Standard Variable Rate loans are suitable for borrowers who are looking for a very flexible and competitively priced loan, with all the “bells and whistles”, but without being tied up to a fixed interest rate contract.
The interest rate fluctuates during the life of the loan and most have the option to switch to another interest rate type at any time. These loans are designed to assist with the purchase of a new home or investment property, renovations, holidays, upgrading your car or most other personal needs.
Some of the features available are:
- Additional Payments
- Flexible repayment options e.g. weekly, fortnightly or monthly
- Offset facilities
- Borrowings up to 100% of the valuation of the security in some cases
- Additional loans
- Minimum loan amounts and terms may apply
- Maximum term is normally 30 years
These packages are available to those borrowers who meet certain lending, balance or employment criteria. There can be costs as a trade-off for lower or waiving of application, monthly or transaction fees, lower loan interest rates or increased deposit interest rates.
These discounts can add up to substantial savings, and are especially attractive to the professional investor who is able to take advantage of interest rate savings that can be spread over a complete loan investment portfolio.
Not all lenders offer these Professional packs and the features can vary substantially between lenders. Ask your Loans Actually broker to explain the benefits in more detail.
Some of the features of Professional Packs are:
- Annual Fees may apply
- Fee Discounts or waivers on credit cards or transaction accounts
- Interest Rate Discounts on fixed or variable loans.
The Professional Pack may have a set loan amount entry criteria. These amounts vary between lenders, as does the percentage of the interest rate discount, the annual fee and any associated discounts or fee waivers.
Base variable rate loans are suitable for borrowers who are not looking for the full range of features normally associated with the lender’s standard variable loans. As a result, the base variable loan interest rate is usually priced at a lower level. They are often referred to as “no frills loans”.
These loans will generally have a fluctuating, variable interest rate and may include a limited selection of special features. Additonal charges may apply for these to be activated.
Base Variable Rate Loans may still offer:
- Convenient repayment options
- Lump sum payments
- Redraw Facility
- Interest only Loans
Base Variable Rate Loans are appropriate for a client who is rate sensitive and looking for a basic, simple, low cost loan facility, without being tied up on a fixed term contract.
Equity loans are often referred to as revolving lines of credit. These facilities differ from a traditional loan in that they are an interest only facility and only require repayments to keep the loan balance under the approved limit.
These loans allow the borrower to gain access to the equity in a property without the need to apply to a lender for a new loan on each occasion. This can save time, expenses & the inconvenience of having to provide the lender with up to date financial, salary and personal information.
Equity loans are a very flexible product and are particularly suitable to the investor who is looking for quick access to funds for investment, property deposits or purchases or everyday personal living expenses. Most equity loans provide access to your funds via cheque, credit card, telephone account processing or over the internet.
Some common features of Equity loans are:
- Access via credit/savings card
- Cheque access
- Internet access
- No minimum /maximum deposits/withdrawals
- Salaries can be direct credited
- Regular deductions can be made
- Funds are available at call
- Some financial institutions will also pay credit interest on any credit funds held in the account
Discounted Rate loans are particularly attractive to first home buyers and others who are rate sensitive, and looking to keep their repayments to a minimum in the early stages of a loan.
Discounted Rate loans are often referred to as honeymoon loans. This is where the interest rate is set at predetermined level below the standard variable rate for an initial set period.
Some of the features available are:
- An interest rate set at a predetermined level below the Standard Variable Interest Rate
- These loans typically allow all features of the normal Standard Variable Rate loan
- Administration and early repayment penalties may be applied if the loan is repaid in full prior to the end of the discounted period.
Fixed Rate loans allow you to protect yourself against possible future interest rate rises and the ability to manage your loan repayments over a specified term. This allows you to budget for other financial priorities in your life, comfortable in the knowledge that your loan repayments will not change over the fixed rate term.
Fixed rate terms can be nominated for periods upwards of 6 months and are usually for between 1 year and 5 years. There are banks prepared to fix loans for up to 10 years in certain circumstances.
The interest rate is fixed for an agreed time, meaning that your interest rate will not increase, even if there is an interest rate rise. Alternatively, it also means that if the interest rates drop you will remain locked in at the higher nominated rate for the fixed term of the loan.
At the end of a fixed rate period, most financial institutions allow you the option of nominating another fixed term or switching to another home loan package, some with nominal switching fees.
Some common features are:
- Fixed rate terms of 6mths, 1, 2, 3, 4 and 5 years
- Maximum additional payments for each fixed loan year or term
- Early repayment penalties can apply if the loan is repaid either partially or in full, within the term of the fixed rate. (These can often be quite substantial).
- Repayments set for the fixed rate term. These can generally be made weekly, fortnightly or monthly.
- Redraw is rarely available.
95% loans are designed to assist people who are looking to borrow as much money as possible against the valuation of the security property. These loans can be used for the purchase of a new home, renovations, debt consolidation or for personal use.
These loans are suitable for first homebuyers who have proven savings over at least a three month period, but do not have a large amount saved. The lender is generally looking for applicants with a strong employment history and no credit problems.
The lender will usually take out loan mortgage insurance (LMI) on these loans and will pass on the insurer’s costs to the borrower. This amount will often vary between lenders depending on the amount of the loan, the loan to valuation ratio (LVR) and the insurer the lender uses.
