What type of home loan do I need?

Navigating the world of home loans can be overwhelming, especially for first-time buyers. With numerous lenders offering a variety of mortgage options, it’s crucial to find the right one for your financial situation and goals. A mortgage adviser like us can help simplify the process. Contact us today to discuss your options.

1. Principal and interest loans

Most home loans consist of two key components: principal (the amount borrowed) and interest (the cost of borrowing). A principal and interest loan requires you to repay both with each installment. Alternatively, you can choose an interest-only loan but be aware that interest rates for these loans are often higher.

2. Variable rate home loans

A variable rate home loan means your interest rate can fluctuate based on the cash rate set by the Reserve Bank of Australia (RBA) and other economic factors. Many borrowers appreciate the flexibility of variable loans. If the RBA cuts the cash rate, your interest rate may also decrease, leading to lower repayments. Conversely, if the cash rate rises, your interest payments may increase.

3. Fixed rate home loans

With a fixed rate home loan, your interest rate and repayments are locked in for a set term, typically between one to five years. This option provides certainty in budgeting, especially when interest rates are expected to rise. However, if rates decrease, you won’t benefit unless you switch to a variable rate or refinance, which may incur fees.

4. Split home loans

A split home loan combines both fixed and variable rate elements. This option allows you to enjoy the benefits of lower rates on the variable portion while having the stability of fixed repayments on another portion. It’s a balanced approach to managing interest rate fluctuations.

5. Packaged loans

Packaged loans bundle a home loan with other financial products, such as credit cards or transaction accounts. These packages may offer discounted rates or waived fees but often come with an annual fee.

6. Offset accounts

An offset account is a savings or transaction account linked to your mortgage. The balance in this account offsets the loan amount, reducing the interest you pay. For instance, if you have $50,000 in an offset account and a loan of $500,000, you’ll only pay interest on $450,000.

7. Redraw facilities

A redraw facility allows you to make extra repayments on your home loan, which can lower your interest costs. You can access these extra funds if needed, providing flexibility while saving on interest.

8. Line of credit

A line of credit functions like a secured credit card, giving you access to funds for big purchases, such as renovations or vacations. You only pay interest on the amount you use, making it a flexible financial option.

9. Low-doc loans

Low-doc loans require less documentation to prove income, making them ideal for self-employed individuals or those facing borrowing challenges. However, these loans often come with higher interest rates and stricter terms.

Ready to get started?

As your mortgage adviser, we’ll help you find the right home loan tailored to your specific needs. Get in touch today at  1300 780 440 or book a 10-minute chat to discuss your options and take the first step toward your property journey!