Types of Loans

P&I loans are where your repayments are reducing the loan balance over the term of loan.

With P&I loans you can generally make unlimited additional repayments over the term of the loan, unless it is a fixed rate loan.

A variable rate home loan is one where the interest rate is not fixed. Instead, the minimal monthly repayments may go up and down over the life of your loan as the variable interest rates change.

The interest rate can change depending on a number of factors such as:

• Changes to the Reserve Bank of Australia (RBA) official interest rates

• Changes to regulations and laws that govern how lenders operate

• Changes to lenders cost of borrowing or business decisions

Common Features:

• Unlimited additional and lump sum repayments

• Redraw options

• Offset or multiple offset options

• P&I and IO loans available

• Option to move to a fixed rate with all or part of the loan (refer below for fixed rate features)

A fixed rate home loan is one where the interest rate will not change over the term of the fixed rate period.

Fixed rate home loans are often for 1-5 years but longer fixed rate terms are available. After the expiry of the fixed rate period, the rate will change to a variable rate unless you enter into another fixed-rate contract.

Features:

• Most fixed rates limit additional repayment options

• Most lenders do not allow for offset.

• Available for Owner Occupier and Investment loans

An interest-only home loan is one where you only repay the interest on the amount you borrowed for a set period of time (normally a maximum of 5 years). You don't have to repay the principal loan amount during that period.

During the interest-only period your repayments will be lower, but once your interest-only period expires you move to a P&I loan (paying off the principal loan amount) so the repayments will go up.

This structure is normally applicable to Investment loan rather than Owner Occupier home loan

Features:

• Unlimited additional and lump sum repayments available

• Redraw options

• Fixed & variable rates available

• Offset options available

Offset home loans are loans where an offset account is used to 'offset' or effectively reduce the portion of your home loan that is accruing interest.

The offset account is a transaction account that is linked to your home loan. The balance of the offset account is then used to against your home loan balance so that you're only charged interest on the difference between the total loan balance and the amount in your offset account.

For example:

• If you had a loan with a balance of $350,000, with $50,000 in a linked 100% offset account, you would only pay interest on $300,000 of your balance. Your monthly repayments would remain at the full amount so you are effectively paying off your home loan faster.

Offset accounts are predominantly available for variable rate home loans only.

Features:

• Unlimited additional and lump sum repayments available

• Redraw available

• Most lenders charge an annual fee with this product

• Available for Owner Occupier, Investment, P&I and Interest-only loans

• Multiple offset facilities are available with some lender

A construction home loan is specifically designed to let you build a new home or for major renovations on an existing property. It is different from most other home loans due to the way it is funded.

A fixed price building contract is required (subject to bank approval).

Unlike a typical home loan, constructions loans give you access to portions of the loan amount in correspondence to the progress payment schedule of construction. The usual payment stages are:

• the start of the contract (deposit)

• when the slab is laid

• when the frame is built

• when the house is lockable

• when the fit out has been done

• when the build is complete

The builder gets paid by the bank on completion of the construction phases.

The builder issues a progress payment invoice which the bank will make payment of upon your authority.

This set up is know as progressive drawdown and it means you only begin to pay interest on the amounts you've actually used.

Usually, construction loans are interest-only loans for the construction period (normally 12-24 months) or until the entire amount is drawn down, whichever comes first. Your loan will then move to P&I repayments. You will then repay the principal and interest.

Features:

• Interest only through construction phase, at end of term the loan converts to variable P&I.

• If a deposit is required this is paid and evidenced before the bank begins to fund the construction.

• Before final repayment is made, an occupancy certificate is required.

• Other particular requirements are needed to be met for construction, please refer to our office for more information.

Often referred to as a guarantor home loan, this product allows for family members, or in some cases someone else close to you, to provide security support (preferably an investment property but it can be owner occupied home) to assist in reducing Lenders Mortgage Insurance and allow you to purchase your first home.

As the homebuyer you are still the person responsible for the regular repayments but if you fail to make the repayments, the security support of the family member can be called on.

This product if not available from all lenders and those that do provide have differing requirements so please contact our office for further information.

Property Share allows you to split the cost of buying a home with someone else, such as family and friends.

Under property share each person is responsible for their portion of the home loan.

All borrowers for a property share must be owners of the property and guarantee each other's home loan(s) as security.

Property Share is available for individuals. It is not allowed for business purposes, bridging loans, land purchase or construction loans.

It allows you to buy a property that you otherwise would not have been able to purchase on your own.