Monday, December 13, 2004

Basic Variable Rate Home Loan Australia

What is a Variable Rate Home Loan?: "
With variable rate home loans the interest rate varies according to market forces but is normally several percentage points higher than the current Reserve Bank interest rate. When the Reserve Bank changes official rates then variable rates from bank and non-bank lenders follow suit. Interest Rates can move up or down.

The Variable rate home loan is still the most common form of loan in Australia and is normally a principal and interest type loan, but can be interest only. Equity, Renovation, Low Doc, No Deposit, Debt Consolidation, Investment and First Home Loans are just other names for Variable Rate Loans. However as many of the loan titles suggest, the eligibility criteria is different for each.

Standard Variable loans include features that give the borrower maximum flexibility in management and repayments.

Basic variable loans are usually the cheapest loan on the market in terms of interest rates. However this doesn't always mean they are the cheapest loan as there may be extra charges like monthly account fees, and they often don't have many of the useful features of the standard loan"

Split Rate Home Loan Australia

What is a Split Rate Home Loan?: "
Split Rate Loans are popular in Australia in times of uncertainty about interest rates, especially if rates are moving up, because borrowers can hedge their bets on whether future rate changes will be up or down.

Taking part of the loan out at a fixed interest rate means no matter what happens to Interest rates your repayments for the fixed interest component of the loan will remain constant. This is obviously a bonus when rates are rising.

The second component of the loan is taken out with a variable interest rate. If interest rates fall then repayments for this section of the loan will also fall.

For borrowers this means you have an each way bet on which way interest rates are going to move. If rates go up you are partially insulated and if rates go down you are also partially protected.

Split loans can take some of the stress out of borrowing during times of volatile rate fluctuations. For those on a tight budget it can help you sleep better at night without having to worry so much about loan repayment increases.

Visit our web-site for further information"

Fixed Interest Rate Loan Australia

What is a Fixed Interest Home Loan?: "
A Fixed Interest Loan allows you to fix the interest rate for a set term (usually 1 - 5 years) unlike a variable rate home loans where the interest rate varies according to market forces. When the loan reaches the end of its term you may be able to roll over into a new fixed term loan at the prevailing interest rate, or convert to a variable rate loan.

Fixed interest loans are popular in Australia when interest rates are rising and borrowers want to lock in a rate that will insulate them from excessive rises in repayments. However no-one has a crystal ball which can accurately predict future interest rate rises. Locking in an interest rate is a two edged sword. Interest Rates can rise or fall. One option available to borrowers is to take out a split loan. Part of the loan can be taken out as a fixed rate loan and the other part as a variable rate loan.

Property investors often like fixed interest loans as they enable them to sleep at night when interest rates are rising. Knowing their future costs assists in budgeting and forecasting projections for investment planning. It can also provide a breathing space and allow time to build cash reserves and make contingency plans.

The unpredictablity of interest rates make fixed rate loans a gamble, but for some borrowers the comfort and security provided is worth the risk.

Visit our web-site for more information"

Interest Only Home Loan

What is an Interest Only Loan?: "
An Interest Only Loan as the name suggests requires the borrower to repay the interest only and nothing off the principal. The interest rate can be variable or fixed and the term is usually relatively short, often only one to five years. At the end of the loan period you still owe the full amount of the original loan.

Interest Only loans are popular with property investors in particular for several reasons. When interest rates are rising property investors have a degree of insulation from excessive repayments that may otherwise trigger cash flow problems. Regardless of whether interest rates are rising or falling, the fact that interest only loan repayments are less than repayments on a principal and interest type loan, means that an investor retains more profits from rents or can afford to purchase a higher value property.

Interest Only home loans for average home buyers are not very common in Australia, but in some countries where property is very expensive they help to make owning property more affordable.

Visit our web-site for more information."