Listed below are some of the mortgage products available in the market and some important factors and tips for the homeowner. This is just to give you an overview of what is now available in the market, it is essential that you discuss these products with a Time Home Loans Mortgage Adviser to establish the best product for your individual situation.
1. Principle and Interest repayments
This is the most common form of mortgage. The repayments are made up of principle and interest repayments reducing the size of the mortgage and can be over 5 to 30 years.
This facility ensures that you pay your home loan off over a certain period. Different products assist you to leverage against this interest and allow you to pay your home loan of quicker.
- Additional repayments
Any extra repayments will allow you to pay less interest over the life of the loan. This will also create a redraw facility for you, hence you can access that extra repayments att a later time and no costs.
- Increase affordability
Clients can also extend their mortgage to 30 years. As your monthly payments will now be less this will assist in borrowing a larger amount – be aware that because you are lengthening the repayment period you will be paying more interest over the lifetime of the loan.
2. Interest only repayments
This facility is available mainly to investors to take advantage of gearing benefits.
It could be set over a period of 1 to 5 years interest only and will revert to Principle and Interest after that. The client will be paying the maximum amount of interest and will not be making any contributions to reducing the mortgage.
Clients need to have a specific reason for using the interest only mortgage such as a facility for gearing benefits or to make minimal repayments as the property was acquired for capital growth over a period of time.
- Overpayments & Underpayments
As clients are only charged the interest on the mortgage, they can pay in lump sums to the mortgage and reduce their monthly interest charges.
- Increase affordability
In certain circumstances this can be used to increase the clients affordability. This should only apply to graduates, or young professionals who are anticipating their income to rise significantly in the near future.
- Gearing benefits
Using this property for tax effectiveness.
3. Fixed (interest rate) repayments
This mortgage allows you to control your repayments for a period of time. Hence knowing your outgoings and being able to control your budget and debt levels in this regard.
- Mortgages can be fixed for 1 to 10 years. Some lenders allow even longer fixing periods.
- Once entered into, a fixed mortgage contract it is very expensive to get out of it – this is referring to as breaking costs.
- Most Lenders allow only a limited amount of extra repayments on a fixed rate home loan.
- It is very important to sit with your Time Home Loans Mortgage Adviser to understand the process and the consequences of fixing.
- Split loan
This allow you to fix some of your loan and leaving the rest on variable. This allow you to control some of your loan, but also having the other portion available to pay of quicker and redraw any additional repayments if need be.
4. Line of Credit
Line of credit mortgages allows you to have a limit of funds that you can use and control as you feel fit. This loan usually has an interest only period of 10 years at which stage it will revert to Principle and Interest. It is a great loan for investment purposes as you control the funds and have access to the limit at a click of a button.
- The interest rate on this facility is usually a bit higher than a normal variable loan product
- Mainly for clients with good equity
- Some lenders will let you have multiple lines of credit under their package, but this will have higher yearly package fees
- Only interest repayments for the first 10 years, with the facility to pay onto this loan as you