Different types of Penrith home loans

May 15, 2017
Paul Holland

Home loans in Penrith cover the full spectrum of borrowers. Discover what’s available – or speak to Penrith mortgage broker Paul Holland on 02 4789 0808 for tailored advice.

There are three main types of Penrith home loans to choose from: variable interest rate loans (standard and basic), fixed rate loans and line of credit loans.

Variable rate loans

The interest rate on a variable rate loan moves up or down in line with the official cash rate set by the Reserve Bank of Australia (RBA) though we sometimes see lenders make rate adjustments of their own. 

Each time the rate changes, the monthly repayments on your Penrith home loan will alter too. While this can leave borrowers vulnerable to rate hikes, it also means repayments will fall if market interest rates drop.

Two types of variable rate loans: standard and basic.

Standard variable rate loans usually have more features and flexibility so the interest rate tends to be higher than for a basic style of loan. Basic variable rate loans tend to be among the cheapest in the market though with fewer features they can be restrictive, and in some cases a very low rate may mask high loan fees. This is something to weigh up.

Bear in mind too, there are no hard and fast guidelines about what makes a loan standard or basic. These may be marketing terms used by different lenders, so it’s really a matter of knowing what each loan offers to determine whether it is right for your needs. This is something my team of Penrith home loan experts are highly experienced in, and we are well-placed to recommend the loan best suited to your circumstances from our panel of over 20 lenders.

Fixed rate loans in Penrith

A fixed rate loan sets a specific interest rate for a defined period, for example 5.0% for three years. This allows the borrower to lock in their repayments, with the most common periods for fixing being 1, 3 and 5 years.

At the end of the fixed rate period the borrower can usually choose between converting the loan to a variable rate, and fixing the interest rate again for a further period at the current market rates.

Fixed rate home loans in Penrith are offering very competitive rates however these loans can have fewer features than variable rate loans and be more restrictive about paying a bit extra off your loan.

Split loans

It’s possible to combine a variable rate and a fixed rate in a single home loan by splitting the loan into two components. It can be a smart way to enjoy the certainty of a fixed rate with the flexibility of a variable rate loan.

Line of Credit loans

These loans allow borrowers to draw cash up to a pre-approved limit when and as you choose often with interest-only repayments required. The reduction of the loan balance is entirely up to the borrower, as there are generally no set repayments. As long as there is consistently more cash coming in than going out, these accounts can work well but they call for careful money management to ensure that at some point the loan is fully paid off.

Choosing the right home loan is an area where expert advice makes a valuable difference. To understand which type of home loan in Penrith is best suited to your needs call me – Paul Holland, today on 02 4789 0808 or drop in and see me at our office in Nepean Village shopping centre.

 

Posted in: Home loans

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