types of home loans
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Fixed Rate Loan, Split Loans, Basic Variable Loan
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.
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.
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.
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.
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.
Basic Variable Loan
, Fixed Rate Loan
, Home Loans Standard Variable Loans
, Honeymoon Loans
, Split Loans