Fixed and variable rate home loans might be the greatest differentiation between mortgage types, but there are a whole host of specialised products designed for different circumstances.
There is a huge array of mortgages on offer now, some with differences so slight that you may not even notice. But with an ever changing property market, it is important to understand and research the different types of mortgages available and what will really suit your budget and needs the best of the lenders.
Introductory Home Loans (aka Honeymoon Loan)
This is a home loan product aimed squarely at getting you in and one which you’re likely to come across a lot. Also known as honeymoon loans, due to the ‘honeymoon period’ during which you pay lower discounted interest rate, these home loans usually offer a very cheap rate for an initial period of time, however the low rate only lasts for a limited period, usually around 12 months and then go up to a higher rate.
As the name suggests, construction loans is the kind of loan you would expect to encounter when you are starting from scratch or renovating your home. With a construction loan, you can break up the drawdown of the loan amount into five progressive draws, which parallel the construction phases so you are not repaying large payments from the outset of buying a land plot. As one phase of the construction is complete, you are able to draw down the next portion of the loan. Normally a 5 or 6 stage process, the stages are: Slab, Floor, Framework, Lock Up, Fit Out and Completion.
The central component is a home loan, which will need to be over a certain amount to qualify. These figures vary with different lenders. With these loans, take care as on one hand they give you a discount and on the other hand, they charge you a fee for the life of the loan.
Low Documentation or Low-Doc loans do not require traditional proof of income such as company financials or tax returns. Instead, borrowers generally complete a declaration that confirms they can afford the home loan, known as self-certification. These loans are designed for self-employed who may have difficulty showing their income at that point in time.
Non Conforming Loans
These are just some of the home loans that are on offer from banks and loan providers, but not everyone is available from every provider and some offer even more in-depth and varied mortgages from a major lenders point of view.