Loan Options

Loan Options

An initiative of Loans4Me - Mortgage Broker & Personal Loans to offer training and professional development to the mortgage brokers with the backing of major industry support.

Did you Know ?

Standard variable loans are the most popular loans in Australia!

Variable rate loan

  • Repayments are calculated so that over the term of the loan both principal (original loan amount borrowed) and interest are paid off in full by the end of the loan term.
  • Usually offers a high amount of flexibility and benefits with a chosen repayment schedule and the allowance of extra payments.
  • Interest rate fluctuates depending on notification of the Reserve Bank of Australia.
  • There is a multitude of variable interest rates to choose from depending on the type of loan you require.
  • If interest rates fall, the amount of your minimum repayments will too. However, repayments increase as interest rates rise.
  • You need to be disciplined around a 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.
  • The loan is commonly taken over a 25 – 30 year term
  • You enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan.

Tip

Increased loan repayments due to rate rises could impact your household budget, so make sure you take potential interest rate increases into account when working out how much money to borrow.

Did you Know ?

Fixed rates offer security against rising interest rates!

Fixed Rate Loan

  • Fixed interest rate loans generally have similar features and flexibility of a variable loan. However, the interest rate is locked in for usually one to five years and does not vary within the fixed term period.
  • Your regular repayments stay the same regardless of changes in interest rates
  • If interest rates rise then the advantage is your rate stays the same and you could be saving money.
  • If interest rates go down, you don’t benefit from the decrease. Your regular repayments stay the same.
  • It is possible to exit out of a fixed rate but sometimes there can penalties involved which generally cover any shortfall or losses the lender may incur from the transaction.
  • A fixed rate option is usually available again at the end of the fixed period and can be beneficial dependant on what rate lenders are offering or you can change to a variable loan.
  • There is very limited opportunity for additional repayments during the fixed rate period.
  • You may be penalised financially if you exit the loan before the end of the rate period.

Tip

You can manage your household budget better during the fixed period by knowing exactly how much is needed to repay your home loan.

Did you Know ?

You decide on the proportion of variable and fixed you want on the loan!

Split Loan

  • A split loan enables you to choose part of your loan at a variable interest rate, which will move up or down in line with interest rate movements, and the remainder at a fixed rate, giving you certainty.
  • If rates increase significantly, part of your loan and budget is shielded from instability. However, if they drop over time, you will have to pay the fixed rate on your nominated portion.
  • You enjoy some of the flexibility of a variable loan along with the certainty of a fixed rate loan.
  • If interest rates rise or fall, your regular repayments on the variable portion will too.
  • You can repay the variable part of the loan quicker if you wish.
  • Only limited additional repayments of the fixed rate portion are allowed.
  • You could be penalised financially if you exit the fixed portion of the loan early.
  • When interest rates fall, either make your regular repayments on the variable portion to continue to decrease the principle part of your loan or put the difference away to use if there is a rise in interest rates as your regular repayments on the variable portion will also increase.
  • If you pay more than the required regular repayment, the extra amount is deducted from the principal. This not only reduces the amount you owe but lowers the amount of interest you repay. Making extra repayments regularly, even small ones, is a great way to pay off your home loan quicker and save on more on interest charges.
  • To pay off your home loan quickly – make weekly or fortnightly repayments. This will save you money as you end up making more frequent payments cutting the interest calculated and reducing the life of the loan.

Tip

Your regular repayments will vary less when interest rates change, making it easier to budget.

Did you Know ?

Interest only loans can assist investors with cash flow!

Interest Only Loan

  • You only pay the interest on the loan.
  • The principal loan amount (the loan amount originally taken out) remains the same while interest only payments are being made unless you make principle reductions or extra repayments.
  • The term of interest only repayments is usually for the first one to five years although some lenders offer longer terms.
  • Popular with investors as repayments are calculated on the interest component of the loan only and who may pay off the principal when the property is sold, having achieved potential capital growth.
  • Also available for owner occupiers.
  • Many lenders give borrowers the option of a further interest-only period.
  • Your monthly repayments are usually lower because you’re not paying off the principle.
  • You may have the flexibility to pay off, and often redraw the principle at your convenience.

Tip

There is a possibility that you could face a sudden increase in regular repayments at the end of the interest only period.

Did you Know ?

Extra repayments can be redrawn from your loan!

Principle and Interest

  • This loan option is one that is designed to have you pay your mortgage off within the delegated term of the loan, normally within twenty five or thirty years.
  • This means you pay the interest component plus a little extra each week, fortnight or month with the view of owning your home at the end of the long term.
  • At the end of the loan period the loan is paid out in full.
  • Loans are usually taken out by people wishing to own their home.

Tip

Rounding your repayment up to a higher amount will assist you in paying your loan off faster.

Did you Know ?

At the end of the ‘honeymoon’ period, the interest rate is likely to rise!

Introductory/ Honeymoon loan

  • Offered at a low starting rate for a six to twelve month period.
  • Can be variable or fixed, depending on option selected.
  • After introductory period has passed, the rate usually changes to a standard variable rate.
  • Loans may have restrictions, such as no redraw facilities for the entire length of the loan.
  • Some lenders will fix the rate during the honeymoon period, while others will maintain a honeymoon rate that is an agreed amount less than the standard rate.
  • As there are no advantages for owner occupiers it is best to pay these loans out as soon as possible.
  • Check your loan details to see if there is an early pay out penalty is you pay off your loan early.
  • Repayments are made up of the monthly interest on the outstanding balance, plus an amount that will reduce the principle.
  • Lenders will usually impose additional fees for those who wish to pay out their loan during the honeymoon period.

