Helping Lift the Home Loans Haze
So…you’re about to buy a property and need a home loan…
Where do you begin?
Whether you are a first home buyer, have bought and sold several times, are re-financing, seeking an equity loan, or even a reverse motgage – there are a lot of thing to consider…
Do you choose fixed rate, variable rate, adjustable rate – or interest only.
Rates, fees, costs – can all vary.
Let’s have a look at the differences:
Fixed Interest Rate – usually fixed for the life of the home loan, say 15-30 years, regardless of increases or decreases in market rates. This type of home loan is ideal for those on a budget – as you always know what your repayments are.
Adjustable (Variable) Interest Rate – this type of home loan allows the interest rate to be adjusted according to the current market rates -usually adjusted at the end of pre-determined periods. These tend to have lower monthly payments and are more flexible than fixed.
Balloon Home Loan – this is fixed amount payments for a period of time and then one large payment (balloon) towards the end of the term.
Graduated Payment Home Loan – this is where the payments start off small and gradually increase.
Interest Only – this type of home loan is usually only for a specified time – where interest only is paid – so the principal is not reducing. Usually only used for a short time, or to finance a second property.
Second Mortgage – this is based on the amount of equity you have in your home. Usually used for home renovation, to consolidate debt or to purchase a second property. Usually set payments at a fixed interest rate. Be aware that interest rates are usually higher.
Home Equity Home Loan – this is borrowing against the equity in your home. It is often used to finance home renovations. Interest rates can vary, as can the fees and term – it is a very competitive market – so do your homework. This loan can have tax advantages – however, your home is up as collateral.
Reverse Mortgage – also known as ‘equity release’. This is for seniors to convert the equity in their home to cash. Repayments are not required until they permanently move, sell, die or reach the end on the loan term.