Home Loan Australia

By: EconomyWatch Content   Date: 26 November 2009

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Borrowers in Australia can utilize home loan funds for several property-related purposes in addition to buying a home. Real estate investment, property construction and renovation are common purposes s for applying for a home loan.

 

Home Loan Australia: Types

Home loan lenders in Australia offer a wide range of products and services, having different terms and conditions, for catering to the diverse needs of the home loan borrowers. Common home loan interest plans in Australia are:

Basic Loans: These are variable rate loans, having relatively low interest rate. Such loans help to save on interest by speeding payments when interest rates decline. However, basic loans tend to have less features and lower flexibility than other loans. While applying for such loans, one must ensure that the lender does not charge high prepayment penalties. These loans are ideal for first-time home buyers due to their low rates.

Standard variable rate loans: Such loans are most commonly offered by Australian banks. These loans are similar to a basic loan, though they offer more features and flexibility, and accompany slightly higher interest rates. Standard variable rate loan holders can choose a redraw option, which helps to split repayments between fixed and variable interest rates. This helps to make prepayments without penalty.

Fixed-rate loans: Under this home loan plan, the interest rate is fixed for a particular period, generally between one to five years. At the conclusion of this term, a borrower may chose to lock-in another fixed rate, switch to a variable rate plan or opt for a split loan. This is ideal for risk-averse borrowers. They help to budget repayments accurately. The flipside pertains to the enforcement of exit fees when the initial term expires.

Equity line of credit loans: These loans enable borrowers to use the equity in a property for financing other home-related activities, such as renovations. One can also use the equity for investing in other assets, including shares and funds. A large deposit in the loaned home is imperative for taking advantage of this feature. The interest rate on such loans tends to be higher than standard products. Also, in the absence of disciplined budgeting, one could end up ruining the equity built on a home loan.

Besides these, borrowers with low or irregular incomes can qualify for special Aussie home loans, including no deposit loans and non-conforming loans. Such loans have more lenient borrowing terms and conditions like lower deposit amount and documentation.


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