Get the home loan that best suits your requirements. Home loans come in different types and with different interest rate options. A Roost Mortgage Broker can help you choose the best home loan for you.
Types of loans
A table loan has payments that stay the same the whole time you’ve got it, only changing when the rates change. Initially, most of what you’re paying is interest.But as time goes on, more of what you’re paying is the principal – the actual loan amount itself.
Revolving Credit or Transactional Loan
Think of this as your everyday bank account… but with a huge overdraft facility!You’ll start off with a large “overdraft” figure on your statement. But then, each time you get paid, it will decrease by the amount you’re paid. As you spend, the “overdraft” will go up again by the amount you’re spending. As long as you don’t overspend, the “overdraft” keeps dropping lower over time. If you’re really disciplined,you could be home loan free in a surprisingly short time.
Interest Only Loan
As the name suggests, you’re only paying interest, but not touching the loan amount (or principal) at all. So it’s ideal if you’re building a house or buying a new home when you haven’t sold your old one first. It’s also often used for financing investment properties and the investor only pays the loan interest. The investor pays only the loan interest while they wait for the property to increase in value and then they sell it again.
Interest rate options
A floating rate moves up and down with the market as do your payments.That’s fine when the market rates are holding steady or dropping, but not so great if they’re climbing. A great benefit of using a floating rate is that you can make extra payments, change payments or pay off your home loan early without being penalised.
A fixed rate stays exactly the same for the agreed term, usually one to five years.The ideal time to get one of these is when rates are low, so you’ll be sitting pretty when they go up.
A capped rate can go down, but never increase beyond a set amount. At the time the cap is set, you usually have to pay slightly more interest than the lowest available floating rate, but you get the security that if the floating rate should increase,you’ll never be charged beyond the agreed limit.
Choosing the best home loan for you
The trick is knowing which type of home loan and what type of interest rate, or combination of interest rates, best suit your needs.