Home Loans SydneyFeel confused over which Sydney home loan to choose? A local Sydney mortgage broker can help you to organise your options, and select the mortgage that is right for you.
So, what options do you have? There are so many types of home loans each with varying interest rates, features, loan structures and repayment options. The most common loans in Australia are:
Standard or Basic Variable Rate Home LoansWith a variable mortgage the interest rate can change frequently, as the Reserve Bank of Australia (RBA) changes official cash rates, and along with whether the lenders funding costs change. Most banks can cahnge rate independently from the RBA so as a homeowner, it pays to keep on top of what is happening to the ecnomy and how your lender views rate hikes. The rate that you pay when you take out the loan, will almost certainly not stay the same throughout the loan, because your lender can increase the rate, and you will pay more, or the interest rate may fall and you pay less in interest on the loan amount.
Standard variable rate home loans will often come with features that include redraw facilities and the ability to make extra repayments. You have a certain amount of flexibility over when and how often you make your repayments, and you can choose from a range of flexible options. Borrowers can choose to combine a fixed loan with another, usually in the form of a split loan.
Basic variable rate home loans are often called the ‘no frills’ option for mortgages. These loans come with lower interest rates than standard variable or fixed rate loans. But, there is not much flexibility with basic variable rate loans and you may not be able to combine with any other loans. So borrowers must weigh up whether a lower rate is more important than extra features before choosing which variable rate mortgage to choose.
Fixed Rate Home LoansWith a fixed rate loan, the borrower and the lender agree to fix the interest rate on the loan, and interest repayments stay the same for a set period, usually from one to five years.
Fixed rate home loans allow borrowers to know exactly what their repayments will be each month, and provide protection over any rises in interest rates. The loan has a fixed interest rate, usually for a term between one to five years and this rate stays the same regardless of whether interest rates set by the Reserve Bank of Australia rise or fall. Customers can fix either part of the loan or the whole amount of the loan. When the agreed term ends, the loan reverts to a standard variable rate, which may be a different rate than when the loan was fixed. Customers need to ask what the rate is likely to be once the fixed term period ends, and whether the loan can be fixed again for a new term period.
Low doc or No Doc Home LoansAre you self-employed or a contract worker? Believe it or not, you can get approval for a home loan and enter the Melbourne property market.
Traditionally aimed at self-employed borrowers, low-doc home loans present more risk for the lender, therefore the risk is usually built in to the mortgage at cost to the borrower. The loan can be a fixed rate or variable rate mortgage, and can be used to borrow, up to 80% of the property. The lender will factor in the extra risk by using a higher interest rate, or charging lenders insurance.However, self-employed borrowers, seasonal workers, as well as customers with no proof of income, who struggle to gain approval for the usual loan types can benefit from these loans that require less documentation or in some case, no documentation of your income. The loan itself operates the same way, but you are able to gain approval without as much documentation.
A low-doc loan still requires some evidence of income such as back statements or tax returns etc, while a no-doc home loan works by self certification. A statement signed by you declaring your income is accepted by the lender. Borrowers applying for a low-doc or no-doc home loan will need to have a clean credit history.
Introductory Home LoansThe “honeymoon” home loan will most likely offer you the lowest rate on the market. This tempting low rate can save you considerable amounts in the beginning, but watch for the rate that the loan reverts to once the introductory period is over. The “honeymoon” period – usually between six months to one year – sees you paying a very low home loan interest rate, sometimes as much as 1% lower than other home loans. The low rates are usually only for this short period of time. After that the loan with revert to a standard variable rate and this could be considerably higher.
Introductory home loans do not usually come with many added features. This is how the rate is kept so low. Some lenders may offer certain benefits wither their introductory loans, but usually the loan will be fairly basic. But it may be worth going without these features if you really want the low rate.
Construction LoansA construction loan helps if you want to build your own home. You can take the money out in installments and only pay interest on the amount withdrawn so far. With a home renovation loan you can fund renovations and improvements to an existing property. Due to the high costs of purchasing a new home in Australia at present, many existing homeowners are choosing to renovate instead.
Loans used for construction or renovations are typically either Standard Variable Rate or Line of Credit. One advantage of most variable rate loans is that there is no penalty in paying the loan off quicker by making additional payments. Other useful features can include offset accounts, a split loan facility, redraw facility, direct salary crediting, portability and repayment options.
Equity Home LoansA home equity loan allows the borrower to use the equity in their home as collateral. These loans are sometimes useful to help finance major home repairs, medical bills or further education. A home equity loan then obviously in turn reduces actual home equity.
Usually you will need at least 20% equity in your home for you to take advantage of a home equity loan. Most home equity loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios. Home equity loans come in two types, closed end and open end.
Both are usually referred to as second mortgages, because they are secured against the value of the property, just like a traditional mortgage. Home equity loans and lines of credit are usually, but not always, for a shorter term than first mortgages.
No Deposit Home LoansBasically, these are no longer commonly available. With recent financial global crisis lenders are becoming more cautious about who they lend to and how much they will lend. Currently, you need a deposit to get a new home loan approved. However, if you have equity in an existing property you may be able to use this to fund a second puchase.
Speak to a mortgage advisor and see what options are available to you, for your money to work harder. Call us on  or submit your details on line:
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Sydney Home Loans
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No longer just a basic home loan. Full features like redraw, all at low interest rates. |
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Make life easier with a single monthly repayment. |
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New low interest rates are now on the market. Time to refinance and save.
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Don't be penalised just because you run a successful small business. Be treated as an equal here.
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Access the equity in your home to buy investments, fund home improvements or take that once-in-a-lifetime holiday.
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Introductory or honeymoon home loans can have some of the lowest interest rates around.
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