Home loan types
Below are just a sample of the many home loan types available. With so many options, it makes sense to speak to a Badu Capital Broker, who will assist you in finding the right loan for you. Call us on 03 9595 3573 or submit an enquiry online.
Variable rate
Repayments can vary during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.
Principal and interest
For this loan type, your repayments will include both interest and payment of part of the amount borrowed (principal) at the same time.
Split home loan (fixed and variable)
Part of this loan type can have a fixed rate with the other part set at variable interest rate. This lessens the risk if interest rates should rise.
Guarantor loans
A guarantor loan is a type of unsecured loan that requires a guarantor (mostly parents or family relatives) to co-sign the credit agreement and typically put up their property as security. The guarantor agrees to repay the borrower’s debt should the borrower default on agreed repayments. This type of loan can reduce the amount of deposit required as well as the costs of mortgage insurance.
Redraw facility
If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).
Fixed rate
With a fixed-rate loan, you’ll pay a set amount per fortnight or month for the fixed period of the loan (usually one to five years).
Interest-only
With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal.
Low doc
For this loan type you do not need to provide documentation of your income to lenders. Low-documentation loans are generally for the self-employed – who have difficulty getting the documentation together that is required to get a traditional home loan.
Construction loans
For buying land, building or renovating your home, a construction loan works differently to other loans in that whilst the amount of finance is agreed upfront, it is released in line with a pre-determined timetable. The lender releases financing as each stage of the build is completed. This benefits the borrower as they only pay interest on the amount owed at each stage of the loan released.
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