Home Loan Types

A Basic Variable Loan is best suited to a budget conscious borrower looking for a ‘no frills’ loan. Basic Variable Loans generally offer a lower interest rate than the Standard Variable loan but also include fewer features and less flexibility.

Standard variable loans are the most popular loan product. They offer flexibility and desirable features such as the ability to split the loan, make extra repayments, take out loan re-draws. Depending on the financial institution chosen, you can get discounts off the standard rate - commonly known as a professional package.

Fixed rate loans allow the customer to fix the loan rate for a predetermined period of time, usually one to five years. At the end of that time, the loan reverts to a variable rate, or you can renegotiate a further fixed term. By locking in the interest rate, you are protected against rising interest rates and your monthly repayments remain the same throughout the fixed period.

A Combination Loan, also known as a ‘Split Rate Loan’, combines the flexibility of a variable rate on a portion of the loan with the benefit of a fixed rate on the balance. This type of loan protects you when the rates increase and benefits you when they drop.

Honeymoon loans, also known as ‘Discounted Introductory Loans’, offer lower rates for six to twelve months or longer. After this period, the loan reverts to a standard variable rate and the repayments increase.

Low Doc or No Doc Loans are specifically designed for applicants who are self employed, PAYG, seasonal workers and small business owners who have income and assets but may not have the traditional forms of income evidence such as financial statements or tax returns at the time of the application. This type of loan is generally flexible and includes a variety of features.

Line of credit loans are a tax efficient money management tool, which enable you to take advantage of investment opportunities as they arise. This is a flexible loan product secured by an existing property that enables you to draw down funds as you need them.

A line of credit also is used as a home loan whereby you can have your entire wage paid into the account, maximizing the loan so that over the course of the loan you pay less interest. You use the account to have all income deposited and the more income received or deposited, the less interest charged. It is suggested you also use an interest free credit card for all of your purchases and paid monthly from the line of credit. With this product you will need to be very disciplined and budget conscious.

An Equity Finance Mortgage (EFM)® is a new type of home loan that can help you to:

• Reduce the upfront and ongoing costs of purchasing a new property; or  
• Reduce your current monthly mortgage repayments (via a refinancing of your existing loan); or
• Buy a more expensive property than you may otherwise be able to afford.

An EFM works in conjunction with a traditional home loan. Together, they let you move some of the expense of a traditional home loan to later when you eventually sell your property.

Here's how: An EFM® allows you to borrow up to 20% of a property's value.  There is no annual percentage rate applicable to an EFM loan, unless you are in default. You are not required to make any regular monthly interest repayments throughout the EFM loan, which you can hold for 25 years. Instead, when you sell the property or repay the EFM for some other reason, you repay the EFM amount you originally borrowed plus up to a 40% share of any increase in the value of the property. And while nobody likes to talk about property values decreasing, if this does happen when you have an EFM and you are selling your property, you may not have to repay the full EFM loan amount - a feature unique to an EFM.

Specifically, if the value of your home falls, and you realise a capital loss when you sell your property, the EFM lender will share up to 20% of the realised losses on your property! The share of the losses borne by the lender will depend on how much you borrow in the first place and how much your property has decreased in value. The lender will not share in any losses if they are not fully realised by you when you repay the EFM.T

The original idea behind the EFM loan was to create a better alignment of interests between the borrower and lender. If you do well, and your property's value increases, the lender can do well. However, if you suffer, and you realise a loss when you sell your property, you may not be charged any regular interest whatsoever on the EFM. In fact, the EFM lender may share up to 20% of the losses, leaving you with less to repay on the EFM loan than they originally lent to you! We strongly recommend that you obtain independent legal and financial advice in relation to this EFM loan prior to entering into the EFM loan contract.

Offset Loans link up an everyday transaction account to your mortgage. The funds in your offset account are completely offset against the balance of the loan. The more funds you have in your offset account, the less interest you pay on your home loan. The account operates much like an every-day savings account. It usually offers ATM access and a cheque book. Whilst most lenders offer mortgage offset account facilities the amount and percentage of offset can vary between lenders.

The No Deposit Loan is a new and unique product which allows you to borrow 100% or more of the purchase price of your home. This is the ideal product for anyone who has dreamed of entering the property market but has not been able to save for a deposit.

There are many different reasons for why a person does not meet the typical lending criteria for taking out a loan. Non Conforming Loans are designed especially for such circumstances.

Some of the most common reasons include:
• Newly employed
• Working part-time, casually or as a contractor
• Insufficient records of past savings
• Inadequate deposit amount
• Non-existent credit record
• A change in life events such as recently divorced or temporarily unemployed
• Age
• Non traditional security

Credit Impaired Loans are designed for customers who have had loan arrears, unpaid or paid defaults and judgments, or even a bankruptcy history. If you believe that you may have a credit history concern, it is best to verify early that all the information in your credit report is correct. To obtain your own credit history report, click here www.mycreditfile.com.au

Developed to meet the needs of borrowers who purchase a new property prior to selling their existing one, a Bridging Loan is a short-term housing loan where interest only payments are either paid by borrowers or capitalised into the loan. The principal is due for repayment at the end of the loan term.

Construction loans are often referred to also as bridging loans. This type of loan is designed for those looking to construct or renovate property and is normally set for a predetermined time frame, depending on the purpose of the loan. Previously, most lenders only offered basic variable rates for these loans, however, certain lenders now offer their full suite of loan rates.