There are various ways to borrow money. The choice you make affects how much you can borrow as well as the types of loans you can apply for. New home loan products are emerging rapidly in the market. Mortgage Consultants at PJ Home Loans can help you find a loan and professionally package it so that it suits your particular needs.
Generally people borrow money on their own or with a partner. There are also other ways to borrow money which can give you the flexibility you need to be able to buy the property you want. These include Property Share (purchase with friends and keep your finance separate) or Guarantor Support and Low Documentation loans for self-employed people.
Standard variable loans are one of the most popular home loans in Australia. Interest rates can go up or down over the life off the loan depending on the official rate set by the Reserve Bank of Australia and funding costs. Your regular loan repayments pay off both the interest and some of the principal. With Standard Variable Rate Loans, you are allowed to make extra repayments. Even small extra payments can cut the length and cost of your mortgage significantly.
One of the disadvantages of having a variable rate home loan is increased loan repayments due to rate rises could impact your household budget. You can also choose a basic variable loan, which offers a discounted interest rate but has fewer loan features, such as a redraw facility and repayment flexibility.
With Fixed Rate Home Loans, the interest rate is fixed for a certain period, usually the first one to five years of the loan. This means your regular repayments stay the same regardless of changes in interest rates. At the end of the fixed period, you can either fix the rate again, at whatever rate your lenders are offering at the time, or move to a variable loan. See our Guides and Tips section to compare the Pros and Cons of Fixed Rate Loans.
Split Rate Loans
Many customers opt for Split Rate Loans where your loan amount is split, so one part is variable, and the other is fixed. Customers get the flexibility on choosing the proportion of variable and fixed. The good part about Split Rate Loans is that you enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan.
With Interest Only Loans customers need to repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. Your monthly repayments are lower since you are not also paying off the principal. At the end of the interest-only period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold, having achieved capital growth. Our Tips and Guides section will give you a good idea of the Pros and Cons of Interest Only loans.
Line Of Credit
With Line of Credit Loans, you can pay into and withdraw from your home loan every month, so long as you keep up the regular required repayments. Many people choose to have their salary paid into their Line of Credit account. With Line of Credit Loans, you can use your income to help reduce interest charges and pay off your mortgage quickly. This type of loan is good for people who want maximum flexibility in their access to funds. One of the disadvantages of Line of Credit Loans are, they usually carry slightly higher interest rates.
Introductory loans offer a discounted interest rate for the first 6 to 12 months, before the rate reverts to the usual variable interest rate. This product was originally designed for first-home buyers, but now available more widely to many types of loans. Most of the lenders offers Introductory/Honeymoon loans, so that customers get lower regular repayments in the initial period to avoid financial burden.
Low Doc Loans are popular with self-employed people. These loans require less documentation but often carry higher interest rates or require a larger deposit because of the perceived higher lender risk. In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a low doc loan may be your best opportunity to borrow money.
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