Types of Loans
Standard Variable
A Standard Variable loan is the most commonly used loan. It is a loan that allows you to pay additional monies off your principal, but be able to access them again in the future if required (redraw).
The loan can be ‘split’, this means you can decide to have numerous sub-loans under the mortgage to suit your needs.
An example of this might be to take out a part fixed/part variable loan, or part P+I (principal and interest) and I/O (interest only).
A standard variable loan interest rate can be adjusted up or down depending on market conditions and cost of funding.
Fixed Rate
You are able to negotiable a fixed term on the whole debt or a part of it (split loan). The usual time frames are 2, 3 or 5 years.
During this period a loan is fixed, the lender may not increase/decrease the agreed interest rate.
Basic Loans
A rather loosely used terminology, as what benefits may or may not be available can vary from lender to lender.
However, a basic loan has a number of benefits removed in an attempt to reduce the delivery costs of the loan.
Line Of Credit
Is a fantastic innovation and very easy to understand. Most people that have equity within their current property but do not have an idea of what they want to do with the funds, can raise a LOC (line of credit) loan which would be set up as a secondary debt(under a split program). You are able to have the funds available but whilst you are not using them you pay ‘No Interest’.
Most LOC loans are interest only but you are able to make principal reductions at any time.
You are also able to carry a zero balance without having to discharge (finalise) the mortgage.
Professional Package
A recent innovation of the banking industry that rewards people in certain jobs or that may borrow high debt levels, so to encourage your business they offer a interest rate reduction.
Lo Doc Loans
A loan that helps people you may not have been able to complete all their past ATO returns, yet want to demonstrate to their preferred lender that they do earn enough money to cover any potential debt.
Non-Conforming Loans
A facility established for people outside the square. They might have had some previous adverse credit history. They might have just changed jobs. They are struggling to convince their bank they are capable of meeting the repayments. Then a non-conforming (also called specialist) loan is available. This type of loan usually does cost more, in the form of a higher rate of interest.
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