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Types of Home Loans Guide

Type of Home Loans Guide

There are lots of different types of home loans to look for and every person has different needs. You should look for the best deal to suit your needs.

The two types of home loans according to interest rate are the fixed home loan and the variable home loan. The fixed home loan gives you a stable payment no matter what happens with the market interest rate. However, in the event that the market interest goes lower, your loan stays at a higher rate.

On the other hand, the variable home loan allows a borrower to pay in varied amounts for the life of the loan. More borrowers opt for this option since market conditions change from time to time. The variable home loan interest rate is heavily dependent on the market interest rate so repayments can either be high or low.

If you cannot decide between the home loan terms, why not get both? Apply for a split loan. Once you are under this deal, you can pay a portion of you loan via a fixed rate and another portion through a variable rate. This type of home loan can make your repayment faster as well.

You can also go for interest only home loans wherein you only have to pay the interest on the principal during the loan term deal. Repayments are lower than that of the standard home loans but you must start paying the principal terms after the interest only period of around one to five years.

Self-employed buyers and investors can avail the low document home loan. Financial documents and tax declarations are not needed for this home loan but it usually has a higher interest rate. People with bad credit history can also go for a non-conforming home loan as long as they can guarantee that they can satisfy the repayments.

Meanwhile, honeymoon home loans are suitable for families or businesses that are starting up. This type of loan has a low starting interest rate for a year or two. After which, the rate reverts to standard interest rates. It is presumed that you have saved in the grace period which makes you able to pay the standard rate afterwards.

You can also opt for a no deposit home loan which allows you to borrow 100% of the house’s purchase price. This option also makes you eligible for the First Home Owners Grant of $7,000. However, there are several additional charges to this like stamp duty fees.

And last but not the least, an equity home loan is part of your options too. Also called the Line of Credit home loan, this deal has a continuing pre-set limit that does not reduce over time. The funds that will be generated can be used for shares and renovations of a personal or an investment property. However, its interest rate is slightly higher than the standard rate.

These are some of the home loans that you can consider. If you are still confused, better consult a home loan consultant who will give you more information and valuable tips on this matter.