Variable Loans? Fixed Loans? Find out what it all means and which type of loan is best suited to you.
Which Loan Is Right For Me
Variable Loans
Variable loans are a popular loan choice amongst clients that require flexibility from their home loan. Whilst a variable rate loan will see interest and repayment fluctuations in line with market movement; a variable loan does enable interest saving loan features plus permits additional repayments which provides clients with the flexibility to reduce their loan sooner.
Fixed Loans
Fixed loans are the opposite to variable loans in that they provide a fixed interest rate for a chosen period providing clients with stability from their home loan. This means that if there are any changes to rates as a result of market movement, it won’t affect your interest rate or repayments during the fixed term; this applies to both increases and decreases in the market.
This type of loan is ideal for clients seeking stability and long-term financial budgeting.
Split Loans
Quite simply, a split loan can provide you with the best of both options. You can achieve stability and protection from market movement with a portion of your loan fixed for a chosen period of time, whilst the remaining loan portion is variable providing flexibility and ability to benefit in a declining rate market.
Line Of Credit
A line of credit allows you to draw money from the equity in your home. It is essentially like having a credit card with an approved limit for spending.
Offset Loans
An offset home loan takes advantage of the savings in your bank account to ‘offset’ the interest you’ll be paying on your home loan. For example, if you have a $500,000 home loan and $30,000 in savings, you’ll only be paying interest on $470,000. If you’re a saver, this is a great option.
Package Loans
A package loan is a comes with a number of additional financial benefits, namely a credit card and a transaction account with a particular financial institution. This can save you money on the account-keeping fees and insurance premiums that are normally placed on these products when they are purchased individually.
Features to consider
It is important not to judge a home loan solely on interest rates. Be aware of other fees including up front fees, ongoing monthly fees, exit fees, and "deferred" establishment fees which are often charged if you leave a variable loan in the first 5 years. We can help you review the costs and benefits of extra features which may save you money such as an offset account or redraw facility.
Other loan features to pay attention to include lenders waiving fees and charges for other accounts held with them, such as monthly transaction account keeping fees. Make sure extra repayments are not penalised. Some loans, such as fixed loans and some no-frills variable loans, may limit the amount by which you can reduce your loan.
How easy is it to switch to another home loan?
Many people end up paying more than they need by staying in an incorrect loan because they think it is 'too hard' to investigate switching to another option. We research alternative products available for you and if changing products is the right solution for your situation, then we help make the process as smooth as possible.
Remember, there may be large costs such as rate break fees to refinance and discharge the current loan and you might lose access to your funds for a period of time. Standard costs such as stamp duty and registration will also apply (although in some states you may be exempt from paying stamp duty).