Loan Options

    Loan Term

    This refers to the length of time the loan will exist. A 30 year loan term is now standard; a shorter loan term will increase your ongoing repayments as you’re committed to repay the loan off more quickly.

    Principal & Interest

    This refers to how your repayments are made; specifically, that over the term of the loan, repayments of the interest plus the reduction of the actual loan (principal) are made. Therefore over time, the loan is reduced to zero. With additional or more regular repayments, the principal is paid off faster and therefore less interest is paid.

    Interest Only

    With most lenders, there is the option to not reduce your debt and simply repay only the interest on the loan. This might be suitable for investors wishing to maximise their tax deductions or to assist with managing cash flow. This option can be available for a nominated period (i.e. 1 to 5 years) which reverts to P&I following the IO period.

    Lo Doc

    This is a lending option where traditional income documents are not required. Most Lo Doc loans are designed for self employed persons who have the income to service a loan but their financial documents (ie tax returns) are not available as evidence of income. Instead, the borrower is required to declare their employment status and sign a declaration that they have the income to service the debt. While initially this seems risky, the borrower is required to contribute far more equity/cash towards the purchase than the traditional borrower.

    Split Loans

    Variable and Fixed Rate loans both have benefits and disadvantages and in many cases it’s suitable to split the loans to have both types jointly. This means that you gain from the flexibility of a variable loan and the stability of a fixed rate loan, without being overexposed to the disadvantages of each. A split loan does require management of two or more loans and your Mortgage Express Adviser will be able to help you how to best structure your loan.

    Bridging Loans

    In some cases, a person may wish to buy a new house before they have sold their existing one. With Bridging finance, the lender will fund the purchase of the new home until the old home has been sold. This overlap is known as the bridging period and upon selling the old home, the bridging period is finalised and any extra bridging funds are repaid. As the timing of property transactions may be difficult, Bridging Loans are a convenient way to ensure you can secure a new property. This loan option is a little more difficult to set up and it is important that borrowers have a comprehensive understanding of what is required.

    Construction

    This option is generally available with most standard variable loans. When building a house, a lender will make a series of ‘progress payments’ throughout the construction process, rather than handing all of the funds to the builder up front. With each progress payment, the debt accrues until the loan is fully drawn down on completion of construction. Borrowers are usually required to make Interest Only repayments during this construction period which then revert to a standard loan upon the final progress payment.

    Guarantees

    There are three types of housing guarantees; Security, Servicing and a combination of the two. These are where a person or entity other than the borrower allocates a portion of their equity (ie home) or their income towards a loan. The most common example is a parent offering to guarantee a loan for a purchase of a property in their son or daughter’s name. There are many scenarios to consider with guarantees so it is highly recommended to discuss this with your Mortgage Express Adviser.

    There are many other options including Offset Accounts, Redraw, Additional Repayments, Direct Salary Deposits, Loan Increases, and Product Switching, that your consultant can comprehensively discuss with you.