Mortgage Lenders

Different Types of Home Loans

Basic home loans

This is the simplest home loan you can get. Few bank fees and a lower interest rate are available if you don’t need flexibility and added features (extra payments are not usually allowed). This type of loan often appeals to first time homebuyers who plan to be owner/occupiers.

Standard variable rate home loans

A variable rate home loan offers a mix of features, flexibility, interest rates and fees. The rate changes with the market, so your payments can change too (for the better and for the worse). Many loans offer the ability to redraw, and allow for extra repayments to be made.

Fixed rate home loans

If you want to have the same repayments for the entire length of your loan, then a fixed rate loan may be for you. You don’t have to worry about rising interest rates increasing your repayments, and budgeting is easy. Conversely, you don’t benefit from lower interest rates, and some lenders don't allow extra repayments

Split rate home loans

This type of home loan gives you the benefits of both fixed and variable rate loans. Generally you choose a percentage of your loan to be a fixed rate loan and the remainder has a variable interest rate.
Interest only home loans

With these loans, your repayments only cover the interest part of your home loan; the principle remains unpaid. Interest only loans are most beneficial to investors rather than owner-occupiers.

Line of credit home loans

A line of credit is one of the most flexible home loans available. You have a specific limit to your loan and are able to access funds as you need. You use your home as equity to draw money out of your loan to fund other things – investments, renovations etc. These loans are often more expensive and have higher interest rates, but very flexible.

Low Doc home loans

Low doc (low documentation) home loans are a type of “non-conforming” loan, and are good for those who wouldn’t qualify for other loans due to lack of documentation or financial statements. Usually appropriate for business owners, the self-employed and those with bad credit histories, these loans often require a large deposit or some other pre-existing equity and may have higher interest rates.

No Deposit home loans

Some lenders now allow loans up to and above 100% of a property’s purchase price. Not having to save up a deposit means that first homebuyers can get into the property market earlier. These loans require a good credit history and a stable income large enough to cover the repayments – application criteria are generally stricter than a standard loan. You will have to pay more interest in the long run as you are borrowing more, and banks usually require lenders mortgage insurance as well.