Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.

Advantages:

•   Flexibility
•   Lump-sum payments can be made without incurring a penalty.
•   If interest rates fall, your repayments will fall.
•   Often offer extra features.

Disadvantages:

•   If interest rates rise your repayments will rise.

Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.

Advantages:

•  Relatively low interest rate.
•  Lower repayments.

Disadvantages:

• Many of these loans do not have the same features or flexibility as other variable loans.

An introductory rate loan generally offers a guaranteed low rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable.

Advantages:

• Usually the lowest rates on the market.
• Some lenders provide offset accounts on these loans.
• Opportunity to reduce the principal quickly during the ‘honeymoon’ period.

Disadvantages:

• Payments will increase after initial introductory/’honeymoon’ period

Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However you won’t benefit if rates go down during the fixed term.

Advantages:

• Guaranteed rate, if interest rates rise your repayments won’t.

Disadvantages:

• Reduced flexibility.
• Extra repayments may incur a fee or be limited.

A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.

Advantages:

• Can save you substantial amount of interest if used correctly.
• Operates like a normal transaction account and has a chequebook, ATM card, etc. attached.

Disadvantages:

• May have higher monthly fees attached to the account.
• May require a minimum balance in the account

A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only.

Advantages:

• You can use the money when you need it and pay it back when you can.
• Rates are generally lower than a personal loan or credit card.

Disadvantages:

• Unless care is shown it is possible to reduce the equity you have built in your home.

A low documentation (or no documentation) loan is suited to investors or self-employed borrowers who do not meet the ‘standard’ lending criteria. This may include; those with an impaired credit history, those who are unable to provide the required documentation in support of their loan application, or those who wish to borrow more than 100% of the property value.

Advantages:

• Simple income declaration form.
• No tax returns.
• No financial statements.
• Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only.

Disadvantages:

• Generally a higher interest rate.

If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed. A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a ‘fixed price building contract’ and ‘council approved plans’.

Advantages:

• Competitive variable interest rates.
• Facility to draw money when necessary whilst building.
• Interest only payments during the building period.
• Additional payments can be made.

Disadvantages:

• Requires a fixed price building contract leaving little room for change whilst building.
• Some lenders charge a fee for every time you draw money whilst building.
• Given it is a variable loan; loan repayments will increase if interest rates go up.

With so many different loan products on the market, finding a home loan is not as simple as it used to be. There is a range of options available to you that may save you money, provide you with greater flexibility and peace of mind.

Our friendly consultants are experts and have strong knowledge and experience in the home loan market. As part of our sophisticated process, our consultants will use start of the art technology to compare hundreds of loans in a matter of minutes. This means we save you time and do the research for you. We will then provide you with a short list of loans that are tailored to your individualised needs – simplifying the loan selection process.

The Federal Government introduced the FHOG in 2000 to assist first home buyers with the costs of purchasing their first home. It was implemented at the same time as the GST was introduced and was also aimed at offsetting the effect this tax could have towards First Home Buyers.

When introduced it was a non means tested grant of $7000. In recent times we have witnessed changes to the scheme which has seen the initial grant boosted as high as $21000 for the purchase of new housing. Each State has different current rules.

The FHOG is a national scheme which is administered by each State and Territory. As such, there may be different incentives offered in each area such as reductions in stamp duty or other concessions.

We can help you to access the First Home Benefits you may be entitled to and can discuss your eligibility to these funds, so please call us to have a chat.

If you would like more information, please visit this Government website which has links to each State’s relevant information www.firsthome.gov.au

This one-off grant is available to First Home Buyers intending to live in the home they are buying. Basically, you are eligible if you are an Australian citizen or a permanent resident who is buying or building your first home in Australia and intend to occupy it as your principal place of residence within 12 months of settlement. Note that if you are purchasing the property in conjunction with others, they must also meet the same criteria for the grant to be available.

It is one thing to work out how much you can borrow, but you need to know if you can afford the repayments.

The amount you need as a deposit will depend on the type of home loan and the lender you select. Generally you will require a minimum of 5% of the property value.

Stamp duty is a tax levied on the purchase of a property. It is calculated according to the purchase price of the property and the state or territory the property is situated in.

As a rough guide, you should budget for between 5-7% of the purchase price, in addition to your deposit, to cover fees and charges. While mortgage and stamp duties will make up the bulk of this 5-7%, the balance may include;

• Building and pest reports
• Valuation fees
• Lenders mortgage insurance (LMI)
• Solicitors fees
• Insurances
• Utility connection fees – phone/gas/electricity
• Council and water rates
• Removalist costs

When deciding on the area to live in, apart from considering proximity to family, friends and work commitments, you will obviously need to think about prices. Prices will vary greatly from suburb to suburb.