Homeloans & Homeloans features. Which is right for you?

The following information on homeloans and homeloans features will help you understand the different types and styles of homeloans and homeloan features that are available. Please note that homeloans and their features may vary slightly in purpose, application and cost between lenders.

Two types of Homeloans

The Australian Mortgage industry is constantly evolving and new product variations, special rates and limited offers come and go regularly but technically there are only 2 types of homeloans – The Standard Amortising Home Loan and Line of Credit Home Loan.

All other homeloans referred to as Basic, No Frills, Fixed, Variable, Introductory, Honeymoon, Capped, Stepped, Split, Offset, Low Doc, No Doc, Construction, Investment, P & I, Interest Only, Bridging, Non Conforming and No Deposit are variances of a Standard Home Loan that has been specifically styled by the lender to cater to a specific borrower usage, need or purpose and then labeled accordingly to represent that purpose and/or the lender’s marketing strategy. In some cases they may involve a combination or mixture of both the standard home loan and line of credit.

Standard Homeloans

Standard Homeloans are traditionally an amortising loan which means that the loan balance must be repaid in full or to zero by systematically calculated repayments proportioned over the term of the homeloan i.e. 30 yr loan term will require 360 monthly repayments which reduce the loan balance to zero by the end of the 30yr term. Most lenders are flexible with the homeloan term with most offering 5 – 30 yr terms and some a 40 yr term.

A standard homeloans repayments are payable monthly and are by default a Principal & Interest (P&I) repayment where each repayment consists of an amount of principal and an amount of interest with the principal component reducing the homeloan balance by a systematically calculated amount each month effectively finalising the homeloan by the end of the loan term.

Line of Credit Homeloans

A Line of Credit (LOC), unlike an amortising loan which has a reducing loan balance, can have the same loan balance for the entire term of the home loan. Only payments of interest, not principal, are required during the loan term but full repayment of the home loan is still required by the end of the term i.e. An LOC with a 20 yr loan term would require 240 monthly payments of Interest Only and full payment of the loan balance owing on the last day of the home loan term.

Commonly referred to as a ‘Revolving Line of Credit’, this type of home loan gives the borrower a maximum limit to their loan and allows them to readily deposit or withdraw funds as they choose provided the home loan balance does not exceed the limit. It allows much greater flexibility for the borrower than a standard variable home loan and usually offers extra features such as access to funds via cheque book, telephone /internet, BPay, ATM, EFTPOS and linked Credit Card.

When a lender refers to their LOC as being ‘Evergreen’ they are stating that their product is a true LOC in the sense that the maximum loan limit and Interest Only (IO) repayments will remain in place for the entire loan term. Some lenders do not have a true LOC product and advertise a featured up standard loan with Interest Only repayments as a LOC. Be cautious and on the lookout for these products as they do convert to a P& I repayment after the IO period and the maximum limit steadily decreases in line with the amount of principal payment included in the P&I repayments.

Possibly the biggest advantage of a Line of Credit is the ready access to money which makes it attractive to Investors and highly suitable for Rapid Mortgage Reduction or as an integral part of a Mortgage Plan. A Line of Credit will usually have a higher interest charge (approx. 0.25%) than that of standard homeloans.

For more information on Homeloans, Homeloan Styles, Homeloan Features and Homeloan Tips visit our Homeloans & Features page or contact Refinancing Group on 1300 448 911

Refinancing Group Campbelltown - Your Local Homeloan and Home Mortgage Refinancing Specialist

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…………….. Kevin (Kezz) Roby …………….. Refinance Mortgage Broker Campbelltown

Kevin Kezz Roby your local refinance mortgage broker from Refinancing Group Campbelltown Dip FS (FP), Dip FS (FMBM), JP
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