The mortgage market in Australia is a mesh of thousands of different types of home loans. It is natural for a first home buyer to get confused while sifting through so many options. While you may not need all of these, it always helps to know your options to make an informed decision.
The most basic types of home loans are the fixed and the variable rate loans. Variable rate loan is the most popular type amongst Australians. Your repayment amount keeps changing in a variable rate home loan as your interest rate fluctuates with that of the market. On the other hand, in a fixed rate loan, the interest rate and the repayments remain the same across a particular time period.
However, to cater to the different needs of home buyers, there are various other specialised products. Even though there’s a whole range of options, there are two key factors on which these loan types are based on – principal and interest. Most lenders will approve a loan in principle, which is a good thing because it enables you to narrow down your budget range.
The interest rate is the deciding factor in determining how much your loan will cost you and your repayment amount. Even a small difference in the interest rate can leave a significant impact on both these factors.
The infographic below will help you get acquainted to the different types of home loans that you probably are not aware of. However, before you finalize a loan, plan your budget to determine how much you can afford. Make sure that you reserve enough time to shop around and evaluate product features, interest rates and other fees. Consult your mortgage broker to help you navigate through the options and choose a suitable home loan for your needs