The Standard Variable Rate mortgages are one of the most popular home loans in Australia today. As the name suggests the interest rate on these types of loans varies in line with the Reserve Bank of Australia’s (RBA) official cash rate. When the RBA increases the official cash rate, the home loan rates generally follow and increase. When the RBA reduces the official cash rate the home loan rates follow and fall, and this results in a fluctuating (variable) monthly repayment. This loan type generally has greater flexibility and the option of added features, such as; extra repayments without penalty, redraw facility, it can be split with other loans, and offset accounts can be linked. The loan term is generally 25-30 years.

Also Introductory or Honeymoon periods can be offered with these loans, where a lower interest rate is offered for an introductory period of 6 months to 1 or 2 years, then the interest rate reverts back to the standard variable rate for the rest of the loan term.

These types of mortgages are becoming more popular and are offered by most lenders. The basic or no frills mortgage generally has a lower interest rate and lower costs than the standard variable rate loans and has less flexibility and features, although there some of the “no frills” home loans now that have a lot more of the options of other loans. The interest rate is variable so it can fluctuate, up and down.

These types of mortgages have a set interest rate for a pre-determined period between 1 year and up to 15 years. This means the interest rate and your repayments will remain the same for the fixed rate period, so you know exactly what your repayments are and protects the borrower against any interest rate fluctuations. At the end of the fixed rate period you can negotiate to fix the rate again or switch back to the standard variable rate. These loans have very limited flexibility for the fixed rate period and can be costly if changes are required.

The Professional package Home Loan offers borrowers interest rate discounts and other free options depending on loan size.  The name can be a little deceiving, implying these loans are only for Professionals such as doctors, lawyers etc., but the determining criteria is loan size and these packages can begin with a loan size of $150,000 the larger the loan size the larger the discount and can be up to 0.7% lower than the standard variable rate.

These types of mortgages offer greater flexibility and are also known as Revolving Lines of Credit or Equity Home Loans.  They allow you to access funds through equity in your property up to an approved limit at any time and operate similar to an overdraft or credit card secured against residential property.  You can also direct all your income through these loans to reduce the amount of interest you pay and use them as a transaction account, with cheque books, credit cards and ATM cards attached to the loan.  Lines of Credit usually attract a higher interest rate and the interest is only paid on the drawn up amount.  The extra funds can be used for home improvements the purchase of investments eg; shares, managed funds, a holiday, a new car or boat and for almost any purpose.

These types of mortgages are designed for the growing number of Australians who are self-employed, where income patterns are not as regular as PAYG earners.  Low Doc loans require less documentation to prove income, savings history and capacity to repay the loan, rather than the traditional up to date 2 years full financial statements for the business.  These loans allow the borrower to “self-certify” their income, which saves time and stress and the need to organise up to date financial statements from the accountant every time you apply for a loan.  These loans normally attract an interest rate premium although some lenders offer all their products as LoDoc loans without any interest premium.

These types of mortgages are also known as combination loans and offer the benefits and flexibility of a variable rate loan and the security of a fixed rate loan. You can choose how much of you loan is to be variable and how much is to be fixed, for example 40% variable rate and 60% fixed rate or 50%-50%. By splitting the loan the borrower hedges against any interest rate rises and also has all the features and flexibility and the lower interest rate of a variable rate loan.

These types of mortgages allow you to borrow 100% and more of the purchase price. Anyone who is finding it difficult to save the traditional 5 to 10 percent deposit can utilise this product to realise their dream of home ownership.

These types of mortgages are designed for people who don’t fit the major lenders conventional lending criteria. The reasons for this are many and varied and include; seasonal workers, working part time, casual, or contracting. Even people with a poor credit history with credit defaults will be considered for these loans. Non conforming loans generally attract a higher interest rates and can vary for each specific situation.

These types of mortgages are also known as Equity Release Mortgages and are relatively new to Australia. These mortgages are aimed at the increasing proportion of the population over 60 years of age to help fund retirement. These loans allow the borrower to unlock the equity in their property without having to make any repayments and all the cost are accrued and paid when the property is sold or they move out of the property. You can either use the funds as an income stream or take a lump sum for any purpose.