Home loans

iFinance will source the most appropriate mortgage for your needs, whether that is the most competitive interest rate or flexibility of facility, we’ll find something that suits.

Some of the options include:

Variable Residential Loans

There are two types of Variable loans, Basic Variable and Standard Variable. The only differences are in the interest rate charged, and the features available otherwise they operate in the same way. A standard variable loan will usually have a full range of features, whilst a basic variable loan will have a more restricted range. The below table demonstrates the differences.

Please note that this is a guide, and that specific differences may be present dependent on lender or products offered.

FEATURESBASIC VARIABLESTANDARD VARIABLE
RedrawYesYes
Extra RepaymentsYesYes
Ability to change to fixed rateNoYes
Mortgage Offset AccountNoYes
Line of Credit optionNoYes
Discounts available for higher loan amountsNoYes

There is a third type of variable loan which is loans with an introductory interest rate. They are usually a variant of a banks Basic variable loan product, and offer new customers a reduced or discounted rate of interest for a set period. The discount duration can range from 6 to 24 months, thereafter the interest rate reverts to the Standard Variable Rate. In order for the Lender to ensure that they recoup the cost of the discount and to discourage borrowers from continually changing from introductory products of various lenders, lenders have introduced mechanisms such as penalties should the borrower repay or switch the facility within a shorter period than originally contracted.

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Fixed Residential Loans

A Fixed Rate Loan is a loan where the interest rate is guaranteed for a defined period irrespective of what fluctuations occur with variable rate loans.

Fixed Rate term loans usually require renegotiation at the end of the fixed term. Therefore a 5 year fixed term loan would normally be repaid in full at the end of year 5. However, Lenders have the ability to arrange for the facility to revert to the Standard Variable Rate after the Fixed Rate term has expired. Lenders have offered terms of 1 to 5 years for fixed rates. There are some Lenders offering terms of up to 10 years.

Fixed rate loans are popular with property investors who have also found the Fixed Rate loans attractive products due to the product offering the regularity of known repayment amounts.

Borrowers need to be aware that borrower initiated variations to Fixed term Loan contracts means that should the contract be broken or the term changed, the Lender may charge the borrower additional fees to cover the costs of breaking the contract. Break costs could be potentially prohibitive and are based on by multiple factors, inclusive of term remaining, interest rates currently in market and outstanding balance. Many Lenders restrict extra repayments on loans during the fixed rate period, restrictions will vary from lender to lender. This is an important consideration when selecting the right loan for you.

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Line of Credit

Financial data

Equity Loans, offer similar benefits and features as bank overdraft.

A line of credit loan allows borrowers to establish a credit or facility limit, and then draw from it and pay down the loan without restriction. Borrowers have the ability to use the entire limit at any time and don’t have the obligation of an amortised repayment schedule.

Lenders who offering Line of Credit loans require monthly interest charges to be the minimum payment required to maintain the account. Borrowers can determine, how much if any, principal they wish to repay.

The facility or credit limit is normally determined by two factors:

– Equity in the property offered as security, and
– Borrower’s ability to repay

The benefit of allowing the borrower to utilise as much or as little of the credit facility for whatever time frame they require, while still only being charged interest for the outstanding balance. Lenders will also allow for the borrower to operate their loan account as their transaction accounts. The facilities allow for the balance to be moved from a credit balance to a debit balance.

Note: Line of credit facilities need to be handled with extreme care. Financial discipline is essential and not suitable for everyone. Without appropriate discipline, it’s possible to never pay down the loan.

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Reverse Mortgage

Reverse mortgage allows the borrower to leverage equity in their property by lending against, and secured against the property in question. Funds may be borrowed for any purpose including day to day living.

The difference between a standard home loans and reverse mortgage is that lenders don’t require the borrower to make principal or interest repayments during the term of the loan, instead the debt is capitalised. The debt is typically repaid once the property securing the loan is sold. With this type of facility and interest being capitalised until the full debt is repaid, lenders will restrict the amount that’s leveraged against the value of the property. Lenders will cap lending up to 20% of the value of the property dependant on the age of the borrower.

Any borrower undertaking this type of facility is required to obtain independent legal and financial advice, due to the diminishing equity in the borrower’s property. The borrower has the option of repaying the loan, however it is not mandatory and allows the borrower to maintain their current living standard.

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