Which loan is best for you?
First Choice Home Loans, your home loan specialists can take you through a number
of home loan options to find the one that best suits your lifestyle and may be one of the following:
Variable Rate Home Loan
If you’re looking for flexibility and being able to pay extra payments without penalty and maybe have features like Redraw & Offset then a standard variable rate home loan may be better suited to you.
By being able to pay extra this can help you save on interest charged & build up equity (redraw) which can help if you have any changes in your future financial situation.
With a variable rate loan, your interest rate can increase or decrease throughout the term of the loan.
The interest rate a bank offers can be affected by a number of factors, including in part the official cash rate set by the Reserve Bank of Australia (RBA) as well as higher or lower funding costs for the lender.
Fixed Rate Home Loan
A fixed interest rate home loan is one where your interest rate is locked in for a set period, this can range between one and ten years.
During the time your interest rate is fixed, both your interest rate and your required repayments won’t change. This can be good if the interest rates increase (your repayment will not change) during this period but can be bad if they decrease (your repayment will not reduce).
The main advantage of a fixed rate home loan is certainty. You can lock in or ‘fix’ your interest rate for a certain period of time – typically between one and five years – and plan for the future, knowing that your repayments will stay the same during that time.
With most lenders when the fixed term ends, your loan will usually automatically roll over to the applicable standard variable rate.
You can choose to refix your home loan but it will be at whatever interest rates are applicable at that time.
Split Home Loan
A split home loan is when you divide your loan into multiple parts – meaning you could nominate a portion of the loan to have a fixed interest rate and the remainder could have a variable interest rate.
The fixed portion you would be protected from interest rate rise (however, you wouldn’t benefit from a drop in interest rates) giving you comfort in payments. This can give you comfort knowing your repayment for a set period & allow you to budget over that time.
The variable portion would allow you to pay extra without penalty & may allow you to have Offset and Redraw.
You may also benefit from an interest rate drop, however that also means your repayments would increase if the interest rate goes up.
Example: You’d like to split your $400,000 home loan, and after considering the types of home loans available and how they may match your needs, you decide on a 80:20 split.
Your home loan would then be divided into two loans – a fixed interest rate would be charged on $320,000 and the remaining $80,000 would have a variable interest rate.
Equity Home Loan
Equity is the difference between the value of your property and the amount you still owe on your home loan. You can often access and use this equity to improve your lifestyle.
If you’ve paid down some or your entire loan, and/or your home has increased in value, you may be able to use your equity for:
- Home renovations (shed, pool, new kitchen)
- Home maintenance
- Investment (purchase shares or investment property)
- Buy a car or travel
To find out how much equity you have in your home, you may need to get your home valued. This can be done by your team at First Choice Home Loans.
Make an appointment with one of our home loan specialists to discuss your equity options.
Whether you can borrow additional funds to access the equity in your home will depend on a number of factors, such as your income, living expenses and how much you owe.
Lenders Mortgage Insurance may apply depending on the amount you want to borrow and the property valuation.
The circumstances of your loan will also determine whether this may apply.