A line of credit functions in a similar way to a credit card since you have a pre-approved borrowing limit and can draw on as little or as much of that sum as you need, with interest paid on the outstanding balance. The Aussie Select Line of Credit has minimum and maximum loan amounts and terms with different interest rates depending on the size of your deposit.
The highest rates apply where you are borrowing more than 90 per cent of the value of your property and the lowest rates apply where you’re borrowing less than 80 per cent. Along with the higher rate, you’ll have to pay lenders mortgage insurance if your deposit is less than 20 per cent.
Repayments can be made either fortnightly or monthly on a principal and interest or interest-only basis, though weekly payments aren’t allowed, a restriction on most Aussie home loans. There is no option for additional repayments and there is no offset account included as part of a line of credit loan. As such, with a line of credit, you need to be careful not to allow interest costs to accumulate.
While you don’t have to repay any principal for many years, that means your interest costs will be higher than on those on a traditional principal and interest loan. This is a particular risk with this loan since you can’t make extra repayments. However, one bonus is that the loan can also be split into other types of home loans, including Aussie variable loans which allow unlimited repayments.
Also, the loan can be transferred to a new property via a portability option.
Who is the Aussie Select Line of Credit Loan good for?
The Aussie Select Line of Credit loan is good for home owners who want access to the equity they have in their property to fund renovations, investments or other purchases. The option to make interest-only repayments may suit some investors. However, the minimum loan amount on this line of credit is relatively high, which may put off some first home buyers and refinancers who’d want to borrow less.
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The Aussie Select Line of Credit Loan allows you to use the equity you own in your property as security against a large line of credit. The loan does not offer much in the way of flexible repayment options, with no ability to make additional repayments, so you can’t reduce your interest costs by doing this. As with any home equity loan, this line of credit functions like a large credit card and it’s important to be disciplined in how and when the loan is used and repaid.
However, the main advantages are the low interest rate and no upfront or ongoing fees, which may make it suitable for home owners wanting to access the equity in their property without having to pay too much for the privilege; you pay less in interest than you would on a personal loan.
The loan also offers different variable interest rates depending on the amount borrowed and the size of the deposit, with the lowest rates given to those with deposits above 20 per cent of the property’s value. It is therefore worth investigating what rate will apply in your circumstances.
Aussie Select Line of Credit Loan Options
The Aussie Select Line of Credit Loan is a variable loan that varies based on the size of the loan and is available to owner-occupiers and investors at different borrowing amounts.
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