Excellence Finance mortgage brokers offer many types of loans and loan options as explained below. The lender has their own variations and, of course, they price their offerings accordingly. In most cases, they are all similar to each other’s rates. These are the residential loans that you need to learn about.
Principal & Interest
This is the type of loan that most people will take if they want to pay off their residential loans or home loan and the interest incurred in the agreed loan term.
The benefits of having a principal & interest loan are:
- You will be able to pay off your initial amount borrowed (the principal) and also the interest incurred in the loan term (interest).
- As time goes by, your principal amount will decrease as well and you will also save interest.
- Making extra repayments and having loan features such as an offset account and loan redraw will also benefit you when you want to reduce your loan principal.
The disadvantages of Principal & Interest loans is that you pay slightly higher repayments as compared to interest only loans. You can check a real estate finance mortgage loan calculator for the details.
Types of residential loans available with principal & interest loans:
- Basic Home Loans
- Standard Variable Home Loan
- Introductory Rate Home Loan
- Fixed Rate Home Loans
Interest Only Home Loan
This type of home loan product is designed to be tailored to match the cash flows for an investment property, usually for the first 5 years of the home loan. After this time, the loan can be converted into a Principal & Interest loan or taken over another 5 years of interest only. You can speak with our finance solutions company for more information on this type of residential loan.
The benefit of having the Interest Only Home Loan is you make lower repayments because you are only paying the interest from the loan. A loan payment calculator can provide you with a basic quote.
The disadvantages of paying interest only among many other types of residential loans are:
- You will not be paying any of the loan principal balance unless you make extra repayments from the loan balance.
- You are only paying the minimum repayments from the loan.
- People who would take advantage of this type of loan would usually use the extra cash they have saved up to pay for their owner.
- Occupied loan or other loans.
Line Of Credit
Also known as "Equity Loans", these facilities free up the equity in the underlying property and convert it into a Revolving Line Of Credit which can be used for personal or investment related purposes. This involves having a credit card and using it to pay for bills and other monthly expenses incurred.
The benefits of having this loan are:
- Every month, once your income comes in the account, your credit card is paid off and the remainder is taken off your principal.
- Withdraw up to your credit limit on your credit card without having to gain a pre-approval from the bank.
- The credit card limit amounts will be usually higher other credit cards available directly from the lender.
The disadvantages of having a Line of Credit loan as your chosen residential loan are:
- You need good budget skills when you have a credit card. In most cases, your credit card limit will be higher than your monthly income therefore you will need to budget yourself correctly so you don’t overspend.
- In some cases, you may pay a higher interest rate among other types of residential loans.
Construction loans or construction home loans are very short term facilities for those who are in the process of building. This loan suits anyone who is wishing to purchase a piece of land and then construct your home on it. The loan is drawn down in 5 stages which will pay the builder. During the construction period, your construction loan is interest only to help you pay your rent or other mortgages you may already have. After the construction period, the loan will revert to a standard loan. This is a good AUS finance solution especially if you are short on budget.
If you would like to speak to one of our Home Loan and Residential Loans Consultants, please contact us to enquire about your finance needs or phone our office at (02) 9609 4655.