Expert Advice on Types of Home Loans with Tricord

Standard Variable Loans

A standard variable loan is one of the most common types of home loans in the country. It comes with a standard variable interest rate, which varies from time to time. The movement of this home loan’s interest rate is mainly dependent on the official cash rate set by the Reserve Bank of Australia.

You can benefit from this type of home loan because it is often flexible, with options like extra repayments and access to redraw facilities. One feature that you can take advantage of is once interest rates fall, you will also have lower monthly repayments. But take note that monthly repayment also increases as interest rate rises.

  • Flexible, with added options
  • Decrease in repayments when interest rates go down
  • Lenders usually allow repayments
  • Access to ‘redraw’
  • Increase in repayments when interest rates go up

Fixed Rate Loan

If you are a borrower who wants to know how much exactly you are going to pay throughout the loan term, this type of home loan is for you. With a fixed rate loan, your repayments stay the same even if there’s a change in the interest rate. This is perfect if you don’t want to be exposed to interest rate changes. Fixed rate loans allow you to have a fixed interest rate for a specified period of time, e.g. one to five years. The downside is you do not have the advantage of lower repayments if the interest rate falls during the specified period.

  • Lower repayments & interest rate

  • Lesser features and flexibility

Basic Variable Loan

This type of home loan works like a standard variable loan, only with lesser features and flexibility. You can still have the option to add features, but it will involve extra cost. Typically, you will have to pay for every additional feature you will require. Basic variable loans may have lesser features and flexibility when compared to standard variable loans, but generally come with a lower interest rate.

  • Repayments stay the same even if interest rate rises
  • Repayments stay the same even if interest rate falls
  • You might have to pay penalty fees for any additional payments

Split Loans

If you want to have the best of both worlds, you can have a split loan, which is a combination of a fixed and a variable loan. A split loan is the type of home loan for those who want to take advantage of a fixed interest rate, but also want to a lower interest rate when interest rates go down. With a split loan, you can control your interest rate risk by having a mix of repayment options.

  • Redraw facility
  • Decreased vulnerability to interest rate changes
  • Repayments still increase when on the variable component

Honeymoon Loans

Honeymoon loans offer lower initial repayments for a specified period of time, which is usually the first year. You will have a guaranteed low interest rate during that period, which can be fixed or variable. The loan will revert to standard variable rate when the discount period is over.

  • Offers low interest rate during the honeymoon period
  • Higher variable rate after the discount period is over

Line of Credit Loan

This type of home loan allows you to use the equity in your home or property as a line of credit. As soon as the money is drawn, you must start paying interest only repayments. The line of credit loan might not be a popular choice among borrowers, but it offers flexibility that allows you to access money only when you need it, which you can repay immediately or over a specified period.

  • Interest rates are typically lower than personal loans
  • Getting the money when you need it and paying it when you can
  • Equity might be reduced if not careful

Construction Loans

Unlike other home loans that provide you lump sum amounts, construction loans allow you to draw money as you need it, usually after each building stage. Construction loans start with interest only repayments and once the construction is complete, you will start paying both principal and interest as monthly repayments.

  • You can make additional payments
  • You only pay interest during the construction period
  • Has variable interest rates
  • Often not flexible since it requires a fixed price before the construction

Low-Doc Loan and Credit-Impaired Loan

If you are worried that you can’t get a home loan because you don’t have the necessary tax documents, a low-doc loan can be the answer to your dilemma. Most self-employed individuals prefer this type of home loan when they can’t comply with the usual mortgage requirements. On the other hand, a credit-impaired loan works great for those who have impaired credit history.

  • Easy documentation requirements
  • Flexibility (choice of fixed or variable interest rate)
  • Features (line of credit, redraw, etc.)
  • You can be charged with higher interest rate than most loans

No Deposit Loan

Want to buy your new home sooner than later? This can be possible through a no deposit home loan. If you don’t want to wait until you have enough savings for a deposit, a no deposit loan will work great for you. This type of home loan allows you to borrow up to 100% of the purchase price of the property.

  • You don’t have to save for a deposit
  • You can borrow up to 100% of the property price
  • Lender’s mortgage insurance (LMI) can be costly

Guarantor Loan

This type of home loan allows you to borrow up to 100% of the property’s purchase price. A guarantor loan works great if you don’t have enough savings for a deposit. A guarantee from your parents, sibling, spouse, or grandparent will be accepted by most banks and lenders.

  • You can borrow up to 100% of property price
  • Interest rate can be higher than typical home loan