Different Types of Loans

When you do a home loan comparison, you might come across different types of loan options. It can be a challenge to choose from these options, and sometimes borrowers fall for a bad deal. It is important to understand the features and terms of these loan options fully before making a decision. Here’s a brief look at the different kinds of loans on offer:

  1. Basic Loan

A basic loan doesn’t have many frills or special features. It is a basic loan package with lower interest rates, which makes it appealing for people on a budget. However, this loan isn’t ideal for someone who wants to make extra repayments. It is also unsuitable for people who might want to redraw in the future. While many banks offerredraw facilities in basic loans, your options are still limited.

  1. Standard Loan

This loan is similar to the basicoptionbut provides a number of helpful features. You can redraw the amount you have already repaid towards the principal. You can switch to a fixed rate, split loan, and gain access to an offset account. However, you might have to pay a higher interest rate through this option.

  1. Home Loan Package

This loan is similar to the standard loan option, but you get an interest rate discount of around 1.2%. You get a free transaction account and can skip the annual credit card fee. But you might have to pay fees of around $400 on this option, which can add to your cost. Consider how much benefit that 1.2% of interest discount offers with the addition of the package fee.

  1. Construction Loan

A constructionloan is ideal for people who want to build a new home instead of buying an already constructed one. Instead of gaining loan money altogether, you can withdraw the different amounts as you receive bills from the construction company. Once the construction is complete, the loan will switch to a regular home loan.

  1. Bridging Loan

Sometimes you can find a dream new home before your older house is sold. A bridging loan comes in two forms; you can get a single loan with both new and old properties as security or take a separate loan for the new property. Both options have their advantages and disadvantages, which you need to consider during the home loan comparison process.

If you want to know more, don’t hesitate to contact us! We’re Mortgage Brokers in Melbourne and can be reached on 0419 856 669.