Types of Loans

Variable or Floating Rates

Person's hands holding cut-out of a house, car and family

 

  • Interest rate can change up or down with the market. 
  • Interest rate is usually higher than fixed rates.
  • The principal can be repaid in part or full any time without penalty.
  • Suitable if you have funds coming within say 12 months that you wish to use to pay down all or part of your loan.

Fixed Term Rates

Mortgage Broker holding model of house in his hands

 

  • Interest rate is fixed for a set period between 6 months and 5 years regardless of whether rates go up or down during that period.
  • Interest rates are usually lower than variable or floating rates.
  • Penalties may apply if the loan is repaid in part or full outside the bank's policies during the fixed period.
  • Some banks allow up to 5% of the loan total to be repaid during the fixed period without penalty.
  • Suitable if you want a low rate and the certainty of a fixed repayment

Revolving Credit Facility

Young couple listening to a Mortgage Broker

  • A loan that works as your primary or current account. 
  • You pay interest monthly only on the balance of the loan calculated daily. That means you can put in as much money as you like to reduce the balance and therefore the interest, then take it out again when you need it to pay bills etc.
  • The interest rate is always variable and a little higher than a standard variable rate, but when used correctly, you can save a lot of money on interest. 
  • Best used in combination with a fixed loan to get the best of both worlds.
  • Coaching on how to set it up and best way to operate it is essential.
  • A very popular loan for disciplined borrowers.

Interest Only Loans

Hands of two people cupping the image of a house on the table with spectacles and coffee cup on it

  • Pay only interest for a period of time to reduce monthly repayments.
  • Useful for investment property loans to maximise tax savings or when cash flow is important.

Equity Loans

Mortgage Broker with laptop talking to young couple about home loans

  • Raise a loan based only on the equity you already have in your home.
  • Mainstream banks are not permitted to make these loans and are available only from private lenders.
  • Very quick to organise.
  • No need for proof of income..
  • Short term. Up to 24 months.
  • Interest rates are high.
  • Fees apply.
  • Interest can be capitalised in part or full (conditions apply).
  • Can be repaid any time without penalty.
  • Suitable for those needing bridging finance.

Low Deposit Loans

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  • Best deals are available when you have at least 20% deposit.
  • Deposits less than this can be OK but come with very strict conditions and restrictions.
  • Interest rate discounts and cash incentives are not normally available.
  • Suitable for first home buyers.