Variable (Principal and Interest) home loans
The rate charged on a variable home loan moves up or down as the Reserve Bank changes official interest rates.
Basic variable loans generally have fewer features than standard variable loans. Basic variable loans are suitable if you want to pay off a consistent amount over the full term of the loan but are not suitable if you want to pay off your mortgage quickly.
Fixed Rate (Principal and Interest) home loans
A fixed-rate loan is a loan that has a fixed interest rate and therefore fixed loan repayments. The time period of these loans can vary and you can usually lock in your repayments between 1-5 years.
Although the fixed-rate period may be 3 years, the total length of the loan itself may be 25 or 30 years. At the end of the fixed-loan period you can decide whether to fix the loan again for another 1-5 years at current market rates or convert the loan to a variable interest rate for the remaining term of the loan.
Split Rate (Principal and Interest) home loans
A split-rate loan is a loan that has one portion of the loan fixed and one portion variable. You can select how much to allocate to each.
Interest-Only home loans
You repay only the interest on the principal during the term of the loan, which makes repayments lower than with a standard principal and interest loan. At the end of the interest only period - usually 1-5 years - you must start making principal and interest repayments over the remaining term of the loan.
Line of credit home loans
This type of property loan allows access to funds when needed and is based on equity built up in your property. This allows you to raise funds for investment by providing cash up to a prearranged limit. Each month, the loan account balance is reduced by the amount of cash coming in and increased by the amount paid on the credit card or withdrawn in cash. As long as there is consistently more cash coming in than going out, these accounts can work well. However, they can be very costly if the balance of the line of credit is not regularly reduced. It requires an interest-only payment as a minimum each month, which can add up to a lot of interest over the long term.
Low-doc home loans
A low-doc or no-doc mortgage is ideally suited for investors or self-employed borrowers looking to refinance, purchase or renovate. No tax returns or financial reports are required.
Introductory home loan
The interest rate is usually low to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for around 12 months before it rises. Rates can be fixed or capped. Most revert to the standard rates at the end of the honeymoon period.