Tip

Set your repayments higher so you can pay off more in the low rate period.

Did you Know ?

You can use your income to help reduce interest!

Line of Cerdit

  • You have the capacity to pay the loan off much faster.
  • Great flexibility to draw on the equity in your home without having to apply for a new loan, so long as you keep up with the required repayments.
  • If you continue to draw on the surplus of this loan it may never get paid off.
  • Your salary can be paid direct into your line of credit account.
  • This loan requires a great amount of discipline because you can keep drawing out on the surplus making it hard to pay off the loan.

Tip

Have your rental income go into your home loan line of credit to help pay the loan faster and save interest.

Did you Know ?

You can access your equity to fund your retirement!

Land and construction

  • This loan is when you are building a new home or making major renovations to your existing home or property.
  • Land and construction loans are generally done in two stages – the first stage is funding the land that you have purchased; repayments will have to be made on this portion of the loan after settlement. The second stage is the construction process; the loan will be drawn down in stages as the house is built and you will be required to make repayments based on the balance of the loan.

Tip

By purchasing the land first you save in stamp duty costs.

Did you Know ?

You can access your equity to fund your retirement!

Builder/ developer home and land packages

  • House and land package are terms used by home developers to describe a deal that includes both a new home and the land on which it is built.
  • Developers can offer slightly different packages and most will have a variety to choose from. Deal directly through us with our builders or developers and get a great deal on your new home or investment property.
  • You can change from negative gearing and having to put your hand in your pocket each month to pay for your investment property to positive cash flow from your investment property. There are several options we can discuss with you.
  • The two basic types of house and land packages are: you select the block of land then choose from a number of standard or customised home designs. These packages are sometimes called ‘off the plan’ and in most cases, a house and land package will consist of a pre built home and the land it is built on.

Tip

We have obtained a relationship with well established and award winning builders so we can introduce you to some of the industry’s best.

Did you Know ?

Tax returns, BAS and bank account statements may not be required!

Low doc/ no doc

  • These options are popular among self employed people whose financials and tax returns aren’t up to date.
  • It is the easiest option for those who are self employed as less information is required.
  • These loans can have a higher interest rate and require a larger deposit, so doing something more to attain financials could be a better alternative.
  • The loan may over look non-existent or poor credit ratings.
  • These loans help people who have trouble showing their income on official documentation.
  • Allows retirees to access equity in their property to help fund quality of life or aged care needs.
  • Gives you the option to draw down on a lump sum or regular part payments, but does not force you to make any repayments during the loan term.
  • Interest is repaid on the death of the retiree, or when the retiree moves out of the mortgaged home permanently.

Tip

Popular for self-employed without current tax returns.

Did you Know ?

Too many loan enquires can impair your credit rating!

non conforming/ credit impaired

  • Designed for people who are self employed but have been for only a short amount of time or have had some form of credit glitch in the past.
  • Lenders are willing to overlook the past situations and the short term self employment if you have the ability to repay the proposed loan
  • People who earn money from unusual sources or unusual circumstances and do not fit the normal banking criteria.
  • These loans are an option for people who have been declined, are unsuitable or do not qualify a bank, building society or credit unions criteria for a loan.

Tip

Keep your online credit enquiries and applications low as it can affect your credit rating.

Did you Know ?

You don’t necessarily have to make repayments over both properties under this structure!

bridging finance

  • Useful if you are buying or building a new home before the sale of your existing one.
  • This loan bridges the gap between two home loans.
  • The lender takes security over both properties and lends against them until both sales are complete.
  • Generally a short term loan, interest is only paid during the loan period.

Tip

Useful If you are buying or building a new home before the sale of an existing one.

Did you Know ?

You maintain both a mortgage and a savings account with the lender!

off set

  • Fundamentally a saving account that is linked to a loan account.
  • Rather than earning interest on your savings deposit, the funds are used to off set the principle of the loan account.

Tip

Quite flexible loan option. They allow for overpayment or even underpayments if prior overpayments have been made.

Did you Know ?

You can switch your basic loan to a fully featured loan!

No frills or basic loan

  • Generally a loan with lower variable interest rate than standard variable loans.
  • The trade off for the discount has less flexibility and fewer features.
  • A basic variable loan doesn’t usually offer a redraw facility, removing temptation to spend money you’ve already paid off your loan.

Tip

Popular option for investors who want a low rate without the features.

Did you Know ?

A car loan is quite easy to obtain and quite quick too!

car loans

  • A car loan is a termed personal loan where you borrow the money that you have to repay within a certain time frame.
  • The type of car you buy and if you have any savings will determine how much you will need to borrow and the repayments you will need to make.
  • The repayments are usually fixed and you know how much has to be paid on a certain date usually monthly and usually the same amount for each repayment.
  • A personal loan term can vary from 12 months up to 5 years.
  • Personal loans are usually a fixed rate loan and the interest rate is locked in for the term of the loan.
  • Fees and charges apply for the personal loan.

Tip

Purchasing a new car is quite exciting! So don’t be disappointed finding a new car without first knowing if you can afford the car. Talk to us first.

Did you Know ?

You could save a lot of money on mortgage insurance premiums!


No mortgage insurance loan

  • This loan feature simply allows you to make extra repayments on your home loan and then access those funds if needed.
  • Your redraw amount could be used as a deposit on an investment property.
  • These loans do not require mortgage insurance or to pay a mortgage insurance premium.
  • Can save you thousands of dollars allowing you to buy your home sooner.
  • Mortgage insurance can be strict and passing the criteria can be the downfall of applying for a mortgage. This way can alleviate the mortgage insurance problem.

Tip

If you have been Declined by mortgage insurance this loan will help.