Types of Home Loans

If you are looking into purchasing a house, you might also look into several types of home loans offered by different banks and companies. Of course, you will get varying offers and options, depending on the bank and on your own credit report. Usually, if you have a good credit score, you will receive a very good deal. Companies would like to make sure that you will make your monthly payments on time, so they look into your credit history.

So now that you have decided to look into several deals regarding home loans, you might find the information overwhelming. Information overload, as most people call it. The interest rates and consequently, the total amount due in your monthly billing statements.

One type of home loan, the standard variable home loan, does not have a fixed rate throughout the life of the loan. This varying interest rate is a good thing, because if the interest rates go down, the payments also become lower. This type of home loan is considered as the most popular one in Australia. In addition to varying interest rates, the bank may also throw in other features and offers.

Another type of home loan, the discount variable loan (or also known as the honeymoon and introductory loans) offers a discount in interest rates for a limited period, which is usually 12 months. During this time, you get a lower interest rate and total monthly payment. After that period, you get the regular or the standard rate.

As its name implies, fixed rate loans have fixed interest rates, usually for as long as a year up until 20 years. Borrowers often prefer this type of loan because they know how much their payments would be for the duration of the loan.

For those who have combination and split loans, they can opt to have certain portions of their loan to have variable interest rates and fixed rates. On the other hand, those who have home equity line of credit loans have secured their loans by having their houses as collateral. The interest rate for such loans are usually lower than other loan types.

Individuals who are self-employed or who lack certain documents, such as financial reports, can opt to get a low-documentation or no documentation loan. This loan requires the loan holder to accomplish a form that declares the annual or monthly income. Such loans usually have high interest rates.

If you have bad credit rating and intend to start over, you can get a non-conforming loan to rebuild your credit score. This will not hide any negative information from your credit report, but it will help you establish a better credit rating.

And last is the No Deposit loan. For this type of loan, you can get a loan for as much as 106% of the property’s equity. As its name implies, you can immediately make your purchase without having to worry about the deposit.