Housing & Investment Property Finance

A Low Doc Loan requires less information to be provided to the lender as evidence of affordability. Recent government changes has seen a tightening of this product and the information that is required. A Low Doc Loan is suited to investors or self employed borrowers who do not meet the standard lending criteria.

Advantages:

• Simple income declaration form signed usually by your accountant
• No tax returns
• No financials statements
• Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only

Disadvantages:

• Generally a higher interest rate

Recent government changes has meant clients now need to provide up to 12 months bas statements and sometimes 12 months of bank statements on the business cheque account.

Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.

Advantages:

• Flexibility
• Lump-sum payments can be made without incurring a penalty.
• If interest rates fall, your repayments will fall.
• Often offer extra features.

Disadvantages:

• If interest rates rise your repayments will rise.

Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term. Advantages:

• Relatively low interest rate.
• Lower repayments.

Disadvantages:

• Many of these loans do not have the same features or flexibility as other variable loans.

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An introductory rate loan generally offers a guaranteed low rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable. Advantages:

• Usually the lowest rates on the market.
• Some lenders provide offset accounts on these loans.
• Opportunity to reduce the principal quickly during the ‘honeymoon’ period.

Disadvantages:

• Payments will increase after initial introductory/’honeymoon’ period.

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Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However you won’t benefit if rates go down during the fixed term.

Advantages:

• Guaranteed rate, if interest rates rise your repayments won’t.

Disadvantages:

• Reduced flexibility.
• Extra repayments may incur a fee or be limited.

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A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only. Advantages:

• You can use the money when you need it and pay it back when you can.
• Provides flexibility to manage your own invests and cash flow

Disadvantages:

• Unless care is shown it is possible to reduce the equity you have built in your home.

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If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed. A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a ‘fixed price building contract’ and ‘council approved plans’. Advantages:

• Competitive variable interest rates.
• Facility to draw money when necessary whilst building.
• Interest only payments during the building period.
• Additional payments can be made.

Disadvantages:

• Requires a fixed price building contract leaving little room for change whilst building.
• Some lenders charge a fee for every time you draw money whilst building.
• Given it is a variable loan; loan repayments will increase if interest rates go up.

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Many lenders offer discounted loan packages to attract professionals or larger loans. Eligibility of a Professional Package is based on the loan size, or could be the amount of salary, or the profession, or a combination of all. Depending on the amount you borrow and the type of loan you choose, you could be entitled to an interest rate reduction and many other benefits in relation to your borrowings under this package. Professional packages usually attract an annual fee in return for a range of benefits. This is a very popular option for borrowers who have several loans or want to split their loans. Apply for a Loan

A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. The balance must be a minimum of $2000 in the offset account and it is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you. Advantages:

• Can save you substantial amount of interest if used correctly.
• Operates like a normal transaction account and has a chequebook, ATM card, etc. attached.

Disadvantages:

• May have higher monthly fees attached to the account.
• May require a minimum balance in the account

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