Loan Products

Variable Rate Loans

Basic Home Loans

Fixed Rate Loans

Introductory Loans

Professional Packages

Lines of Credit

Construction Loans

Reverse Mortgages

Bridging Loans

Variable Rate Loans

These are loans where the interest rate can vary througout the term of the loan. That is to say the interest rate may go up or down during the loan term largely in line with changes to interest movements set by the Reserve Bank.  Your repayments will increase if interest rate increases and conversely if rates fall so will your reapyments.

There are two broad categories of variable loans, standard and basic.

Standard variable loans have a number if features such as redraw facility, additional repayment option (lump sum or regular), salary crediting and offset accounts. The basic variable home loan normally has fewer features but also has a lower interest rate so you are not paying for laon features that you may not use.

Variable rate loans give borrowers flexibility because they can pay additional extra repayments on top of their weekly, fortnightly or monthly repayments and there is often no penalty for paying out a variable loan early.  Paying extra on your loan, be it by way of regular repayments or a lump sum, reduces the outstanding balance and therefore saves you in interest costs.

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Basic Home Loans

Basic, Discount Variable or No Frills home loans as they are known are just that, basic. These loans have fewer features and therefore a lower interest rate and as a result you are not paying for what you don't use. Features such as redraw, salary crediting and the abilility to make extra lump sum or regular repayments are rarely part of basic home loans. Investors often use these loans as they don't require the features of the other loans and they receive a competitive interest rate.

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Fixed Rate Loans

These are loans where the borrower's interest rate and repayments are fixed for a set period, usually from 1 to 10 years and sometimes longer. These loans revert to the standard variable rate at the end of the fixed period unless "rolled over" for another fixed rate term (at prevailing rates).

Repayments can normally be either principal and interest or interest only however, most lenders require borrowers to start repaying the pricipal after 5 years.

Fixed rates create certainty for borrowers as they know exactly how much their repayments will be for the duration of the fixed rate period.

Lenders normally charge a fee or penalty called a "break fee" if a fixed rate loan is paid out early. This is because the lender has lent the money to you at a certain rate and depending on rate movements, may not be able to lend that money out at the same rate (if rates have fallen) and therefore will incur a loss which is passed onto the borrower in the form of a break fee. This fee is typically determined according to a preset formula. In the past extra repayments were not allowed but some lenders now provide an option whereby extra repayment can be made up to specific dollar amount or a multiple of the monthly repayment without incurring a penalty.

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Introductory Loans

These are variable rate loans with a discounted interest rate off the standard variable rate (commonly over 1% less), lasting a certain period of time, usually 1 year. After this period they normally revert to the standard variable rate. Sometimes depending on the lender, rates can be fixed or capped during the initial/honeymoon period. Whilst during the initial period the repayments are attractively low, over the longer term they often prove to be more costly and hence are rarely recommended.

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Professional Packages

Professional packages are not, as the name suggests, only for professional borrowers. The criteria to be eligible for a professional package is predominately based on the amount you are borrowing. Each lender who offers a professional package sets a minimum loan size to qualify, some as low as $100,000. The packages on offer from lenders often provide a discounted interest rate off the standard variable rate together with a range of extras including discounts on credit card fees, insurance and in some cases, application fees. The interest rate discount normally increases in stages as the size of the loan increases.

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Lines of Credit

Generally line of credit loans are used as interest only loans and don't have a loan term like conventional loans which have terms of say, 10, 15, 25 or 30 years. In most cases the minimum repayment is equal to the interest accrued for the month. In some cases the interest can be capitalised. Borrowers do not need to fully draw down the loan at settlement and can use their funds when it suits them. Lines of credit work similar to an overdraft but with much better interest rates. Care needs to be taken though as some borrowers can quickly eat up the equity in their home if spending is not kept in check.

Investors find these loans useful as they provide great flexibility and only require minimum repayments.

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Construction Loans

If you are building a home or planning major renovations, a construction loan is more than likely the type of loan that you will use. There are a few differences between other loans and a construction loan. You will need a fixed price building contract from a licensed builder and council approved plans before a loan can be advanced. Payments to the builder are normally made in stages. Some lenders require inspections at each stage before a payment is released and some charge a fee each time a payment is made. During the period of construction loan repayments are interest only and then revert to principal and interest once the home is completed but additional repayments are able to be made at any time during the construction phase. On completion of the home a final valuation will occur and the loan will then revert to the selected loan product. Fees are often charged for the valuation. Lenders frequently only lend up to 90% of the property.

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Reverse Mortgages

Reverse mortgages are gaining popularity and allow you to unlock equity in your home. Unlike conventional mortgages no repayments need to be made until the borrower dies, moves into long term care or sells the property. The interest due is simply added to the amount borrowed and normally repaid out of the proceeds of the sale of the house. Most lenders require the youngest borrower to be 60 years of age or older and can borrow between 15% & 45% of the value of your home. These loans are a valuable option for persons who are asset rich but with little disposable income.

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Bridging Loans

If you want to purchase a new property before selling your current home a bridging loan may be required to fund the new purchase. A bridging loan is a short term loan, normally between 6 and 12 months. This will give the borrower time to sell the original home. Often repayments are interest only and in some cases can be capitalised until the first home is sold assuming the borrower has sufficient equity. Interest rates are much more competitive these days compared to recent years where rates made bridging finance quite expensive.

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