Multi-Choice Home Loans : How to choose the best loan

Consider all Lenders
What Determines the Choice of your Loan?
Loan Choices - A Product Overview
Types of Home Loans
The Introductory Honeymoon Loan Standard Variable Loans Basic Variable Loans	Professional Packages Fixed Rates Revolving Lines of Credit
Loan Features
Redraw 100% Offset Accounts All-in-One Loans Combination Loans	Interest Only Loans Bridging Finance Pre-Approved Loans Interest in Advance Loans
Lo Doc Loans and No Doc Loans
Credit Impaired Loans

Consider all Lenders

Our panel of lenders consists of Australia's leading and largest banks to the smaller credit unions and building societies who offer some very competitive and unique products. We will go to the ends of the earth for you, so give us an opportunity to help you source the funds you need.

Our consultants will help you find the best lender and best loan for you from over 40 lenders, so give us a call to have your loan approved. We make it simple.

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What determines the choice of your loan?

Our aim is to find you the best loan for your set of circumstances and to make it simple and easy for you.

Do you have proof of income?

No - then we use a low doc lender where you are able to self certify your income. The interest rate achieved will depend on numerous factors such as loan size, property location, loan purpose and the Loan to Value Ratio (LVR).

Yes, you have proof of income and are chasing the best loan for your set of circumstances.

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Loan Choices

Choosing a loan - your guide through the mortgage minefield

It is easy to be daunted by all the various products on offer these days and by the column of printed interest rates in the various newspapers.

Many people seem to choose a home loan for all the wrong reasons, primarily because they have opted for the apparent best advertised rate on the day, or choose discounted establishment fees which more often than not end in disappointment and frustration.

We have simplified the task of understanding your choice by graphing an overview of the industry

Take 5 minutes to read this through and then call one of our consultants to discuss any questions you might have.

Remember, to determine the right loan, you must deal with more then just rates and fees. You must first qualify for that particular loan based on equity or savings and income. Secondly, the loan must have the features you need and thirdly, the lender must be able to deliver the level of service you require.

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Types of Home Loans

The Introductory Honeymoon Loan

This loan was designed initially by marketing merchants, allowing them to quote and advertise an artificially low rate in order to achieve sales. The loan gives you a cheaper rate for normally 12 months and then reverts to the standard variable rate for the rest of the term of the loan. Penalties normally apply should you wish to break the term of the loan within the first 3 years. This is generally not a good long-term choice. The loan does have benefits however for those who have a definite short-term cash flow problem.

Standard Variable Loans

A traditional style loan, the most common in Australia with repayments calculated as principal and interest generally over a 30-year term.

All variable rate loans may vary in rate either up or down over the period of the loan. These tend to be the most flexible type of loans with features such as extra repayments, offset accounts, redraw facilities and repayment holidays.

Basic Variable Loan

This variable rate loan was introduced by the banks as a no-frills discounted rate in order to combat the entrance of the non-bank mortgage managers who were, at the time, offering lower rates. Over time and with increased market competition this loan has evolved to include some extra features such as extra repayments and redraw facilities. These loans certainly have their place, particularly suiting the rate shopper or those on a tight budget with little extra cash for extra loan repayments.

Professional Packages

Some lenders offer discounts either to professionals or to those applying for loans greater than $150 000.00. A very popular style of borrowing since the loan has all the features of a standard variable loan with a 0.5% to 0.7% discount. Most lenders normally charge an annual fee of approximately $300.00 and then deliver a set of benefits for the package including a discount off the normal rate, no application fees and banking discounts.

Fixed Rates

Fixed rate loans allow the borrower to lock in the interest rate for a pre-determined term from 1-10 years, ensuring that loan repayments will not change over that term. This is particularly useful for those on a tight budget and those with large borrowings, who need the security of a fixed repayment without having to feel at risk of interest rate hikes.

The disadvantage of fixed rates is that they tend to be inflexible. Extra repayments are not normally allowed, redraw is not allowed and penalties for early payout can be quite stiff.

Some lenders do allow both extra repayments and redraw on fixed rates so if that is what will suit you, make sure to ask our consultants which lender offers such features.

Revolving Lines of Credit

Traditionally an overdraft facility, these loans were brought into the consumer arena by financial planners designing quick, non-tax deductible, debt reduction for their high-income earning clients.

A line of credit is essentially a giant credit card where funds can be drawn up to a pre-determined approved limit. Any funds paid into the loan can be drawn out again up to the limit. Used properly, this style of loan can significantly reduce interest costs.

