Are you planning to purchase a new home? Do you feel confused about all of the mortgage options available? This guide will show you some basic types of home loans and mortgages in Adelaide for a better decision.
Variable rate mortgage
If you select a mortgage with a variable rate, the charged interest rate will move down or up in line with official rates adjusted by Australian Reserve Bank. This means you have to pay more if the rate goes up, and vice versa. A standard variable mortgage provides borrowers with flexibility and many other features like chequebooks and redrawn facilities. In addition, you can transfer your amount to other properties later or make a lump-sum payment.
Fixed rate mortgage
A fixed rate home loan means that the interest rate and repayments will stay the same and be independent of any change to the official rate by the Reserve Bank. If you guess interest rates would rise in the future or you want to be sure about repayments in the long term, then this might be your option. Lenders will often provide fixed rate mortgages for up to 5 years.
Split or combination mortgage
A split or combination mortgage provides borrowers with the option to set a part of their home loan as a fixed-rate amount and the other one as a variable rate amount. This is a good option when you are unsure which direction the interest rate would go in the future.
Honeymoon rate mortgage
Many mortgage broker Adelaide provide so-called honeymoon rates in the early months of a home loan. The offered interest rates could be considerably low compared to the existing variable interest rates. However, you would apply only for a limited period, often from 6 to 12 months. After this time, the rates will often be back to the standard one.
Home equity mortgage
Lenders often structure a home equity loan differently. But in general, it provides you with the access to equity which you already pay off. When it is in effect, any payments that you make could be withdrawn as long as you can to pay your interest charges. Home equity mortgages are suitable for businesses and investors.
This type of mortgage is often set up as a full transactional account along with your loan, check accounts, and savings combined. All of the case deposits and income will be paid to this account. This helps reduce the loan balance. A credit card is usually connected with the account, and payments will be withdrawn each month from this transactional account so that you could reduce the interest costs.
A reverse mortgage might appeal most to retirees and those people who have already paid off their house or have lots of assets with a low income. The lender would give you a monthly payment or a lump sum. In return, you have to put your house up as collateral, along with interest.