Q: What are the types of legal home loans?
- Variable rate home loans
Variable rate home loans are one of the most popular types of mortgages in Australia. With a variable rate, your interest rate can fluctuate with changes in the market, meaning that your monthly repayments can also vary. The benefit of a variable rate loan is that you may be able to take advantage of lower interest rates when they occur, potentially saving you money over the life of the loan.
- Fixed rate home loans
Fixed rate home loans offer the security of knowing exactly how much your repayments will be for a set period, usually between 1 and 5 years. This can be helpful for budgeting and planning purposes, as you won’t be subject to market fluctuations during the fixed term. However, if interest rates fall during your fixed term, you may miss out on potential savings.
- Split rate home loans
Split rate home loans allow you to split your mortgage between fixed and variable rates. This can give you the best of both worlds, providing the stability of fixed rates for a portion of your loan while still allowing you to take advantage of potential savings with a variable rate.
- Interest-only home loans
Interest-only home loans allow you to pay only the interest on your mortgage for a set period, usually between 1 and 5 years. This can be helpful for investors who want to maximize their cash flow or for those who are renovating their property and want to keep their monthly repayments lower during the renovation period. However, it’s important to note that you will need to repay the principal eventually, which can result in higher repayments later on.
- Line of credit home loans
Line of credit home loans allow you to access funds up to a certain limit, which you can draw down and repay as needed. This can be useful for renovations or other expenses that require a large upfront payment, but you’ll need to be disciplined to avoid overspending and taking on too much debt.