Choosing The Right Home Loan

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Choosing The Right Home Loan

There are various types of home loans on the market, all offering differing rates and features. It is important to understand the benefits of each in order to make an educated decision on which path to take. 

We have listed a few of the different types of loans below to help get you started:

Honeymoon Loans

With lower repayments for the first six to twelve months, a honeymoon loan’s payments increase to a standard variable loan after this period. It is important to ensure the increased payments can be met following the initial period. You could also be faced with a fee following the end of the honeymoon period to switch to another loan type, or a rate that is not as competitive as other in the market.

Basic or “No Frills” Loans

A variable loan rate with a relatively low interest rate. Repayments will rise and fall with fluctuations in interest rates. With no extra options available, the low rates for these loans couldn’t mean that you can repay the loan faster. Keep in mind to check the loan conditions – particularly your ability to make additional repayments, and pay-out without a penalty, to ensure they suit your circumstances.

Standard Variable Rate Loans

The most common type of loan available, repayments with a standard variable loan with fluctuate with interest rates. This loan offers more flexibility than the basic or “no frills” loan, such as a redraw facility, the option to split between fixed and variable, extra repayments and portability. These extra options should be taken into consideration when choose your type of variable loan.

Fixed Rate Loans

These loans have a set fixed interest rate for the specified period – usually one to five years. With advantages such as allowing you to organise finances and repayments without the risk of rising interest rates, this is offset by not benefitting from a drop in rates. Following the end of the term, all fixed loans automatically revert to the applicable variable rate. At this stage, you have the option to lock into another fixed rate for a new term, switch to variable, or go for a loan wherein you split with a percentage fixed and the remainder variable. These loans may have limited features, as well as lack the flexibility of 100% variable loans. There may also be early exit fees and limited ability to make extra payments.

Equity Line of Credit Loans

Using the equity in your home for things such as home renovations, investments or other personal purchases, repayments for this type of loan are determined by the interest rate applicable at the time. If you have sufficient equity, you will need to make a separate application for a line of credit loan. An added advantage of this loan is the ability to make unlimited repayments as these are not set. It is important to check the conditions of these loans as they are sometimes more expensive than standard products.

Professional Home Loan Packages

These loans are offered to provide an all-in-one package. It offers interest rate and fee savings on your home loan, credit card and transaction accounts and some lenders will waive annual fees. Those annual fees could add up to a few hundred dollars.

Some professional packages also offer increased flexibility, with some banks willing to waive product switching fees when changing from a variable to a fixed rate, or converting a principal and interest type loan, to an interest only loan.

Bridging Loans

This loan may be necessary when buying one property before the existing one is sold. A bridging loan covers a financial gap, and is generally secured against your property as you are utilising equity in your existing property. These loans are usually short term and more expensive than other types of loans.

Don’t embark on this journey alone. Our Alchemy Finance brokers are experts in their field and will guide you through your options to find the solution that better suits your situation.

Our Panel Of Lenders

At Alchemy Lifestyle Group, we have a wide range of specialist lenders that can help you achieve your financial goals.