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When you are in the market for a home loan, it is important to know what to look for. There are many different types of home loans available, and it can be difficult to decide which one is right for you. Let’s discuss the different types of home loans available, and we will help you to decide which one is right for you.
The Types Of Loans Available
The right home loan for you will depend on your situation. The most common types of loans are interest-only, fixed, and variable rate home loans. Based on where you work or what you do, you can also get a loan that is specific to your employer, like the Woolworths Home Loan. Or, you can go to physician banks and get a home loan as a doctor. If you want a home in a particular area and you can’t afford to buy anything in that area, then an investment home loan may be right for you. With this type of loan, there is no salary or employment requirement. You will also need a decent deposit saved up, but it doesn’t have to be as expensive as if you wanted to purchase a family residence.
1. Interest-Only Home Loans
With an interest-only home loan you pay the mortgage interest each month, but none of the principal is paid down. This type of loan is generally used by investors to purchase rental properties or by people who intend to sell their property before they have finished paying off the home loan. If you plan on selling soon after obtaining your new home, an interest-only home loan might be right for you. However, if you plan on staying put in your new house for several years, this may not be right for you because it can lead to negative equity in which case you risk being out of pocket to sell your property.
2. Fixed-Rate and Variable Rate Home Loans
With a fixed-rate home loan, you pay the same interest rate each month based on what was agreed upon when you purchased the house. This is generally the safest type of home loan because it gives you some stability in terms of knowing exactly what you are going to be paying every month. Unfortunately, not everyone can get this type of loan so if you do qualify for one expect to pay more interest than with an interest-only or variable rate home loan. With a variable rate home loan, how much you pay changes from month to month and will depend largely on the bank’s economic base lending rate (usually named something like prime + 2%). Therefore, your monthly payments can be higher or lower depending on economic circumstances. This type of home loan is generally the cheapest, so if you want to get a great deal then this is the best way to go. However, there is no stability with it and your rate could change dramatically over time.
3. Employer-Supported Home Loans
This type of home loan is generally offered by large corporations who have partnered with banks so their employees can get great deals on loans. For example, Telstra workers can get an amazing deal on their housing loans through Westpac Bank because it has partnered with Telstra. This means that you can get a home loan for as little as 1% or 2% interest. However, this is usually only offered to large groups of people, so it may not work if you have never worked for a large company before. Because these deals are offered by the employer, they generally tend to be more expensive than other types of loans because there is no competition from other banks and nothing else incentivizing them to offer a great deal.
How Long You Want To Pay It Off
When you decide what type of home loan you want, the next thing to think about is how long you want to pay off your home loan. If it will be for a considerable amount of time, then a fixed-rate loan may be what is best for you. However, if you are planning on being in your new house for only a couple of years then any other type of home loan could work better for you.
Before signing on the dotted line, it’s important to take into account that house prices rarely fall so if you decide that you would like to sell your property in the future, be aware that you will most likely get back less than the amount of your original mortgage. In addition to this, because interest rates change regularly it is wise to try and select one type of home loan so that your monthly repayments remain stable over time. Finally, it is important not only what type of home loan you have, but also the interest rate and whether or not it changes over time.