A variable rate home loan is one of the most common types of home loans in Australia, and is also one of the most competitive products for lenders.
A variable rate home loan is a home loan product which has an interest rate which fluctuates up or down over time as your lender sees fit. Unlike a fixed rate home loan where the rate is locked in for a fixed term, the interest rate of a variable rate mortgage moves up and down in accordance with market changes.
Fixed rate home loans offer peace of mind against rising repayments, which allows you to budget with confidence. Unlike a variable rate home loan where repayments move up and down in accordance with the cash rate, fixed rate repayments remain unchanged throughout the loan term.
This means that for the length of your fixed rate term — usually between one and five years, but sometimes as great as 10 or even 15 years — you’ll know what your repayments will be.
Whether you need to access your existing equity to finance a renovation, property purchase or even to fund your ‘bucket list’ retirement plans, a line of credit or equity loan can help you realise your personal and financial goals.
As your property increases in value, the difference between the amount you owe on your mortgage and the amount your property is worth is called equity.
An introductory variable interest rate home loan can help you lower your periodic repayments as you ease into your mortgage commitments.
While an introductory competitive rate loan can help you during the initial stages of your loan, you need to make sure that you effectively plan for the anticipated rate rise when the interest rate reverts back to the standard variable rate offered by the lender.
An offset account is a transaction account which reduces the interest payable on your home loan by the amount held in your account.
A reduction in interest can also shorten your loan term, as you’ll be able to pay your loan off sooner.
For example, a 100% offset account with $50,000 in it, on a home loan of $300,000, would see interest-only calculated on a balance of $250,000. On a home loan of 5.50% over 30 years, this could amount to a saving of $90,000 in interest, with seven years cut from your home loan.
If you are looking to build your new home rather than buy an existing property, you need a different type of home loan known as a construction loan. A construction loan can also suit you if you are making major renovations to your existing home or to a property you have bought but which needs a bit (or a lot) of work before you call it home.
Low doc home loans, otherwise known as lite doc, or alt doc loans, offer you a home loan option if you’re self-employed. Rather than having to provide payslips, you can usually self-certify your income by providing statements from your accountant, recent Business Activity Statements, or a self-signed income declaration form.
Having bad credit shouldn’t stop you from getting a home loan and owning your own home or investment property. Due to uncontrollable life events, such as suddenly losing your job, going through a separation or divorce, or experiencing a sudden illness, you may find it difficult to keep up with your financial commitments.