Choosing the right home loan is very important as it can saves you lots of money. Read on to understand the different type of loans.
Honeymoon rate home loans
Honeymoon or Introductory rate home loans offer a low interest rate for a period of time, usually for the first year. The Honeymoon rate may be as much as one percentage point below the standard home loan rate. Honey moon rate could be fixed or variable. Once the honeymoon period is finished, the interest rate usually reverts to the standard variable home loan rate.
Low-doc home loans
Low doc loans are designed to assist people who do not qualify for a traditional home loan to buy a property. The requirement is that you need an ABN number for at least 2 years.
You may not be required to provide much of the paperwork that is necessary with standard home loans.
Low doc loans are designed to benefit those people who have trouble showing evidence of regular income. This could apply to casual workers or self-employed. They need some deposit saved or existing equity as the bank only lend up to 80% for low doc loans.
If you’re building a new home, this loan will help reduce interest payments during construction.
There are five instalments payments. The loan will be taken out in instalments as each stage of the building process begins. You only pay interest on the amount you have borrowed so far. As you are not drawing down on the full amount of the loan immediately, interest payments are minimised.
Variable home loan
This loan comes with a variable interest rate, which basically means that the interest you pay will be depend on the market condition. Interest rates in this type of loan can and will fluctuate.
Fixed rate home
A fixed rate loan protects you from rising interest rates and against higher payments for the future. If you want to your home for an extended period, this could be an important benefit.
The interest rate will not change even if the interest rate goes up and down. You have the assurance of knowing exactly what your repayments will be with the ability to fix your interest rate for a set period of time.
The payment amount, which includes the principal and the interest, will be the same despite even if the interest rate goes up or down. The fixed rate home loans give you confidence to budget accurately and plan your finances.
Choosing your home loan is an important decision, so it is important to speak to a finance specialist to see which home loan suits you and they can also help you to choose cheap home loans.