In this type of home loan, your loan is divided into two parts, one part being variable and the other as fixed. If you want to avail of the flexibility of a variable loan and peace of mind of fixed loan, you may want to go for a split home loan service.
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Buying your own home is a dream, yet the process can be overwhelming. But not with us! As one of the leading home loan brokers, we are widely known for providing personalized services to our clients whilst finding the most appropriate lenders offering home loans at competitive interest rates.
With years of experience and an extensive understanding of the market trends, we take pride in ourselves while providing efficient services to all our clients. We value your time, hence, lay major emphasis on getting the job done right in the first place.
It is rightly said that finding the right home loan expert can make your life easier than you think.
Let’s delve a little deeper into the features of the home loan services we provide:
1. Split Home Loan
Pros:
For fixed portion, your regular repayments will vary less if interest rates increase, making it easier to budget.
If interest rates fall, your regular repayments on the variable portion will fall too.
You can generally repay the variable part of the loan quicker if you wish.
Cons:
If interest rates rise, your regular repayments on the variable portion will rise too.
Your additional repayments of the fixed-rate portion will be limited.
There may be significant break costs that you must pay if you exit the fixed portion of the loan early.
2. Variable Interest Rate Loan
The full variable loan is a loan with variable interest rate. This rate usually changes upon banks discretion or RBA rate fluctuation. Variable rate loan provides flexibility and luxury of makes changes to your loan to a certain extent.
Pros:
If interest rates fall, the size of your minimum repayments will too.
Standard variable loans generally allow you to make extra repayments. Even small extra payments can cut the length and cost of your mortgage.
Basic variable loans often don’t come with a redraw facility.
Cons:
If interest rates rise, the size of your repayments will too.
Increased loan repayments due to rate rises could impact your household budget, so make sure you take potential interest rate hikes into account when working out how much money to borrow.
You need to be disciplined around the redraw facility on a standard variable loan. If you dip into it too often, it will take much longer and cost more to pay off your loan.
If you have a basic variable loan, you may not be able to pay it off quicker or get access to money you have already put towards your loan.
Offset accounts may be available with variable rate only.
3. Fixed Interest Rate Loan
The loan under this term is fixed at a certain rate for one to five years. It guarantees your repayments won’t be affected by the changes in interest rates. However, as a part of the mutual agreement with lenders, this fixed rate can be altered at the end of the given time period.
Pros:
Your regular repayments are unaffected by increases in interest rates.
You can manage your household budget better during the fixed period, knowing exactly how much is needed to repay your home loan
Cons:
If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same.
You can end up paying more than someone with a variable loan if rates remain higher under your agreed fixed rate for a prolonged period.
There are extremely limited opportunities for additional repayments during the fixed-rate period.
There may be significant break costs that you must pay if you exit the loan before the end of the fixed-rate period.
4. Interest Only
Generally, the interest is given as the repayment of this principal amount. Usually, it occurs for a period of up to 5 years. As it doesn’t involve repaying off your principal, the amount of repayment is lower. At the end of the scheduled time period, you will start paying off both the principal and interest.
Pros:
Lower regular repayments during the interest-only period.
If it is not a fixed-rate loan, there may be flexibility to pay off, and possibly redraw, the principal at your convenience during the interest-only period.
Cons:
The overall cost of the loan is likely to be significantly higher.
At the end of the interest-only period, you have the same level of debt as when you started.
If you’re not able to extend your interest-only period, your repayments will increase at the end of the interest-only period.
You could face a sudden increase in regular repayments at the end of the interest-only period.
5. Low Documentation Loan
This type of home loan is a great alternate home loan solution for business owners who are seeking lending based on lesser documentation for approval. Though the higher rate of deposit might be mandatory as compared to a standard loan.
Pros:
Lower requirement for evidence of income.
Cons:
You will probably pay higher interest than with other home loan types or may need a larger deposit, or both.
6. Introductory Loans
Mostly those homebuyers who have bought their first home might be interested in considering this option. It is though equally popular among common people. The discounted rate for the first six or twelve months can be obtained through this type of loan. Afterward, it rolls back to the normal variable rate.
Pros:
Lower regular repayments for an initial ‘honeymoon’ period.
Cons:
Loans may have restrictions, such as no redraw facilities, for the entire length of the loan.
When the honeymoon rate period ends the loan may roll over into an interest rate that is not as competitive as elsewhere.
Some banks may charge early termination fees if you decide to switch to a new lender.
If you are looking for an efficient home loan broker with extensive knowledge and vast experience, you are at the right place. We are the best-in-class home loan service providers. Please contact us or call our experts at +61 430910007 to mitigate all your queries.
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