General Info

Most Common Home Loan Products in Australia

By admin ⋅ March 5, 2008 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

Ok so this post isn’t going to be too entertaining but it’s important to get the basics listed so they can be referenced at any time. Let’s start with a brief description of the generic Mortgage Products that all the institutions offer.

Standard Variable Rate

Probably the most popular type of home loan in Australia. Being variable, the interest varies up and down throughout the life of the loan.

Basic Variable Rate

A lot of lenders offer the Basic Variable with a lower interest rate compared to the standard variable but with fewer features. Again, the interest rate varies up and down throughout the life of the loan.

Fixed Rate

Interest rate and loan repayments are fixed for a set period, between one and 5 years. Most fixed loans automatically convert into a variable loan at the end of the fixed rate period. Additional repayments cannot be made with a Fixed Rate loan.

100% Offset

A little tricky to understand Offset loans have a savings account linked to the mortgage loan. The purpose of savings account is so that the balance of funds in the savings account is 100% offset against the interest being charged to the loan account. So, instead of interesting being charged on the balance of the home loan, it gets charged on the balance minus the funds in the savings account.

All-in-one

Works a lot like the 100% Offset but instead of having a savings account in conjunction with the loan account, any income and additional savings go straight into the loan account therefore interest is being charged daily on the lower balance. Funds required for everyday use can then be withdrawn from the loan account as needed.

Low Doc

For those that are self-employed and don’t have time to provide two years of financials (most banks require 2 years), applicants can provide a signed declaration of their income and servicing is based on this. There are usually LVR restrictions with these products
Line of Credit
Almost like a large credit card facility secured over your residential security. Applicants can then draw down to a set credit limit as required. Lines of Credit are popular with investors and are usually interest only. If you’re not a good money manager then a Line of Credit is not for you!

Other Loan Types & Terminology:

Non-conforming Mortgages

For those applicants that may have adverse credit issues eg. Defaults, judgments etc. or past repayment issues eg. Dishonours or reversals on their home loan, short-term employment, savings from an unusual source or other unique criteria, then there are lenders who specialize in this department and are called non-confirming lenders.

Combination home loans

Simply having a combination of both a variable and a fixed portion. Eg. Having 2 separate loans splits secured against your security