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Types of Home Loans in Australia

The process of purchasing a home is no walk in the park. Perhaps shopping around for houses to buy is one of the more enjoyable parts of it, but you also have to face the financial side of things at one point or another. Everybody could definitely use some help on that end from time to time. You can reach out to trusted financial institutions to acquire home loans in Australia.

But where do you start? There are so many home financing options out there that it can be overwhelming to first-time buyers and even non-first-time buyers alike. Here, we have a guide on the many types of home loans available in Australia.

1. Owner-Occupier Home Financing

Owner-Occupier home financing is perhaps one of the most common types of home loan that many people get here in Australia. In this kind of financing arrangement, the borrowers will be living in the property that they got a loan for. These are considered stock-standard home loans as there are hundreds of them in the market. The best thing is that there are so many lenders and banks that are amenable to flexible owner-occupier home financing deals.

Whether you are a first home buyer or a refinancer, you can use this kind of home loan to finance your home purchase. One of the other reasons why so many people go for this type of home loan is that they have lower interest rates on average as opposed to other loan types. Lower interest rates are on the table since the property to be purchased will likely be your main residence which usually means higher chances of you hanging on to the deal for the long haul.

2. Refinance Home Loans

A refinancing home loan is not really a product, but rather an option you can consider should you wish to look for a lower interest rate. The market is volatile and these fluctuations affect the interest rates on your current home loan too. As such, there are times when refinancing might be a good financial decision since you can save more money by doing so.

Many lenders offer this option to attract customers who are looking to refinance. You can go to another lender for a refinancing option or stick with your existing one, the final choice is yours.

However, if you have signed off on a fixed-rate home loan, this option might not be easily accessible to you. For instance, you may incur break costs. Break costs take into account how much your fixed rate is, how much variable rates have changed, and the term remaining on your fixed rate. Be sure to talk to a knowledgeable broker or lending representative to completely be aware of your options.

3. Guarantor Home Loans

Just like refinance home loans, a guarantor home loan isn’t a specific product either. In a guarantor home loan arrangement, a guarantor (close family member or an eligible party) agrees to take the responsibility of making repayments should the main borrower become unable to. Typically, in the event that you can no longer make repayments, the property will be seized by the lending firm or development group. But the presence of a guarantor safeguards the property in such an event.

People with low incomes have the option to list down a guarantor. Some lenders even allow customers who are backed by a guarantor to take out a 0% deposit home loan.

4. Investment Home Loans

If you are not looking to buy a home for your personal use, you may be in the market for property investment home loans. As the name suggests, this type of loan is reserved for individuals or businesses who are looking to purchase a home for investment purposes. Renting out property and profiting from the steady rise of the property’s value can indeed be a smart investment move.

However, applying for investment home loans get even trickier than all the other home loan types. For example, they impose higher interest rates and stricter eligibility criteria. This is understandable since there can be a higher risk involved in this kind of deal.

On a brighter note, owners can have enormous tax benefits when they take out an investment home loan. The Australian Taxation Office (ATO) states that interest payments and others can be claimed as a tax deduction.

5. Low-Doc Home Loans

Low-doc or low documentation home loan is an option available to those who are unable to procure sufficient documents for the application. This includes copies of the most recent payslips, pay summaries, rental income statements and dividends, among others. As a compromise, low-doc home loans typically come with higher interest rates.

6. Reverse Mortgages

Reverse mortgages allow people who have enough asset but not enough cash to borrow the equity in their home. Unlike other loans, reverse mortgage borrowers do not have to make repayments while they are still living on the property. The older the borrower is, the more he or she can borrow through a reverse mortgage. For example, 60-year-olds can borrow about 15-20% of the home value.

7. Construction Loans

A construction home loan is available to those who are planning to build a new home from scratch. This home loan is also suitable for individuals whose homes need renovating. Regular home loans cover the home after-construction, while construction loans cover the expenses made during the construction process. This progressive draw-down occurs in five to six stages.

8. Bridging Loans

What if you already have a home but wish to move to a new one? Then you can get a bridging loan to help you out with the transition. When you take out a loan like this one, you naturally have to go through a ‘bridging period’ where you are holding two loans at once. But as soon as you sell your old property you will go back to one loan for the purchase your new property.

9. Line of Credit Loans

This type of home is a home loan feature that allows you to borrow against the equity of your existing home. Here, you can swap the equity you have built up in your home for cash up to a certain amount (credit limit) set by the lender.

Which one should you choose?

Different circumstances and needs will require a different home loan scheme. There are so many home loans in Australia to choose from, the important thing is to choose wisely on which lender to work with.

For a wide range of home loans in Perth, feel free to call Nu-Age Loans. Let’s discuss your options and create a solution that’s uniquely yours.

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