1. Variable Loans This is the most common loan. Variable loans can be used for either owner occupied or investment. There are now variations of this type of loan for example Basic Variable.
Basic Variable is generally a no frills type of a variable loan. Given the name it is a limited function type of a lending product, however having said that due to the increasing competition in the market place, there are now more features in a Basic Variable loan and it is very comparable to a Standard Variable Loan.
2. Investment Loans An investment loan is when the borrower using residential property to generate income from rents or borrows more than 50% of the loan amount for business or investment purposes.
3. Line of Credit Are you good with a credit card? Do you pay them off every month? If you are not good with credit cards, then stay away from line of credit. A line of credit is a revolving line of credit. This means that your limit (approved loan amount) will always be available to you so long you meet the monthly interest repayments. If you have a 20 year line of credit potentially at the end of the 20 years, your debt will be the same as when you started if you had not made any additional repayments.
A line is credit can be useful for those who can mange them well. As lenders then to calculate their interest on a daily balance, utilising a line of credit can assist with lowering your interest component and therefore reducing the years required to pay off your loan. THis is done by having your salaries deposited directly into your line of credit. However the warning here is, if you are not good with a budget, then you should seek financial advice from a qualified financial planner or an accountant. Joykaya is not a financial planning firm or an accounting practice.
4. Low Doc Loans (Self Employed) There has been a lot of discussion of late in regards to Low Doc loans. The general fear is that Low Doc loans are related to sub prime. Many borrowers are now concerned about what the impact of the sub prime may have on their loan. So what is a Low Doc loan? In simple terms, a low doc loan is limited or low documentation loans. This loan type is used when the applicant cannot show regular income, IE PAYG.
The borrower generally is a business owner who needs to budget their cash flow annually on their income and expenses. Thus, to service this type of a loan, the borrower needs to sign a declaration that they can repay their loan. Generally the loan amount cannot exceed a Loan to Value Ratio of 80% of the value of the residential property. However under certain circumstance, lenders may choose to lend more with a higher interest rate.
5. Construction Loans A construction loan is when progress payments are required to complete the construction of a residential home. Construction loan could also be used if the home is being substantially being renovated.
6. Renovation Loans See construction loans.
7. Interest-Only Loans Interest Only Loans or IOL are used to assist borrowers to pay interest only within the nominated duration, (generally 1 to 5 years depending on the lender). We work with your accountant to find the best tax benefit for our clients. As we are not tax advisers, we encourage clients to get their accountants to work with us in fomulating the best solutions for your scenerio.
8. Refinance Mortgage To refinance your mortgage, all you will need to do is to discuss your requirements with your mortgage broker and they will advise the best possible option for you. Be careful when refinancing as currently there are a lot of lenders that will charge the borrower a fee for leaving them. This can be called early termination payment, deferred establishment fee or early payout fee depending on the lender's terminology. Please discuss this with your broker.
