Mortgage Loans
Comparisons of the types of Mortgage Loans from Mr Mortgage
Here are a few types of mortgage loans that Mr Mortgage can offer you and some of the pros and cons.
Standard variable mortgage loans
This type of mortgage loan is the most popular of the loan types.
- If you choose this loan:
- The loan amortises [is paid off as you pay both a principal portion and the interest repayments on each repayment.
- High loan to value ratios can be sought [up to 95% and higher]
- Loan costs can be capitalised into the loan.
- Very flexible in terms of repayments.
- Good income and job stability required
- Interest rate is variable and fluctuates with market circumstances.
- Can make voluntary repayments in addition to agreed repayments.
Interest Only Mortgage Loans
This loan is like the standard variable, but no principal [capital repayment] is made so the loan is always the same.
- If you choose this loan:
- You get all the benefits of a standard variable and
- Your repayments are less.
- The Interest only repayments are usually for 5 to 10 year only before they revert to a principal and interest loan.
Fixed Rate Interest Only
- Fixed rate loans give you the peace of mind of knowing the repayments, and the interest only reduces the repayments required.
- This loan is the darling of the residential property investor because:
- The repayments are low.
- All interest is tax deductible.
- Tax is payable only on the sale of the property when the capital gained is calculated so paying down the loan has little value.
Construction Loans
Construction loans are not mortgage loans, They are loans on the building linked to the land it will be built on. Once the home is completed, then the loan becomes a mortgage loan.
- The benefits are:
- A progressive loan amount as the builder invoices the lender.
- So this allows an easier path to a new home
- The problem with this type of loan is that land values are becoming a major part of the total lend, and this means that the partial loan is already high for someone paying rent.
- When you put on the length of time that some home take to build these days, often over a year, then this type of financing has become difficult for first time home buyers.
- So this loan is becoming a better option for second home and third home buyers who have equity in their existing homes.
- This is why so many people today look at buying a new home but realise the funding of it is hard when paying for rental accommodation at the same time as the increasing progress payment interest.
100% Offset Mortgage Loan Accounts
Offset accounts are two accounts in the one mortgage loan.
- It is a savings account attached to the mortgage, with
- any positive account balance offset against the interest charged on your loan.
- This has tax advantages as the loan interest is not calculated as earnings.
- You have surpluses accumulate and spend as you wish.
- You may have to pay extra for the extra account keeping fees.
Home Equity Line Of Credit
- Home equity lines of credit have a minimum repayment, but
- some true lines of credit don't require any repayment of the principal,
- and only require monthly interest repayments when the loan hits the credit line, that is it reaches the agreed loan value.
- This is usually set at 80% of the loan value, so this is for homeowners who have built up equity in their home.
- Multiple accounts can be added for business accounts, and property portfolios, making this a great account for small business and property investors.
- This again is not for the first home buyers. but people who have built up equity over time.
Lo-Doc Mortgage Loans
Lo doc means low requirement to document incomes for people that work with a ABN.
- Lo doc mortgage loans again require equity, or a big down payment
[around 20% or more] and strong incomes, and are designed with:
- Small business
- Contractors and
- The self employed in mind.
There are several varieties of lo-doc mortgage loans and names include:
- Lo doc loans
- Low doc home loans/ mortgage loans
- Easy doc home loans
- No financials loans
- No Doc home Loans
Proof of income varies with these offers but are not the same as full doc loans, where full income and financial statements are required as evidence of income for the business person.
So this loan can save you a lot of time and some money too.
Interest rates can be the same or a little higher than full doc home loans.