Things to Consider

A variable rate loan is a type of loan in which the interest rate can change over time, in response to changes in market interest rates. The interest rate on a variable rate loan is typically tied to a benchmark interest rate, such as the Reserve Bank of Australia’s cash rate, and will increase or decrease as the benchmark rate changes.

One of the main advantages of a variable rate loan is that the interest rate can be lower than the interest rate on a fixed loan, especially if market interest rates are low. This can result in lower repayments, making it easier for the borrower to manage their finances. Additionally, variable rate loans often come with more flexible repayment options, such as the ability to make extra repayments or pay off the loan early without incurring break costs.

However, it’s important to consider the potential drawbacks of a variable rate loan as well. The interest rate on a variable rate loan can increase as well as decrease, which can result in higher repayments if market interest rates rise. This can make budgeting and financial planning more difficult for the borrower.

Overall, a variable rate loan can be a good choice for individuals who are comfortable with the possibility of higher repayments in response to changes in market interest rates and who value flexibility in their loan repayment options.

A fixed loan is a type of loan in which the interest rate is set for a certain period of time, typically 1 to 5 years. The fixed interest rate remains unchanged during the fixed term, regardless of changes in market interest rates, providing the borrower with stability and predictability in their loan repayments.

One of the main advantages of a fixed loan is that the borrower knows exactly what their repayments will be during the fixed term, making budgeting and financial planning easier. Additionally, a fixed loan can offer peace of mind in uncertain economic times, as the borrower is protected against sudden increases in interest rates.

However, it’s important to consider the potential drawbacks of a fixed loan as well. If market interest rates decrease during the fixed term, the borrower may be paying a higher interest rate than they could with a variable rate loan. Additionally, if the borrower wants to pay off their loan early or make extra repayments, they may be subject to break costs, which are fees charged for breaking the fixed term early.

Overall, a fixed loan can be a good choice for individuals who value stability and predictability in their loan repayments and are comfortable with the possibility of paying a higher interest rate than they could with a variable rate loan.

A part fixed, part variable rate loan is a type of loan in which a portion of the loan is subject to a fixed interest rate, while the remaining portion is subject to a variable interest rate. This type of loan combines the benefits of both fixed and variable rate loans, providing the borrower with stability and predictability in part of their loan repayments, while also allowing them to take advantage of potential decreases in interest rates.

With a part fixed, part variable rate loan, the borrower can choose the proportion of their loan that is fixed and the proportion that is variable. For example, they may choose to have 50% of their loan subject to a fixed rate and 50% subject to a variable rate. This allows the borrower to balance the stability of fixed repayments with the potential for lower repayments if interest rates decrease.

It’s important to consider the potential drawbacks of a part fixed, part variable rate loan as well. The interest rate on the variable portion of the loan can increase as well as decrease, which can result in higher repayments if market interest rates rise. Additionally, if the borrower wants to pay off their loan early or make extra repayments, they may be subject to break costs on the fixed portion of the loan.

Overall, a part fixed, part variable rate loan can be a good choice for individuals who want to balance the stability of fixed repayments with the potential for lower repayments if interest rates decrease.

This is where you elect to pay either just the interest charged on your loan or the interest and principal. These are referred to as Interest Only I/O, or Principal and Interest P & I. Usually with a Home loan you would elect to pay principal and interest as the rates are lower and with every payment your loan balance is reducing. Whereas with an investment loan you may elect to pay interest only so as to save cash flow and not diminish your loans tax deductibility. Nic will go through the options and advise the most appropriate payment type for your situation.

There are situation though where we recommend to pay just Interest only on a home loan. Eg; During a building loan, where the loan is progressively used, we recommend interest only, as you only want to pay interest on what you are using, then at the end you can move to P&I payments.

Non-conforming lenders are financial institutions that offer loans to borrowers who do not meet the standard criteria set by traditional lenders, such as banks. These borrowers may have a poor credit history, a low income, or difficulty proving their income. Non-conforming lenders are often more flexible in their lending criteria, and may offer loans to borrowers who would not be approved by traditional lenders.

