdraw funds they have already paid, usually this is a condition based on if they are far enough ahead on loan payments. This is not available on all loans.
Settlement Date
The date on which transfer of ownership officially takes place – the buyer pays the rest of the purchase price, and the final legal documents are exchanged. It is also usually the date on which the buyer receives the keys and assumes possession.
Split Loan
A home loan in which a predetermined portion of the loan is locked in at a fixed interest rate and the rest comes with a variable rate of interest.
Variable Rate
A home loan interest rate that fluctuates according to the official cash rate set by the Reserve Bank of Australia. The rate can go up or down over time, varying your repayments. These loans allow for more flexibility and options.