Choosing the right home loan from the many products available can be daunting. It’s important to understand all the alternatives before making your choice.
There are two options available to you when organising finance. You can apply directly to
a finance institution or you can use a mortgage broker to help you through the process. There are
two fundamental types of home loans available, each offering you a range of repayment options.
“Variable Rate” home loans:
With a Variable Rate Home Loan the interest rate is described as variable because it may change
during the term of the loan, depending on economic conditions
Repayments can usually be made monthly, fortnightly or weekly
The maximum term is 30 years with many lenders
Interest is calculated on the daily outstanding balance of your loan and charged to your account monthly, so any additional or increased repayments will benefit you immediately
Unless the loan is paid out in the first five years, there are rarely additional costs for early repayment
of the loan, other than government/bank discharge fees.
“Fixed Rate” home loans:
As the name implies, this home loan product has a fixed rate of interest. The term for whichthe interest is fixed may vary from one to five years. After that, the loan may need to be renegotiated for another fixed rate period or it may simply revert to a variable rate home loan
You may be able to make the choice to repay interest only or principal and interest
There may be additional costs if you opt for early repayment of the loan