Standard Variable (Floating Rate)
The advantage of a variable rate loan is that you have more flexibility with the loan; for instance, you can make extra repayments without penalty. The disadvantage is that your loan interest rate can vary up and down which will affect your repayments and is more difficult to budget for. The Interest rate fluctuates over time due to changes in the Official Cash Rate made by the Reserve Bank.
Your interest rate is fixed for a set period of time that you nominate (generally 1-5 years) so your repayments will remain the same irrespective of economic cycles; therefore fixed rate loans provide you with more certainty. While it is easy to budget your repayments, you may also have restrictions regarding changing the loan, including making extra repayments. It’ is also worth reviewing your loan when your fixed term expires as usually the interest rate will revert to a standard variable rate which is often higher than other available variable rates.
If you repay a Fixed Rate loan early – you might sell your home – then you may have to pay an early repayment fee. Your Mortgage Express Adviser can help you with eliminating or minimising the impact of early repayment fees.
Line of Credit (Revolving Credit)
This is a flexible, floating interest rate loan similar to an overdraft. As the borrower, you are able to withdraw funds up to a pre-approved credit limit. Interest is only paid on the amount of funds that you have used in any particular period.
This type of facility is useful for people who earn bonuses or commissions and self-emlpoyed people with irregular income and expenses. These clients can use the revolving credit facility to reduce the principal owing on their mortgage and the interest rate they are charged each month.
See your Mortgage Express Adviser to find out how you can benefit from this type of loan facility.
These are loans for people who may have a poor credit history, may have been bankrupt or don’t fit the normal lending criteria of the major banks. The interest rate is usually higher and the loan restrictions are greater. However there may be a short term lending solution that suit your needs if other lenders won’t meet your funding requirements. Your Mortgage Express Adviser does have access to lenders who specialise in providing solutions for clients who find themselves in this situation.