Home Loan Types

When it comes to mortgages, there are a number of options to choose from. In Australia, there are a variety of home loan types offered by lenders and financial institutions, including a fixed rate loan, a line of credit, and more. Each loan product has different terms and conditions attached to it. This is what makes it difficult for people to decide which home loan type is in line with their financial goals and suitable for them.

We, at Hunter Galloway, understand how important it is to make the right decision, especially when it involves a long-term financial commitment. Therefore, to make it easier for you to choose the right product and get a better understanding of what it is about, given below is a breakdown of various home loan types offered by our panel of lenders, along with the things you should consider when selecting a loan product.

 

Basic Loan

It is one of the simplest types of home loans with minimal features and low or no ongoing fees. The basic home loan has very low-interest rates. In fact, often the application fee is either waived or you have to pay a very little amount. With this type of loan, you only pay for the features you need at a minimal cost.

 

100 Percent Offset Account

With this home loan type, you can decrease your interest repayments and pay off your entire loan sooner rather than later. The interest is charged on your home loan balance after subtracting the offset account balance from it.
Under this loan type, your home loan is linked to your savings account. For example, if the loan value is $275,000 and you have $50,000 in the savings account, the interest will only be charged on $225,000.

 

Fixed Rate Loan

In a fixed rate loan, the interest repayments and loan repayments are fixed for a certain period of time; it normally varies between 1 and 5 years. It is a great option for those people who prefer to prepare a budget for all their repayments and don’t want their interest rates to change. The fixed rate loan mitigates the risk of rising interest rates.

 

Rate Tracker Home Loan

A rate tracker home loan is a variable rate loan, wherein the interest rate is linked with the Reserve Bank of Australia (RBA). When the amount of RBA rate moves up and down, the interest rate on a loan also fluctuates the same way.

 

Line of Credit

If you wish to refinance and also have equity in your home, a line of credit is the right choice for you. It is normally taken out by those who want to renovate. A line of credit allows people to draw out a certain amount bit by bit or on a lump sum basis. It’s like a revolving loan that allows you to withdraw a certain amount again and again. The amount you can withdraw depends on the equity held by a borrower on his or her loan.

 

Equity Loan

Home equity is an amount you get after subtracting your outstanding mortgage from the value of your home. With the home equity loan, you can borrow a certain amount and use the home equity as a collateral security.
Normally, equity loans have fixed repayments schedule with fixed terms and a fixed interest rate. It gives you access to the amount you have paid off.

 

Professional Packages

As the name suggests, this one is specifically designed for professionals, such as accountants, lawyers, or physicians. In other words, professional packages are for those who want to borrow a high sum of money, usually over $250,000. The professional package consists of various features, including a free offset account, interest rate discounts, credit card benefits, and a lot more.

 

Low Doc Loan

Low doc loan is basically for those people who are self-employed. It is specifically for those who have a source of income and/or assets in their possession, but they are not able to provide a proof of income, tax returns, financial statements, or any other evidence.
Under this home loan type, a person does not have to provide any proof of income and banks approve the loan without income verification. However, credit assessment to make sure you can pay back the loan.

 

Things to Consider When Choosing the Home Loan Type Suitable for You

If you want to find out which home loan type is suitable for you, keep the following things in mind:
• Do you have a proof of income and other documents required for a loan application?
• Are you required to make additional repayments?
• Are you able to redraw additional repayments?
• Are you able to access the funds through ATM or offset account?
• Do you need protection from interest rate fluctuation?
• If you want to apply for a large amount of loan, do you qualify for a professional package?

These are some of the very basic, yet crucial questions when it comes to choosing the right home loan type. However, speak with Hunter Galloway for further advice and to guide you in the right direction.