Finding a low home loan interest rate can be as simple as looking at a list of home loans, sorting them by their rates, and making your home loan comparison from there. However, the home loan with the lowest interest rate may not be the best mortgage for you.

As a leading lending broker, we pride ourselves on a level of personalised service that you just won’t get anywhere else. We understand each client’s needs and match a home loan from one of our leading lenders that will put them at a distinct advantage in years to come.

Our clients include first home buyers, builders, investors and everything in between. Investment property loans are slightly different to those of an owner-occupied loan and we work closely with our clients to build their property portfolios.

Many of the home loans we arrange are refinancing loans, which involves reviewing current arrangements with the latest market offerings and securing a better deal.

Re-financing a home loan can be helpful for additional purposes such as renovations or debt consolidation.

Uses of Home Loans

Home loan finance can be used for:

  • the purchase of existing residential property
  • owner occupation, also known as owner-occupied property used as an investment, for example, a property that is rented out to a third party
  • a construction loan to build a new home, called a construction loan
  • home renovation or improvements to the mortgaged property
  • refinancing debt from another loan product and/or credit provider
  • bridging finance, used to manage the transition between buying and selling properties
  • investment (e.g. self managed superannuation fund (SMSF) loans are home loans for those who wish to invest their superannuation in property).

In addition, equity home loans allow borrowers to draw down the equity value on their existing property to purchase other items such as cars, boats, shares and other investments.

Interest Rate Type

Home loan products offer a range of interest rate options:

  • Variable rate, where the interest rate rises or falls in line with the changes in the official cash rates.
  • Fixed rate, where interest is paid at a fixed rate over the term of the loan.
  • Split rate, or a combination loan, consisting of a variable interest component and a fixed interest component.

Home Loan Repayments

Payments can be either:

  • principal and interest (P&I), or
  • interest only.

As a general rule, residential loans can be taken over a 30-year period, of which most credit providers will allow a maximum period of five years interest-only repayments, with some credit providers allowing up to 10 years interest-only repayments.

Home Loan Features

Home loan products are packaged in ways to meet the many and varied needs of consumers. They are usually distinguished in terms of features or characteristics such as:

  • interest rates
  • method of calculating the interest, whether variable or fixed
  • portability — the ability to keep the same loan if moving to a new home
  • loan term
  • fees and charges
  • redraw facility — where a borrower has made additional loan repayments, they can access these funds using a redraw facility
  • top-up, or the ability to extend the credit limit on an existing loan
  • offset accounts — the ability to link the mortgage loan account to a transaction account where the funds in the transaction account then offset the loan account.

Home Loan Fees

Fees vary for the type of home loan product and the credit provider. Fees on a home loan may include:

  • Establishment fees: Also called as application fees, up-front fees, start-up fees or set-up fees, establishment fees are a one-off payment to start the loan. When not charged an establishment fee, borrowers may face higher ongoing fees.
  • Lenders mortgage insurance (LMI): A premium payable by the borrower that protects the credit provider against the potential loss incurred if the borrower is unable to repay the home loan. LMI may amount to several thousand dollars. For full-documentation loans, up to 80% of the property value can be provided without the borrower having to pay a LMI premium. Some credit providers will increase the loan size up to 95% of the property value with LMI.
    For low-doc loans, LMI may be payable by the borrower when the loan to value ratio (LVR) exceeds 60%.
  • Ongoing fees: Also known as service or administration fees, these are fees charged for managing or administering the loan.
  • Early exit fees: May be charged on a home loan paid out in full within a specified period, for example, the first five years of the loan. According to MoneySmart (2015): Exit fees on new loans were banned on 1 July 2011. Exit fees can still be charged on loans signed up before 1 July 2011 but some credit providers have removed these fees from existing loans. Other credit providers will pay your exit fees for you when you move your loan across to them.
  • Break fees: Break fees or costs are charged for breaking a fixed rate loan contract. They can be very high.
  • Discharge fees: May be charged when a borrower pays out the mortgage in full.

Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.