February 17, 2015
Searching for a home loan can be hard enough especially with the range of options that are available today. Not only do you need to decide on your choice of lender but you also need to consider the type of loan and its features. Things to consider may be:
- Fixed or variable rate
- Interest only (IO) or principal and interest (P&I) repayments
- Basic home loan, introductory rate loan or professional package loan
- Branch and internet access
- Additional repayments and redraw
- Offset account, salary credit or BPay payments
Basic home loan
A basic home loan, as it’s name suggests, is a home loan with basic features and a competitive interest rate. Often referred to as a ‘no frills’ home loan, a basic loan is great for buyers who are looking for a loan for a single property, either for the home owner or investor.
Basic home loans will generally offer a lower interest rate than the lenders standard base variable rate and can attract an establishment/application fee but no ongoing loan maintenance fees. Most basic products enable the home owner to make extra repayments, redraw additional funds and internet access to the loan.
Introductory rate home loan
An introductory rate home loan is similar to a basic home loan but offers a more competitive interest rate for a set period at the beginning of the loan. The interest rate is further reduced for the initial 1-3 years of the loan term (depending on lender) and reverts to a basic variable interest rate at the end of the introductory period.
This type of product is a great option for first home owners as the initial interest rate reduces the loan repayments, allowing extra funds for furnishings, landscaping, small renovations or even additional repayments for future redraw.
Professional package home loan
The professional package loans are generally offered by the major banks as they include a full range of financial benefits under the package. Other features such as internet banking, additional repayments, free redraw and salary crediting can also be included.
These types of loans attract an annual fee of around $350-$400 and can include a fully transactional offset account, rewards credit card with $0 annual fee, discounted financial planning advice and reduced insurance premiums. The interest rate is also reduced under the package and the discount applied depends on the loan amount and the loan to property value ratio (LVR.)
A package loan is a great option for investors with multiple loans as the annual fee is only charged once a year regardless of the number of home/investment loans you may have with that particular lender. You may also be eligible for a further discount off the interest rate as your total loan balance increases with the purchase of additional investment properties.
If you are in the market for a home loan, chat with me today and get yourself on the path to home ownership and get access to expert advice that will get you there easier. Call me on 0425 826 967 or (03) 9432 2121.