Standard Variable
Interest rates on these loans vary with the economic climate of the time. The variance is generally a reflection of the official Reserve Bank rates. As one of the most flexible loan types, it can apply to a wide spectrum of loan situations. In most cases, Variable loans will enable you to offset your loan, make additional repayments and redraw, which may help you to finalise your loan earlier and on most occasions is less likely to incur penalties.

Basic Variable
A very popular loan, similar to a Standard Variable but generally offered WITHOUT the extras that come with a standard variable loan, such as credit card sweep, 100% offset accounts etc; Interest rates are normally lower and are favoured by borrowers who are confident that they don’t require the additional features. However if the lender allows direct salary crediting with a low cost for redraw , the loan facility can operate very similar to a line of credit.

Line of Credit
For borrowers with a high surplus budget position for rapid debt reduction, it is essentially an overdraft where monies paid against the loan can be withdrawn up to the original limit. Technically an Interest only loan, however most people make higher repayments enabling them to finalise the loan quickly and redraw for investment purposes up to the original loan limit. Again interest rates will normally be higher for this style of loan.

Fixed Rate
Locks in an interest rate for a defined period of time. When you choose a fixed rate loan you have the comfort of knowing if rates rise, your rate will remain the stable. However, if interest rates drop you will remain at the higher rate. If you require the reassurance of a fixed rate but would like to take advantage of the fall in rates you can split your loan into two separate loans, Part Fixed – Part Variable (see Split Loans). Most fixed loans do not allow you to make additional repayments or refinance during the fixed period unless penalties apply.

Introductory Loan
Introductory loans (sometime known as Honeymoon loans) generally enable you to commence with a lower rate for a fixed period “normally 6-12 months” and then revert to a higher rate (usually a standard variable loan ) for the remaining loan period. These loans can be either fixed or variable rate and on most occasions have higher upfront and ongoing fees.

Construction Loan
If you decide to build your own home (using a Licensed Builder), a construction loan is the way to go. With a normal home loan the money is generally received in one lump sum amount. With a Construction loan the money is drawn down as per the building contract in a series of progress payments to the builder on a needs basis and closely follows a progress schedule requiring regular inspections by the lender. Usually repayments are on an interest only basis during the course of construction, whilst after construction variable rates and principal and interest repayments generally apply.

Low/ No Doc Loans
Generally geared to self employed persons where no proof of income is required, the lender accepts self or accountants certification of income, however, some lenders will consider P.A.Y.G. applications in special circumstances. Interest rates are generally 1% + above the standard variable rate and early repayment penalties may apply.

Professional Package Loan
Professional package loans provide discounts on interest rate, monthly fees and associated offset savings account fees. Generally to qualify for this type of loan, your loan must meet a minimum size, a particular credit card must be provided and an account with that bank must be opened. There is generally an annual fee associated with the facility.

Redraw
A redraw facility on a loan allows you to access any additional repayments that you have made into your loan account. This facility can save you interest charges while allowing you easy access to any extra repayment monies that you have paid. Some lenders place conditions on the minimum amount that can be redrawn at any one time. Generally, redraws will attract a fee.

Mortgage Offset
Is another way to reduce your mortgage by attaching another account (normally, a daily transaction account) to the loan and using the daily balance in that account to reduce the interest payable on your mortgage. Have your earnings paid straight into the Offset account, which is linked to your loan account and usually with a credit card sweep.

Interest Only
Requires no principle repayments to be paid; you only pay the interest portion of the loan You cannot have a balance outstanding higher than the original loan, so repayments have to keep the balance lower or equal to the original loan amount. It is commonly used for investment loans where interest can be included as a tax deduction.

Split Loans
Allows you to nominate what portion of your loan will be fixed and what portion will be variable. The variable component enables you to make additional repayments while the fixed component provides the comfort of protecting this portion against rate rises whilst in the defined time period.