Some common features available are:
- Fixed or Variable Rate loans
- Extra repayments depending on loan options
- Only 5% Genuine Savings required
- Weekly, Fortnightly or Monthly repayment options
- 30 Year loan terms available
No Deposit loans are generally available to borrowers who have existing personal or investment properties to offer as security, but do not have sufficient ready cash to meet the full cost of a new property purchase.Some borrowers, especially those in the first home market, require higher levels of borrowings because they have not been able to generate sufficient savings. To qualify, the borrower would need to have a strong employment record or future prospects.
These types of loans are also available to the first home buyer in some circumstances.
Some common features of these loans are:
Lenders mortgage Insurance is required in most cases – (LMI)
- Some lenders allow the LMI to be added to the loan, thereby allowing borrowings to exceed 95%. Others will not finance this cost and require cost to be covered from the borrower s own cash resources
- A Loan Extension Fee is applied by some lenders
- Higher establishment fees can be charged in some instances
- May have some restrictions to the loan relating to additional payments or redraw
- Strong employment record or future prospects is essential
- No credit defaults
Financial institutions can provide finance to assist you purchase land with the expectation that the land will be improved within a set time frame by the construction of a dwelling for personal or personal investment use.
Most lenders will lend up to 90% of the valuation of the land, although some will lend up to 95% in certain circumstances.
In most instances the lender will provide funds based on the value of the land only, however, if your intention is to improve the land by way of construction of a dwelling, the lender may look at the value on an “on completion” basis. This may include the value of the land plus the cost of construction but can vary from lender to lender.
Some of the Common features available are:
- Construction of a dwelling required within a set time frame (6 months to 5yrs)
- Loans against vacant land value
- Loan restrictions based on maximum land size
- Loans restrictions based on zoning. ie: Residential, Rural or Residential/Rural
Many borrowers will look to upgrade or downsize their residence at some stage during their lifetime, and relocation loans can be particularly helpful.
Relocation loans can be considered where a borrower already has an existing loan on a property, the property has been sold, and the borrower has purchased a new property. Their intention is to “transfer” the debt to a new dwelling with minimal disruption to their financial situation.
The lenders are generally looking for simultaneous settlements. In these instances the lender will agree to transfer the existing loan to the new security property, for a set cost, with a lesser, equal or higher loan amount. In most cases the borrower will need to provide up to date personal and financial information at the application stage before the lender will approve the transfer of the loan.
Features of Relocation loans are:
- The borrower details must be the same as existing loans
- Simultaneous settlements are preferred
- Up to date personal and financial details are normally required
- The bank will normally requalify the borrower for the loan
- The loan will have to be approved within the lender’s current credit criteria
Elderly borrowers, often with only Centerlink or superannuation pensions as income, but with substantial equity in their property can access “Seniors Type” loans.
These types of loans are available to assist with relocation costs and purchases, meet unforeseen expenses or even to help out family members for elderly borrowers.
They are available to borrowers who have reached the age of retirement and have built up equity in their existing property.
These loans can be set up without the need for repayments and in single or joint names, enabling the loan to be repaid on sale of the security property or on death of the last borrower. They are particularly helpful to borrowers who are looking to downsize their property, require access to funds to meet current or future expenses of themselves or family members, but have a limited income to service the remaining debt.
Due to the unique nature of these loans we strongly recommend that borrowers seek full financial advice before entering into a facility of this type.
Features of this type of borrowing include:
- Minimum Age 65
- End Loans – After settlement of the existing and proposed purchased property, a debt to the bank still remains
- No End Loans – All debts will be cleared on sale of the existing property
- Generally an equity lend, where the borrower has built up substantial equity in the existing property
- The lender will generally look to see a low level lend, keeping the security risk to a minimum
- As the borrower may have limited access to funds to meet repayments the debt will often continue to grow after settlement, with repayments often not required until the death of the last borrower. It is therefore extremely important that all borrowers and proposed beneficiaries are aware of the structure of this type of loan.
- Due to the unique nature of these loans we strongly recommend that borrowers seek full financial advice before entering into a facility of this type.
A rural loan is for a property situated outside the metropolitan area, generally consisting of a residence where no income is derived from the property.
Rural properties are sometimes located on the fringe of cities or towns and are solely for the purpose of private or personal investment use.
If the purchase of the rural property is to be used for income producing purposes, such as commercial/hobby farms or income producing purposes, or as a short term speculative investment, please refer to our Commercial/Business pages.
Not all lenders are keen to lend against rural properties, and the majority will place restrictions on the acreage or proposed land use of the property.
Rural loans may have restrictions placed on them such as:
- Location – within kms of a major township or population centre
- Maximum size restrictions – Maximum acreage/hectares which can range from 5 -10 acres/hectares through to an unlimited size. Most of the lenders have different lending criteria and interest rates, and conditions can vary substantially between lenders, even so far as to whether the loan is considered as a personal or business venture.
- Income from property – Lenders will generally consider income generating rural properties as a commercial enterprise, however, there are exceptions.
- Land Use – As above.
- Zoning- Rural/Residential or Township
- Please discuss your options with our Lending Specialists loan consultants.