| Loan Type |
Benefits |
Disadvantages |
| |
|
|
| Standard Variable Rate |
Can pay weekly, fortnightly, monthly. Redraw possible. Extra repayments allowed. May have cheaper interest rate in the first year. |
An early repayment fee may apply to loans paid out within a specific time when a “honeymoon” rate is taken. |
| Basic Variable Rate |
Low interest rate. Extra repayments allowed. Possible redraw facility. |
No off-set available. |
| Off-set |
Ready access to savings account by ATM, EFTPOS, cheque. As savings off-set the loan amount a reduction in interest paid may be achieved. |
Interest rate may be higher that the standard variable rate. The savings account represents another account to manage. Not all off-sets are 100% off-sets. |
| Line of Credit |
Ready access by ATM, EFTPOS, cheque to your approval limit. Reduction in interest paid can occur as all income paid into the account. Extra payments at any time. |
Interest rate may be higher than standard variable rate. Disciplined approach needed as ease of access may encourage spending. Interest only, so debt may not reduce if not managed properly. |
| Fixed Rate |
Helps budgeting as your repayments are fixed for a period. Some lenders allow you to make extra payments without penalty. Principal and interest payments possible, so loan reduces over time. |
Loan can cost more if interest rates decrease. Penalty applies if you break the contract before the end of the term. |
| Combination |
Having part of the loan at variable and fixed rates can provide peace of mind. You can manage the variable portion as you would normally. |
Professional advice required on how to structure the loan. Short term debt may now be taken over a longer period. |
| Bridging |
Allows greater flexibility as you can move in or build your new home before you sell your current one. |
You require a stronger financial position because of the greater interest commitment, particularly if you do not sell at the price you wanted or by the target date. |
| Lo Doc |
No financials/proof of income required. |
Normally 20% deposit /equity required. Interest rates can be higher. Product may have limited features. |
| No doc |
No financials/proof of income required. No asset and liabilities declared. |
Normally 35% deposit/equity required. Interest rates can be higher. Product may have limited features. |
| Reverse Mortgages |
Allows you to borrow money against your property without having to make regular payments. |
Interest rates can be between 1-2% higher than the standard variable rate. Product may have limited features. |
| NB: These are very general comments. Please consult your Finance Manager for more details. |
