Whether you are already seriously looking for a new home or you are just considering going down the home loan path, it's important to know what kind of home loan is right for you. There are many different options that you can choose from and each one is good for a different requirement, which we will get into later. But don't feel too overwhelmed by picking which one is good for your specific needs, we got you covered with some of the most common loans that a new homeowner can pick from.
This is a short-term loan that someone might get if they already own a home. It's ideal for this situation because the loan gives the borrower about six months to sell the existing property while you move into a new place. According to Mortgage Choice, "When you take out a bridging loan, the lender usually takes over the mortgage on your existing property as well as financing the purchase of the new property."
As the name suggests, the loan helps a person who may be building a structure on a new property. The specialised loan gives the borrower the ability to draw down on the loan balance. A typical mortgage gives the borrower the funds all at one time. The loan type is often also called an owner-builder loan.
Interest-only home loan
Again, the name of this loan may seem self-explanatory. Mortgage Choice explains that sometimes a borrower can choose to just pay the interest on a loan instead of both the interest and the principal. This choice often results in lower repayments that can often be used to enhance the new real estate. There is an "interest-only period" after which the borrower must continue paying the principal.
Fixed home loan
For those who choose a fixed home loan, the current interest rate is locked in and will not change over the lifetime of the loan. The lender will be unable to increase the interest rate, even if the rate would have otherwise changed. The time period of the fixed interest rate loan could go from 5-30 years.
Variable home loan
On the other hand, a variable home loan has an interest rate that is subject to change over time. While a variable interest rate could leave you vulnerable to increasing interest rates, there is a chance that interest rates may go down during the loan term. In this case, you would pay less interest than you did at the time of the settlement.
In most situations, borrowers will have a hard time finding a good loan if they want to borrow but they have a poor credit history. A non-conforming loan can help those with a bad credit score, a long unemployment history, or those who want to borrow more than 80% of the home's value. Note that these loans usually have higher interest rates than other more traditional loans.
Are you ready to find your next property and put your home loan to good use? Reach out to Ray White Surfers Paradise today.