Standard variable is the biggest selling loan category in the market and accounts for a big chunk of mortgage business. Getting a standard variable home loan is an easy process for a borrower who meets mainstream criteria and holds a good credit record.
Standard variable home loans often include redraw facilities, portability features and allow the borrower to make additional repayments. Borrowers have the option of making repayments weekly, fortnightly or monthly, and can combine their loan with another eg fixed rate or split loan. However, these flexible features come at a price – interest rates on standard variable home loans are higher compared to the basic loans.
An offset account loan links your savings account to your mortgage. These accounts allow you to offset your savings, salary and other cash resources against your home loan. You pay less interest on your loan as you’re only charged interest on the balance.
For example, if you have a $300,000 mortgage and $10,000 cash on the offset account, you will only have to pay interest on $290,000 each month. However, since your monthly repayments are calculated on the original amount, you are effectively paying extra on your mortgage each month. The additional repayments enable you to clear your debts faster.
Fixed Rate Mortgages, as the name implies, is effectively a loan locked in for a period of say, one, three or even five years. They are ideal for borrowers looking for security and certainty, and are concerned that interest rates may rise in the near term.
Reverse Mortgage products were introduced to Australia over 10 years ago and have become increasingly popular amongst asset-rich, cash-poor seniors who want to remain in their home and still have money to live and enjoy life. Reverse mortgages allow people over 60 to borrow against the equity in their home.
Line of Credit loans are also known as ‘evergreen loans’ because they don’t have a set term. Line of credit loans offer the most flexible option in the market as you have virtually unlimited access to your funds. A line of credit is only a sensible choice if you are extremely disciplined in managing your everyday finances. If you will be tempted to use the funds for spur of the moment purchases, a line of credit is probably not for you.