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How many types of home loans are there?


Hundreds. The key is finding the one that is the right one for you. If you don’t know a lot about the mortgage market you might decide to go with a basic home loan but the loan type and the rate will vary depending on the loan amount and contribution and this is why it's best to speak to a qualified mortgage broker. Here we look at just some of the more common home loan & mortgage options on offer today:

• Basic home loan

• Honeymoon loan

• Standard variable rate loan

• Redraw facility

• 100% loan Basic home loan

A basic home loan offers a low but variable interest rate and few or no regular fees. However, there is also limited flexibility. e.g. you may not be able to pay off extra if you get a windfall, or vary your repayments. These loans are normally taken for loans lower than $250,000

A honeymoon rate offers a very low interest rate for an introductory period – generally 12 months. Once the “honeymoon” is over, the interest rate reverts to the higher variable rate . You need to consider the cost of the loan over more than just the honeymoon period, and if any fees are incurred if you refinance after the honeymoon period.You really need to know the revert options on this type of loan.

A standard variable rate loan is a loan product that generally allows you to choose many “bells and whistles”. e.g. a redraw facility, an all-in-one account facility, linked accounts and credit cards etc. Consider the features you need carefully with your Mortgage Broker. These loans under the banks package are probably the most common type of offering as the banks try to win all of your business from credit cards to insurances.

A redraw facility lets you pay off more of your home loan but still allows access to those extra funds if you need to. There wcould well be aminimumredraw amount, it is important to know the amount if keeping all surplus cash in your loan is important to you. There will also typically be a fee for every time you redraw.

A no deposit home loan or 100% home loan is where you borrow 100% of the purchase price of the property. While this sounds like you don’t need a deposit, most institutions will require you to have saved 3% of the purchase price. This amount is often then used to cover lender mortgage insurance.

You also need to have saved for all the associated costs of buying a home.Now which loan is right for you? These mortgage options are just the tip of the iceberg. With this vast choice, how do you know which loan is most appropriate for you? By talking to CBM Mortgages about finding out the best options for you. CBM Mortgages also have a great smartphone and ipad app which can help you search for property and calculate your repayments, click on the icons on the top of the screen.

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Sunday, 24 October 2021