We understand that it is not that easy to totally understand the whole process of applying loan. Whether you are purchasing owner occupied or investment properties, refinancing, getting equity, renovating, constructing or even developing, we are here to ensure you understand the whole loan process, and assist you in applying the loan til the settlement. Here come some guilds and tips for applying loans with the explained loan terms.
Variable rate loans often provide additional flexibility and are the most popular type of home loan in Australia. As the name suggests the interest rate is variable and therefore fluctuates with the Reserve Bank of Australia’s movement and the cost of the financial institution sourcing funds to lend. Variable rates are generally broken into two categories by financial institutions: basic and standard.
As the name suggests the basic variable rate only covers the basic home loan features. On these loans you won’t have access to features such as a redraw facility; however this also means the interest rate is generally slightly lower than other loans.
The standard variable rate is traditionally slightly higher than the basic variable, however along with this you receive extra features such as a redraw facility, repayment frequency flexibility, portability and the option to pay in advance.
Variable loans generally require closer monitoring, especially if you overcapitalise and interest rates rise. It is important to make sure that you budget and plan for the future should interest rates rise, to ensure that you are able to meet the required repayments.
Fixed rate loans generally have all of the features of a standard variable product; however the interest rate is fixed generally from one to five years. Fixed rate products are great products to help maintain the household budget because the repayments will not change during the fixed period.
However, a fixed rate loan means you could end up paying more if interest rates fall. It is possible to exit the loan agreement if you feel it is right to do so, although lenders will generally charge penalty fees to compensate for any loss in profits they may suffer.
Low and No Doc loans are increasingly popular in Australia, especially for self employed or contractors. As the name suggests you require less documentation to take out the loan (this is essentially proof of income and other debts etc).