Secured against residential
or commercial property either owner occupier or investor. A mortgage product
with a reduced rate, of 1 - 1.5%, for an initial period, usually 6 months
or one year. This rate will not change during the honeymoon period. The
purpose of these loans is to bring customers in the door. After the initial
period most require that you revert to their standard variable rate loan.
The loan is targeted at first home- buyers and is not available to existing
bank clients wishing to refinance within the same institution.
Advantages:
A very cheap initial rate that allows
new homebuyers to get accustomed to making mortgage payments.
If you start off by paying the standard
interest repayment, the additional money will be paid directly off the
principle.
Will normally allow up to 95 % borrowing
for owner occupied or 90 % for investors.
Disadvantages:
Many honeymoon rates don't allow you
to choose which product you revert to after the initial fixed period,
requiring you to revert to their 'standard' mortgage rate, which is
not their cheapest. Therefore over a three or more year term you would
have been better off with the basic rate from the start.
Many honeymoon rates don't allow you
to redraw extra repayments made during the initial period.
Some of the worst honeymoon rates will
not allow extra repayments during the initial period or limit the maximum
lump sum repayment.
If you break the mortgae contract on
a honeymoon rate the costs are usually a lot higher than standard mortgages
which will negate any interest savings made.
A plain & simple mortgage with few
features, some fees may also apply to activate or use the features. In
return for fewer or higher cost features the interest rate is lower by
around 0.5%. This type of loan is suitable for borrowers who want to make
regular repayments and require little else, for example, investors.
Advantages:
Permanently discounted interest rate.
Customers do not pay for features they
don't use.
Most lenders do not charge ongoing account
keeping fees
Will normally allow up to 95 % borrowing
for owner occupied or 90 % for investors.
Disadvantages:
Higher fees for standard home loan features,
for example, redraw facility.
Many basic rate home loans will not allow
or limit the amount of additional repayments.
Some loans do not give the option of
interest only payments.
Secured by residential property or commercial
either investor or owner occupied. This is the variable rate loan that
honeymoon rates revert to. Suitable for most mortgage situations allows
up to 95 % lending for owner-occupier and 90% for investors.
Advantages:
Offers standard features such as redraw,
additional lump sum repayments.
choice of repayment options (ie: weekly,
fortnightly or monthly).
Many offer an offset facility.
The options of interest only or principal
and interest payments.
Disadvantages:
Unless you utilise the features of the
loan you are paying a higher interest rate than needed.
Not normally allowed switching to lower
interest rate loans within the same institution.
A variable rate loan secured by residential
or commercial property either investment or owner occupied. In most situations
this is the fastest and most cost-effective method of repaying your mortgage.
It works by having all your income (salary, rent, etc) paid directly into
your mortgage account. All additional monies above the interest are deducted
off the principal that same day. This has the effect of reducing the interest
charged on the outstanding principal daily. You leave all additional money
in your mortgage. Bills and general living expenses are paid for using
a credit card; the card is fully paid off at the end of each month. The
effect is to greatly reduce monthly interest expense. Access to your money
is via a debit card linked to your mortgage, periodical payments or direct
debits.
Advantages:
All excess cash is utilised to reduce
your mortgage principle.
Instead of earning interest on savings
1-2% and paying tax on it, you save interest on your mortgage at your
mortgage rate.
Reduces the number of inter-account
transfers and payments reducing bank charges, FID's and BAD taxes.
Utilises your credit card to work for
you. All bills and expenses are paid for by credit card, leaving your
cash to reduce your mortgage. Every month your credit card is swept
to a nil balance before interest is charged on the card (ie: 55 days).
Will normally allow up to 95 % borrowing
for owner occupied or 90 % for investors.
Disadvantages:
Interest rates are the same or marginally
higher than standard mortgages.
Some people feel uncomfortable having
their savings sitting inside their mortgage.
Top of the range mortgage product.
A variable rate loan secured by a mortgage over your home or other residential/commercial
property, a credit limit is set. The balance at any given point in time
can fluctuate between paid out ie zero balance or to the limit. Interest
is calculated daily on the balance, not the limit. It is a flexible mortgage
that can be used for any purpose and can be repaid or drawn upon at any
time.
Advantages:
Margin loans at 8%, car lease at 9%,
personal loan at 10%, overdraft at 12% and credit card at 16% can all
be rolled into one equity mortgage facility at just above home loan
rates.
Interest payments are simply added to
the existing balance, there are no set repayments
All excess cash is utilised to reduce
your mortgage principle.
Instead of earning interest on funds
in a savings account, say at 1-2% and paying tax on it, you reduce the
charges on your mortgage at your mortgage rate
Reduces the number of inter-account transfers
and payments reducing bank charges, FID's and BAD taxes
Utilises your credit card to work for
you. All bills and expenses are paid for by credit card, leaving your
cash to reduce your mortgage. Every month your credit card is swept
to a nil balance before interest is charged on the card (ie: 55 days).
Each month you receive just one statement
containing all you financial transactions.
Disadvantages
Interest rates are the same or marginally
higher than standard mortgages.
Some people feel uncomfortable having
their savings sitting inside their mortgage.
Maximum lending ratio is between 80%
and 85% of the security offered.
Requires a change in the way your normal
banking operates. (Change is good!).
Secured over residential or commercial property
owner occupied or investors. As opposed to variable rate loans, which
fluctuate with current pricing, the individual lender sets a rate that
will not change for the selected period. They are usually offered for
terms of 1, 2, 3, 4, 5, 7 and 10 years. Your fixed rate mortgage repayment
does not change like a variable interest rate; it is fixed for the term
chosen.
Advantages:
Your repayment will remain fixed during
the fixed period.
You are better able to budget as the
repayment will not change.
Disadvantages:
Your are charged a premium or higher
interest rate in return for the banking taking a risk on interest rates
increasing above your fixed rate.
Break costs are usually higher on fixed
rate mortgages. You will usually be charged an interest rate adjustment
in addition to the administrative charge.
Additional repayments and redraw facilities
are usually not available on fixed rate mortgages.
Professional
Packages
A variable rate loan secured by residential
or commercial property either owner occupied or investor. Special mortgage
packages aimed at attracting professionals or low risk clients, (in the
lender's opinion). The packages usually reduce the interest rate and waive
or reduce the fees; they may also offer other services such as free financial
advice or reduced insurance premiums. Each lender has various "criteria"
in order to qualify for the packages.
Advantages:
Reduced interest rate.
Reduced or waived fees.
Special offers on other services.
Disadvantages:
Sometimes a large annual fee is charged,
that may out weigh the benefits
Loans secured by residential or commercial
property, these can be variable or fixed rates. Interest only or principle
and interest repayments. Most lenders require one applicant to be self
employed or hold an ABN number.
Advantages:
No need for the last 2 years tax returns
Self declaration of income
Less paperwork and time delays waiting
for the accountant to provide income information
Professional interest rate discounts
available
Wide product offering
Disadvantages:
Restrictions on lending ratios and geographical
areas
Interest rates may be higher
Exit fees may apply for longer time periods
Not all lender products available for
Lo Doc loans
The information contained
in this document is provided by GIM
to be used as a guide only. It provides general information on general
products. For more detailed analysis of your needs please call GIM
on 0405 153 090
