Choosing Your Home Loan: 5 Home Loans You Should Know

“Finding the right home loan can be a lot like finding your one true love. There is many to choose from, but only a few suits your needs. Some will reject you, some you’ll dump after a while and some you’ll be stuck with for many years to come”

With so many home loans to choose from it can easily get overwhelming, especially if you’re a first home buyer, and looking for your first home loan.

Allow us to share the five most common home loan options available to get you started on your home loan journey.

Fixed-rate loan

A fixed-rate loan is one of the simplest home loans available, it allows you to lock in the current interest rate at the time of settlement for a specified period of time (eg. 1 year, 2 years, 5 years, or longer). Providing a stable repayment throughout the fixed loan period, regardless of changing interest rates in the lending market.

Though some people might feel they might lose out on falling interest rates as the market changes. There are other things to consider,

Variable-rate loan

Whereas a variable-rate loan is subject to interest rate changes, according to the conditions of the lending market. Lenders may move the variable rate, up or down, in concern with the RBA intervention in altering the “Cash Rate”.

The key reason it’s a popular loan option is that it provides you with the flexibility to switch lenders without incurring break cost fees.

In terms of repayment, a variable rate loan means that the monthly loan payments will change to match any changes in the interest rate applied.

Split Home loan

A split home loan is proportionally combined as partially variable and partially fixed interest rates. Effectively giving you the best of both worlds.

You essentially split your home loan balance into two different accounts – being charged a fixed interest rate and one charged a variable rate at different portions. Splitting your home loan means you can take advantage of the benefits of both types of rates.

If you’re not sure what split ratio is suitable for you feel free to contact one of our lending specialists at Abacus Home Loan, to help find the right split for you.

Low-Doc loan

This type of loan is an option for borrowers who have difficulty demonstrating a consistent form of income, such as people who have their own business and or self-employed.

It allows self-employed people to apply for a home loan without the standard paperwork at the cost in the form of a marginally higher interest rate. If you’re looking for fast, flexible mortgage finance a low document loan could be suitable for you.

Not every lender offers low doc loans to the public. At Abacus Home Loan we specialise in Low Doc lending and have assisted hundreds of self-employed Australians with our low doc loan products. To explore the options available that suits your financial situation, speak with our team of lending specialist.

Construction loan

For those looking to build a home or do major renovations, as opposed to buying an established property, a construction loan is most suitable to them. They may be short-term loans, usually for a period of 3 – 18 months either secure or unsecured. It’s funded in ‘progress payments’ to cover the various stages of your home development process. Payment is sent to your builder as each stage of work is completed.

Luckily for new home builders, contractors aren’t paid for work that is incomplete. This helps to protect the borrower from any financial loss during the construction period. For your loan repayments, there is interest only payable on the amount of the loan drawn down. After the construction has been completed, the loan will revert to a standard home mortgage based on the lender you have chosen.

So how do I choose what is right for me?

We understand when it comes to finding the most suitable home loan for you it can be daunting, especially with all the types of products available in the lending market. When the time comes, don’t feel like you have to do it by yourself. Call us on 1300 268 686 and our team of lending specialist will gladly assist you today.

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions

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