This loan is suited firstly to cautious spenders and controlled budgeters who have fairly significant excess monthly savings, looking to pay their loan off sooner. Secondly, the loan is commonly used by investors for flexible access to unutilised equity in their own home in order to make further property or share market investing. An excellent tool for wealth creation.

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Loan Features

Redraw

A loan with a redraw facility allows access to advance or extra payments made to the loan account. You can make extra payments to the loan, helping to reduce interest costs, whilst still having access to the funds in the future. A fee is often charged when the funds are redrawn and some lenders have minimum redraw limits.

Tip: Always try and apply for an extra $5000 or more which you can pay straight back into the loan after settlement. These funds will then be available for redraw.

100% Offset Accounts

A loan with a normal transactional account linked to it with any funds deposited into that account, offsetting the balance on the home loan and thereby reducing the interest charged on the mortgage. For example, if your home loan balance is $150 000.00 and you have $ 10 000.00 in your offset account, you will only be charged interest on $140 000.00.

These style loan features suit borrowers with good disposable income and frugal spending habits. All monies earned be it salary, rent or investment income can be deposited directly into the offset account to immediately reduce the interest being charged on the home loan. It is also possible to delay expense withdrawals from this account by utilising a credit card for monthly bills, thus enhancing the benefit of an offset account.

Mortgage offset is tax effective because the account itself earns no interest thereby legally minimising taxable income. Please refer to your financial planner or accountant before making tax related decisions.

All-in-One Loans

These are normally principal and interest loans which are also used as transaction accounts. All income is paid directly into the home loan and living expenses are withdrawn from the loan, similar to a line-of-credit in operation except that the loan is reducing or amortizing. This loan is suited to borrowers who don't have 20% deposit funds and yet have fairly high disposable income.

Combination Loans

It is possible to combine different loan types from one lender. The usual scenario is to have 50% of the loan variable to allow flexible repayments with potential for redraw, the other 50% fixed in order to reduce the risk of rising or fluctuating interest rates. However, any combination is possible. Investors may wish to separate tax-deductible debt from non-tax deductible debt via the use of a combination loan. Entry costs on combination loans differ significantly, so please check with our consultants.

Interest Only Loans

Interest only loans require no principal payments. The maximum term allowed is usually 5 years with either a variable or a fixed rate option. These loans are useful for investments where the interest charged is deductible and the investor is not looking to reduce the loan balance because possibly other non-tax deductible debts are held.

Bridging Finance

These loans allow a borrower to bridge the time gap between the sale of their home and the purchase of another. Particularly useful if the purchase property has to settle prior to the sale of the existing home. Lenders qualify your maximum borrowings based on the final debt after sale, whilst taking into account interest charges that will occur on the whole debt for six to twelve months. This can be an expensive form of financing and it is imperative you talk to one of our consultants to confirm suitability.

Pre-Approved Loans

A loan that has been approved to a certain limit for a certain borrower. Drawn down of the loan being subject to the borrower locating a suitable property as security for the loan. This is an excellent start to property purchasing, allowing borrowers confidence in their bid for contract acceptance.

Interest in Advance Loans

These loans are used by investors traditionally at the end of the financial year. The product offers a discounted fixed rate loan that allows the customer to pay all of their interest for the next financial year in advance. It is a tax effective strategy of property investment.

Low Doc Loans and No Doc Loans

" Low Doc" means "low documentation" ie minimising the paperwork required to support the application for a loan.
" No Doc" means even less paperwork, ie simply complete an application form without any supporting paperwork.

This style of equity lending is fairly new to Australia but has become very popular for its simplicity. It suits both the borrower and the lender. The advantage for the borrower is that once you have acquired equity in a property, you now have an excellent chance of securing finance because the lender relies on the security of the property and not on your income.

Its simplicity makes it a winner. These loans are predominately for the self-employed but some lenders also accept PAYG income earners. The loans can be restricted by the Loan to Value Ratio (LVR), location of the security property and size of the loan. They are normally slightly more expensive than traditional loans due to the higher risk profile. The lower the LVR however, the greater the chance of reducing the interest rate charged.

Credit Impaired Loans

There are a number of lenders who specialise in providing loans to individuals who have a poor credit history, ie a history of defaults, judgments or bankruptcy. They are sometimes called lenders of "last resort". Their intention is to provide credit to individuals who would otherwise not be able to borrow, the objective being to get the borrower back on track so that in a couple of years the borrower is able to re-enter the mainstream mortgage market. The interest rates levied are dependent upon the applicant's credit rating and are obviously higher than normal bank interest rates.

Our consultants will help you find the best lender and best loan for you from over 40 lenders, so give us a call to have your loan approved. We make it simple.

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