Financing your Property

Choosing a home loan

There are a variety of home loans available and each offers different features. Lenders will provide information on the types of loans they offer. When selecting a loan you should look for a competitive rate of interest, sufficient time to repay the loan, favourable conditions and options that suit your needs. Repayment options and switching costs should be taken into account. There are two basic home loan types; variable rate loans and fixed rate loans. Each has advantages and disadvantages.

Variable rate loan

Variable rate home loans are mortgages where the interest rates generally move with changing economic conditions. When interest rates fall, repayments fall but when interest rates rise, so do your repayments.

The standard variable loan is often more flexible than others and comes with more features and the option to make additional payments without penalty.

Basic variable loan

Lenders now offer basic variable loans with lower interest rates, but with fewer features than a standard variable loan. The interest rates and repayments vary over the term of the loan however, it may not offer the features or flexibility of the standard variable rate loan.

Introductory loan

Also known as a honeymoon loan, an introductory loan offers a low interest rate to attract borrowers. The rate generally lasts for 6 months to a year before it rises and reverts to the standard variable rate.

Fixed interest rate loan

Fixed rate loans protect you against interest rate changes for an agreed time, so you have peace of mind knowing your repayments won’t change.

This type of loan is suitable for people who like to know exactly how much their interest rate and repayments will be for one, two or even up to five years.

You can still make extra repayments over and above your normal monthly repayments without penalty however, you won’t benefit if rates go down during the fixed term. The amount of the extra payment allowed will depend on your lender.