We're About Mortgages And More

By: Think Financial 2011  06-Dec-2011
Keywords: Loan, Bank Lenders, Non Bank Lenders

A variable loan is one that the interest rate goes up and down as the market changes, this means your loan payment will also go up and down.

The loan allows for greater flexibility, as you can pay any additional payments. lump sums, or pay the whole loan off with no penalties (although with some non bank lenders there may be a early payment charge for full repayment of loan).

In New Zealand the Reserve Bank will review the Official Cash Rate (OCR) every 6 weeks. This helps to set the variable rate offered by lenders.

The variable rate tends to be higher than a fixed rate, so in most cases clients will choose this rate if they expect to repay a portion of the loan, or if they expect rates to reduce in the near future.

A fixed rate loan means you can lock your interest rate for the chosen period of time. The

Fixed Rates are normally for 6, 12, 18, 24, 30, 36,48, and 60 months. This will mean you will have the same loan payment for the time of your chosen time period.

Your mortgage advisor will help you choose a fixed rate term based on; economist reviews, comparison to other loans held by you, what the future may hold for you, and the flexibility you need.

With some lenders, they will allow small extra payments, or lump sums with little or no penalty.

In most cases the fixed rates are cheaper than the variable rate.

A principal & interest loan means you are not only paying the interest due on the loan but an extra payment to reduce the balance of the loan. Over and above the fixed rate term you may choose, you will also choose the term of the loan, the term will help set the principal reduction portion of your loan; this is normally 30, 25, 20 year terms but can be less.

The opposite is an interest only loan, which means what is says; you will only pay the interest due and no additional principal payments.  As with a fixed rate loan you will choose how long you wish to pay interest only.  You will still pay the loan off over a chosen term, as with a fixed rate loan, but the reduction of the loan will kick in after your chosen interest only period.

Variable & fixed rate loans set the interest rate, whereas as principal & interest or interest only loans sets the type of loan payment.

A type of variable rate loan. The loan you are approved for is the limit of the loan which does


reduce over time. If you make additional payments to reduce the principal of the loan you can then access those funds in the future, up to the original limit of the loan, in other words you can put money in & out as much as you like up to the approved limit. It can even attach to a transactional bank account.

You will only pay interest on the loan balance owing, not the limit of the facility.

This is called many things by lenders;  

    orbit facility,

    choices home loan,

    flexible facility,

    flexi facilities

    and so on.

Is similar to a revolving credit. You can put money in & out as much as you would like, and it can also function as a transactional bank account. There are 2 main differences; 1) the limit will reduce over the chosen term of the loan, and 2) if you are on a fixed rate and over pay the minimum repayment you can draw the excess funds.


As you see above there are many types of loans, and for the greatest flexibility you can split your loan into different loan types. For instance, you may choose a smaller portion to be on a variable rate (a higher interest rate) that will allow you to pay extra payments with no penalties, the rest of your loan could be placed on a cheaper fixed rate, allowing for the certainty of your loan payment on the majority of your loan.

Your adivsor can help you work out the best loan structure to suit your individual requirements.

This is the type of loan applicant you are, and could be any of the types of loans above.

If you are a PAYE earner you can easily prove your income with pay slips or letter from your employer but for a self employed applicant it can be harder to prove your income.

Lo doc (no doc) means you can declare your income for the purposes of borrowing funds and provide limited proof of that income.

For further information see

This could be any of the loans above but the purpose of the loan is to purchase a residential investment property rather than a home loan. Lenders may have different lending criteria for investment loans, for instance the amount a lender will lend based on the purchase price or value of the property may be greater for an owner occupied home.

For further information see

Keywords: Bank Lenders, Loan, Non Bank Lenders

Other products and services from Think Financial 2011


Finance For Property Investment

If we are providing a loan structure that we believe will need consultation from an accountant we will inform you and speak direct with your accountant to ensure the complete loan structure is correct. Not all mortgage advisors are created equal, there are specialty areas, and different knowledge requirements are essential for providing sound residential investment lending advice.


Self Employed Purchasers

Over the last few years there have been some great advances by the lenders at the required information from self employed applicants to get finance approved. In simplistic terms these accounts will state the business income, the business expenses and the funds left over would be deemed your income. The Lenders Mortgage Insurance fee, is a premium that is charged to you (the fee can be added to your loan) and is a one of fee.


Are You A First Home Buyer

The lenders criteria is different from lender to lender, which is why one lender could decline you, but another would approve you, or why the amount you could borrow is more at one lender than another. The report will show the lender which lenders have also previously checked on you, and whether you have been put into 'default' of payment or 'collection' with any previous lender or account holder.


refinancing - mortgages - Think Financial 2011 Limited

If you are wanting to increase your loan and remain at your current lender this is a loan 'top up', its only when you change lenders that it is a refinance. If your loan also needs to be approved by Lenders Mortgage Insurance, there may be an additional 24 hour delay. You would like to increase your borrowings BUT your current lender does not wish to approve your application.