Non-conforming loans can include:

1. Bad credit loans: These are loans specifically designed for borrowers with a poor credit history.
2. Low doc loans: These are loans for self-employed individuals or those who have difficulty proving their income.
3. No doc loans: These are loans for borrowers who do not want to provide any documentation about their income or assets.
4. Specialist loans: These are loans for borrowers with specific needs, such as those looking to purchase a non-standard property or those with a complex financial situation.

It’s important to consider the potential drawbacks of non-conforming loans as well. The interest rates on non-conforming loans can be higher than those offered by traditional lenders, and the loan terms may be less favourable. Additionally, non-conforming lenders may require a higher deposit on a purchase or charge higher fees.

Overall, non-conforming loans can be a good choice for individuals who do not meet the criteria set by traditional lenders and who are looking for a loan. However, it’s important to carefully consider the terms and conditions of the loan, as well as your own financial situation, before taking out a non-conforming loan. It’s also a good idea to consult with a financial advisor to ensure that a non-conforming loan is the right choice for you.

Self-certified loans are loans that do not require proof of income from the borrower. This type of loan is sometimes referred to as a low documentation loan or a no documentation loan. Instead of providing traditional documentation, such as pay stubs or tax returns, the borrower is simply asked to state their income. This type of loan is often used by self-employed individuals, commission-based workers, or those who have difficulty proving their income in a conventional manner.

The key advantage of self-certified loans is that they can be quicker and easier to obtain, as there is less documentation required. However, there are also some potential drawbacks to consider. For example, self-certified loans typically come with higher interest rates and fees than traditional loans, and may require a higher deposit. Additionally, lenders may be more cautious when providing loans to borrowers who cannot prove their income, so loan approval may be less likely.

In general, self-certified loans can be a good option for those who have a unique financial situation and are unable to provide the required documentation for a traditional loan. However, it’s important to understand the terms and conditions of the loan, as well as the risks involved, before committing to a self-certified loan. As always, it’s a good idea to consult with a financial advisor to ensure that a self-certified loan is the right choice for you.

A reverse mortgage is a type of loan that allows homeowners to tap into the equity they have built up in their home and convert it into cash, without having to sell the home or make monthly payments. Instead, the loan is repaid when the homeowner sells the property, moves out, or passes away.

Reverse mortgages are typically available to individuals who are 62 years of age or older and have a significant amount of equity in their home. The amount of money that can be borrowed is based on factors such as the value of the home, the age of the youngest borrower, and current interest rates.

One of the main benefits of a reverse mortgage is that the loan does not have to be repaid until the homeowner sells the property, moves out, or passes away. This allows retirees to access the equity in their home and use the funds for expenses such as medical bills, home repairs, or simply to improve their standard of living in retirement.

An offset account is a type of savings account that is linked to a mortgage or other loan. The idea behind an offset account is that the balance in the offset account is used to offset or “reduce” the balance of the loan, effectively reducing the amount of interest charged on the loan.

For example, if you have a mortgage of $600,000 and an offset account with a balance of $50,000, the interest charged on your mortgage would be calculated as if you only owe $550,000 ($600,000 mortgage balance minus $50,000 offset account balance). This can result in significant savings on interest charges over the life of the loan.

Offset accounts are typically offered by banks and other financial institutions in conjunction with a mortgage or other loan and are a popular option for borrowers looking to save money on interest charges and pay off their loan faster.

When considering an offset account, it’s important to consider the interest rate and fees associated with the offset account, as well as the features and accessibility of the account. Some offset accounts may offer additional benefits, such as a higher interest rate or flexible features, while others may have restrictions on access to the funds in the account.

Overall, an offset account can be a useful tool for individuals looking to reduce the cost of their debt and pay off their loan faster. However, it’s important to consider the terms and conditions of the offset account and your financial situation carefully before choosing to open an offset account.

Basic loans refer to a type of loan that is simple, straightforward, and typically does not come with many additional features or complex terms. Basic loans may be offered by banks, credit unions, or other financial institutions.

Basic loans can be a good option for those who need a simple, straightforward loan without many additional features or complex terms. However, it’s important to carefully consider the interest rate, repayment period, and overall cost of the loan, as well as your own financial situation, before taking out a loan. It’s also a good idea to compare loan options from multiple lenders to ensure that you get the best deal.