Home Loans
Combo Loan
Want the security of knowing that your interest rates will not increase for up to 10 years, but don't want to sacrifice all the great flexibility of a variable loan?
Then we suggest you apply for a 'Combo Loan', i.e. part of the loan fixed for up to 10 years and the other portion variable.
First home owners may also find this loan suitable for their situations.
This loan is also available as an investment loan.
Construction loans
A lot of our clients chose to purchase a block of land and build their dream home, as opposed to purchasing an established property.
This way, our client's get the exact home that they want.
Construction loans are more involved than loans to purchase established homes, but let Better Choice take the hassle out of it for you.
More often than not, initially you will have two loans, i.e. one loan for the land and one loan to construct the home.
On completion of the home, if you desire, the two loans can be consolidated into one loan. During the construction phase, the lender will control the release of funds to the builder. That is, at each stage, (usually 4-5) when the builder requires payment, the invoice will be sent to the bank for payment. The bank will seek the borrowers authorisation before payment.
As the construction loan is drawn down in stages, you, the borrower, only pay interest on what is outstanding.
This loan is also available as an investment loan.
Deposit Bonds
At Better Choice Mortgage Services we understand that the burden of a significant cash out lay once the vendor accepts your offer can be difficult or impractical. Your cash may be tied up in a term deposit which may prove costly to break or the majority of your cash may be tied up in real estate equity and accessing this equity may take longer than is practical. And if you are 'buying off the plan' your deposit may be 'tied up' for up to 5 years!
The solution to these conundrums may be a Deposit Bond (DB). A DB takes the place of the cash deposit required between the time the vendor accepts your offer and the day of settlement. At settlement you must pay the final purchase price of the property (including the amount of the DB). Your loan or cash equity takes the place of the DB.
DB's are especially useful in purchasing apartments off the plan where the vendor requires a 10% deposit and the apartment may take up to 5 years to complete.
A DB is also useful in Australian states where a 10% deposit is the norm eg NSW.
If you, as the purchaser fail to settle on the property the vendor may then request that the DB issuer pay to the vendor the face value of the bond. The issuer of the DB will then pursue you for the face value of the bond.
Advantages of DB's:
- Cost effective: The once off premium is generally less than interest costs if you were to raise a loan for the deposit.
- The application process for DB's is very streamlined and a DB may be available within 5 days of application
- Saves you having to break term deposits or access equity within existing properties
- Especially useful when purchasing apartments off the plan, where your deposit may be tied up for up to 5 years.
This is also available as an investment loan.
Fixed Rate Home Loan
A Fixed Rate Home Loan (FRL) offers you security. Feel safe knowing that there will be no change in the interest rate of your loan over a set term - anywhere from 6 months to 10 years. Once the term expires the loan rolls over to a variable rate, or you have the option of re-fixing your rate for another term.
FRL are generally less flexible than variable loans, for example:
- In the main, you are limited in how much you can make in extra repayments
- In the main, they do not have a 100% offset feature
- In the main, they do not have the redraw feature
- With most lenders, you cannot progressively draw a fixed rate loan for construction purposes, however some do permit this.
Should you wish to payout a FRL early; you may be up for significant early payout penalties. To counteract the draw backs of FRL's, we suggest the borrower may wish to consider a combo loan- part fixed or part variable. Ask us about our Combo Loans.
FRL's are perfect for investment property purchase.
You may also choose to obtain a combo loan (part fixed, part variable) that may be more suitable for your needs.
This is also suitable as an investment loan.
Home to Home Loans
So you have found the home you want to buy, but you haven't even placed your existing home on the market.
To top it off, the Real Estate Agent is saying, "Don't bother putting an offer in subject to the sale of your existing house". What can you do?
Consider a home to home loan!!!
If you have sufficient amount of equity in your existing home the lender may fund the purchase of the new home, prior to you selling your existing home.
But hold onto your horses, this loan doesn't possess magical properties, and there is no denying you would be carrying considerable amount of debt, whilst you sell your existing property.
There are two ways the lender will assist you in making the repayments, ie the lender will allow the interest to accumulate to the loan or the lender will advance you additional monies to help with the repayments.
The lender will allow you up to 12 months to sell your existing house. If this option is for you, we think you will be pleasantly surprised with the interest rates.
Introductory Rate Home Loan
The Introductory Rate Home Loan starts with a low interest rate (often the lowest on the market) and is suitable if you want lower, fixed repayments during the first 12 months of the loan to make things easier. At the end of the initial 12 month term, the loan converts to the standard variable interest rate or the option of a fixed interest rate.
The advantage of an Introductory Rate Home Loan is that it offers borrowers a chance to reduce the principal quickly by making extra repayments. The main disadvantage is that most banks charge penalties if you pay out these loans within the first three to four years.
Another disadvantage of this loan type is that generally, after the first 12 months on the considerably reduced rate, the variable interest rate would revert to the lenders standard variable rate. The standard variable rate can be up to 0.7% more expensive than the lender's basic or professional variable rate.
Certain lenders will pass on professional package discounts (variable rates) after the 1st year, but the ongoing discount is significantly less, approximately 0.4%.
Ask a Better Choice Consultant to do the figures as to whether this loan suits you.
