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These loans are normally available for terms up to 30 years, however,
for older buyers such loans may be available for only 15-20 years term . The
borrower makes regular repayments consisting of principal & interest. Most of
the times, they can be repaid in full without penalty even before maturity. The
rate of interest can fluctuate either due to market forces or due to change in
Reserve Bank rate. In recent past, interest rate mark-up above
Reserve Bank official cash rate has been in the range of 1.70 % to 1.82 %.
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These are also called home saver, money saver or mortgage saver by lenders.
The rate of interest is set at a discounted rate below the standard variable
rate for the life of loan.
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fix the rate of interest for 6 months to 5 years (or even 10 years).
repayments for fixed P & I are calculated at the fixed rate of interest over the
full term of loan (actual rate may be different after the expiry of fixed rate
period). after expiry of fixed rate - renegotiate for another fixed rate period
or it is rolled over to standard variable rate product.
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Interest loans the borrower only service the interest and do not pay off any
of the initial amount borrowed. Such loans are generally taken for investment
purposes as the repayments are less. These are generally available
for one to five years term and after the term reverts to P & I loan of standard
variable rate product. These loans should have flexibility to repay at the time
convenient to investor i.e. on sale of property.
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These loans helps the borrowers to keep their repayments small during initial
period of loan and offer short period heavily discounted rate, normally for 6
months to one year period. The rate can be a fixed discount to variable rate or
a discounted fixed rate. After the introductory period the loan reverts to
standard variable or even more than standard variable (check comparison rate
over 5, 10, 15 years). Most introductory loans have exit fee of some description
after introductory period so one can't jump from one honeymoon period to
another.
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Many lenders offer discounts in interest rates and fees based on borrower's income, amount of loan or/and profession. These are not limited to certain professions (Doctors, Lawyers, Teacher etc.) but are also available to people who borrow more than $ 150,000. The normal discounts that are offered to these consumers are reduction in fees, discounted interest rates and free provision of additional services including financial planning or insurance.
More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizeable amount of credit, available for use when and how you please. There are two main advantages of a line of credit / home equity loan. First, one can use the accumulated equity in the property. Second, one can deposit and withdraw at will, thereby, has the ability to reduce interest by optimum utilisation of funds and discipline. The borrower is allowed to redraw their facility back to the original or revised limit.
This is a great facility for repaying the loan earlier. Normally, the
borrower has their salary, casual credits deposited directly into the facility,
which reduces their balance, thus reducing interest costs. The borrower would
then normally pay all bills and expenses using the credit card. The credit
card outstanding is paid by debit to line of credit after utilising the full
interest free period. However, given the option to access funds the temptation
to spend needs to be curbed. This facility is more suited to persons with a
disciplined approach.
You can also avail home loan for the purpose of constructing owner occupied or investment dwellings. The construction loans require fixed price building contract and council approved plans and specifications. Normally, the payments will made on a progressive draw down basis as per the building contract.
Generally cost overruns are experienced by owner builders, therefore, lenders are normally reluctant to advance loans to such borrowers. However, certain lenders may consider application for loans to owner builders. The borrower needs to have more funds available as the lenders will fund owner builder facilities as per the normal construction loans i.e. on completion of work.
Rural properties fall outside the standard residential loans. Lenders may consider proposals on rural residential properties with stick guidelines pertaining to town water supply, sealed road access, electricity access etc. Usually rural property loans restrict the size of property to less than 15 acres. Properties must not be used for an income producing purpose and must be located within 20 km of a town with a population of 10000 or more people.
To invest in Australian residential property an overseas resident will need to gain approval from the Foreign Investment Review Board. Such approval is normally available to individuals only. Depending on the lender, the applicant will only be able to borrow to a set loan to value (LVR) ration, normally maximum 80 % of the value of security. Most lenders have a restricted number of countries to which they will consider applications from.
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