Redraw

Any 'extra money' you have paid into your home loan is accessible via redraw. Sometimes this is as simple as selecting redraw via online account access software and other times it requires a phone call or fax to your lender.

Interest only repayments

Investors often choose to make their repayments interest only - this means they will not repay any of the 'principle' or capital of the money borrowed but simply cover the interest cost each month to help with cashflow. This is not usually recommended for owner occupied home loans, but we’ll talk more about this.

Fixed interest rates

Exactly as the name suggests, fixed interest rates represent an agreement between you and the lender to set the interest rate at a particular number for a set period of time: usually 1, 2, 3, 5 or 10 years. If the variable rate changes there is no impact on the agreed fixed rate for the term of the agreement.

This could be handy if you are on a tight budget and would prefer to keep your repayments consistent but it does mean less flexibility.

Some Lenders let you make more additional repayments to fixed loans than others, ask us who.

Treat a fixed rate loan like a contract between you and the lender – an agreement on the interest rate for fixed period. Like any contract, if you break the agreement there’s a penalty to pay, and depending on the interest rate chosen and the remainder of the contract the penalty could be quite a bit of money. Selling your home or refinancing the loan is considered breaking the contract. This means that it is very valuable to fully discuss your situation with Finance Seekers before you decide on the fixed interest rate term that is right for you.

Repayment holidays

Some loans will allow you to request to take a break from repayments for a set time, perhaps due to illness or pregnancy. Usually this is only available where you have made extra repayments. You should never simply stop making repayments - always speak to your lender to make an arrangement if you need to do so.

Low Doc loans

A Low Documentation (Low Doc) loan is one where the lender requires less proof of income for you - say, if your tax returns are not yet complete. The Low Doc loans are generally for self-employed borrowers and will come with restictions regarding how long you have been running your business or working in that line of work. You might consider this type of loan if your income is irregular or difficult to verify. The lender will rely on your declaration that you can afford to meet the repayments without undue hardship. A lender may still require some other verification like lodged BAS statements and bank statements. Generally clients will require a deposit of 20% to 40%.

Family equity guarantee

Other loan types which can be of assistance to first home buyers are loans which allow a family member to provide a limited guarantee secured against your home to assist you in purchasing your first home.

Tip...

Some Lenders will let you consolidate your personal loans into this guarantee to make your repayments more affordable.

Interest rates, discount rates, professional pack rates and comparison rates

We all know that paying less interest on a loan will save you money, but can you easily decide which interest rate will save you the most money? The cheapest interest rate, right? Not always. What if the loan has a lot of fees? Or what if the interest rate is low only for a short period of time and the ongoing interest rate is much higher?

Comparison rates were devised to assist with making this decision, but even these are not a full picture of the loan price. A comparison rate is calculated by adding any regular ongoing fees and any costs to establish the loan; to the interest which would be paid in each particular loan example, and calculating this as a true percentage of the amount borrowed. The best way to read a comparison rate schedule is to look at the difference between the interest rate being charged and the comparison rate which most closely resembles your scenario - and question what the difference amounts to. If there is a large difference we need to find out why.

Don't rely on comparison rates only. That's why you engage our professional services. There are a lot of costs which are not included in comparison rates which can vary greatly from loan to loan e.g. fees for compulsory accounts linked to your loan. Another common example is redraw fees: it would be difficult to add these into the comparison rate as we can't know how many times you might need to redraw, and the cost for the redraw can vary from nothing to $50 per redraw.

So how do we choose? Well we listen to your requirements and test your borrowing capacity and together we'll decipher which loans will suit you.