Types of Home Loans
The Types of home loans in Australia
Home loans are a crucial aspect of the Australian housing market, as they allow individuals to purchase their own homes and invest in real estate. In Australia, there are several types of home loans available to borrowers, each with its own set of terms and conditions. In this article, we'll explore the different types of home loans available in Australia, so you can make an informed decision when it comes to financing your next home.
- Fixed-Rate Home Loans: As the name suggests, fixed-rate home loans offer borrowers a fixed interest rate for a set period of time. This type of loan is ideal for borrowers who prefer the security of a fixed repayment amount, as the interest rate will remain the same for the duration of the loan term. Fixed-rate home loans are typically offered for terms of one to five years.
- Variable-Rate Home Loans: In contrast to fixed-rate home loans, variable-rate home loans offer borrowers an interest rate that can fluctuate over time. This type of loan is ideal for borrowers who are comfortable with some level of risk, as the interest rate can increase or decrease in response to changes in the market. However, variable-rate home loans also offer borrowers more flexibility, as they can often make extra repayments or redraw funds without penalty.
- Split-Rate Home Loans: Split-rate home loans are a combination of fixed-rate and variable-rate loans, offering borrowers the best of both worlds. With this type of loan, a portion of the loan is fixed at a set interest rate, while the rest is variable. This allows borrowers to benefit from the security of a fixed interest rate, while also taking advantage of any potential interest rate reductions.
- Low-Doc Home Loans: Low-doc home loans are designed for self-employed individuals or those who have difficulty proving their income. With this type of loan, borrowers can often bypass the traditional documentation requirements, and instead provide alternative forms of proof of income, such as tax returns or bank statements.
- Line of Credit Home Loans: Line of credit home loans are similar to a credit card, offering borrowers a revolving line of credit that can be used for any purpose, including purchasing a home. With this type of loan, borrowers only repay the interest on the amount they borrow, and can redraw funds as needed.
- Bridging Home Loans: Bridging home loans are designed for borrowers who need to finance a new home before they have sold their current property. This type of loan allows borrowers to use the equity in their current property as collateral for the loan, providing them with the funds they need to purchase their next home.
There are several types of home loans available in Australia, each with its own set of benefits and drawbacks. When choosing a home loan, it's important to consider your personal circumstances, including your income, credit history, and financial goals. By taking the time to research and compare the different types of home loans available, you can find the loan that best meets your needs and helps you achieve your financial goals.
Speak to a mortgage broker today about Self-Employed Home Loan options or refinancing to set yourself up to pay off your home faster and avoid paying unnecessary interest.