This loan is also available as an investment loan.
Line of Credit Home Loan
The Line of Credit (LOC) is the 'King of Flexibility'. LOC's are generally evergreen facilities, ie there is no term or end date to the loan. The borrower can use as much or as little of the LOC limit as they would like and only pay interest on what you actually use. Large lump sum repayments can be made at anytime and then these funds can be redrawn for another personal purpose.
With cheque book, internet, phone & ATM access to funds LOC's are the perfect loan product for:
- Share and managed funds investors
- Borrowers who wish to operate their own mortgage minimisation program. (see your financial advisor before embarking on a mortgage minimisation program)
- Borrowers who do not require the total loan proceeds all at once and wish to progressively draw down the loan.
This loan is also available as an investment loan.
Lo Doc Loans
Are you self employed and at times have difficulty proving your income? Or are you a wage earner and due to remuneration package variables such as bonuses and commission you also have the difficulty in proving your income? If this is the case, then you may consider a Lo Doc Loan for your funding needs.
Instead of having to provide the lender with reams of papwork justifying your income, all you may need to do is fill in a declaration stating your income. In other instances, the lender may also required trading bank account statements and 12 months business activity statements.
Other lending criteria associated with Lo Doc Loans include:
- Possession of registered ABN (Self employed borrowers)
- Minimum 2 years self employed (Self employed borrowers)
- A clear credit history
- 20% equity in the real estate transaction
Should your situation not qualify for the Lo Doc policy set-out above, rest assured non-conforming lenders will assess borrowers who have been self employed for less then 2 years or whose credit rating is less than squeaky clean.
Better Choice strongly recommends that borrowers seek independent legal and financial advice prior to taking out a Lo Doc Loan.
This loan is also suitable as an investment loan.
No Deposit Home Loan (NDHL)
A significant casualty of the global financial crisis was the NDHL. Whilst there now does not exist a NDHL in its purest form, e.g. $250,000 purchase, $250,000 loan, there are situations where certain borrowers will not have to put up a cash deposit.
Examples of these situations include:
- Cocktail Lending facilities structures to lend 100% of the purchase price
- First home buyers purchasing cheaper priced properties
- Purchasers that pledge the equity within a property they already own, as security for the loan to purchase the new property
- Purchaser that have family or friends prepared to offer a security guarantee, i.e. a mortgage over their property for the borrower's home loan.
This loan is also available as an investment loan.
No Frills Loan
As the name implies, a no frills loan is generally a lenders variable rate loan with fewer features. As this loan has fewer "bells and whistles" than others it is the lenders best variable interest rate on offer, (usually approximately 0.5% cheaper than standard variable rate loans).
As time goes by, and as lenders endeavour to get a competitive edge over their competitors, more and more features have been added to the no frills loan.
As a result, Better Choice facilitates more no frills loans than any other type of loan.
What are the characteristics of a no frills loan:
- Lowest variable rate on offer from the lender
- Redraw feature is available
- Minimal or no ongoing fee's
- The 100% offset feature is not available with no frills loans
This loan is also available as an investment loan.
Non-conforming Home Loan
If you answer "yes", you may wish to consider a Non-Conforming loan:
- Are you self-employed and have difficulty in proving your income?
Non-conforming loans and non-conforming lenders are also high profile casualties of the global financial crisis.
There still exists lenders that provide non-conforming loans, but there are fewer players in this market segment than 2 years ago.
Changes to non-conforming loans since the global financial crisis:
- Fewer products/providers in the market place
- The borrower requires at least 20% equity within the transaction
- Higher interest rates
- Less lender tolerance to poor credit history
Better Choice strongly recommends that borrowers seek independent legal and financial advice prior to taking out a Non-conforming Loan.
This loan is also suitable as an investment loan.
Professional Packages
Professional packages (or pro packs) encompass not only the borrowers home loan, but also their basic accounts and credit cards.
As part of a package, the client sources all of their day to day banking needs from the lender that provides their home loan.
Generally, the home loan interest rate is significantly discounted but yet still is the lenders' fully optioned home loan.
In the main, the clients bank account and credit cards are fee free and home loan applications fees are waived. The client pays an annual package fee.
The interest rate discount varies in line with the size of the loan and minimum lending of $150,000 is required to be part of the professional package.
This loan is also available as an investment loan.
Reverse Mortgage
Reverse Mortgages are best suited to borrowers who seek to convert the equity in their homes into cash. This style of loan allows the cash-poor, asset-rich to tap into the value of their property without having to sell it.
With any loan there is of course interest to pay, however a reverse mortgage requires no monthly payments. Instead, the loan is paid back with the interest accumulated when the house is sold. In other words, the interest is capitalised which means it's added to the amount of the loan.
There are a variety of reverse mortgage options and a knowledgeable Better Choice Finance Consultant can help ensure that you are maximising the full benefits.
Standard Variable Home Loan
These days few loans are written as Standard Variable Home Loans (SVHL). Many SVHL features are available via a Basic Variable Loan (BVL). BVL are up to 0.7% cheaper than SVHL. Many borrowers couple a Professional Package and a SVHL to reduce the interest rate down by up to 0.7%.
This is also available as an investment loan.
