Home Loan

Home Loans – Which One is Right for You

Whether you are a first time home buyer or have bought property earlier, chances are that you would also be considering for a home loan and these days by no means one-mortgage-fits all. Variable such as where you live and how long you plan to stay can make certain home loans best suited to your circumstances and choosing wisely is the key to saving a lot on your down payments, fees and interest.

Here is a quick guide to the basic types of loans you are likely to come across.

  • Fixed Rate

Fixed rate loans allow the interest rate to be set for a certain period of time and therefore your repayments stay the same, no matter what changes the reserve bank makes to the official cash rates. If you think that interest rates will rise or you prefer to have some certainty about your payments then the fixed rate loan would be more suitable for you. Lenders normally offer a fixed rate for a period of five years.

  • Variable Rate

Variable rate loan is the most common type of home loan and the interest rate charged can be more or less depending on the official cash rates set by reserve bank. This means that if the cash rate goes up, so does your repayment, but if they fall, then you can pay less each month. Standard variable home loan offers flexibility with many offers such as redraw facility, cheque books and the ability to make lump sum payments or transfer your loan to another property in future.

  • Split Rate

Not all who locks in a fixed interest rate wants to fix their entire loan amount, this is because they fear being stuck paying more than they need to if interest rates fall. Instead, borrowers can fix a portion of their loan amount to lessen the risk and keep their future repayment options open. The rest of the loan will remain on a variable interest rate.

These are some of the home loans you need to know as selecting the right home loan can be just as important as choosing the right property.

Posted by Roberta Banks