Rates on hold but market still awash with home loan bargains
The RBA has this afternoon announced that rates will remain on hold for the moment but banks are continuing to offer low interest rate deals for ideal borrowers with big deposits.
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Smart Home Loan
Fixed - 3 years
Interest rate structure
Fixed - 3 years
$150k - $100m
Principal & interest
Loan term range
0 - 30 years
Unlimited extra repayments
Allows split interest
ACT, NSW, NT, QLD, SA, TAS, VIC, WA
Estimated upfront fees
Minimum SMSF Amount
Other fees may apply
If you can’t pay off your guaranteed home loan, your lender might chase your guarantor for the money.
A guaranteed home loan is a legally binding agreement in which the guarantor assumes overall responsibility for the mortgage. So if the borrower falls behind on their mortgage, the lender might insist that the guarantor cover the repayments. If the guarantor fails to do so, the lender might seize the guarantor’s security (which is often the family home) so it can recoup its money.
A bad credit home loan is a mortgage for people with a low credit score. Lenders regard bad credit borrowers as riskier than ‘vanilla’ borrowers, so they tend to charge higher interest rates for bad credit home loans.
If you want a bad credit home loan, you’re more likely to get approved by a small non-bank lender than by a big four bank or another mainstream lender.
Your repayments should appear on your bank statements or your internet banking. If you make weekly or fortnightly repayments, make sure you convert them to monthly calculations.
A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.
Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.
However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.
Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.
Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.
That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.
Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.
Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.
If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.
A guarantor is someone who provides a legally binding promise that they will pay off a mortgage if the principal borrower fails to do so.
Often, guarantors are parents in a solid financial position, while the principal borrower is a child in a weaker financial position who is struggling to enter the property market.
Lenders usually regard borrowers as less risky when they have a guarantor – and therefore may charge lower interest rates or even approve mortgages they would have otherwise rejected.
However, if the borrower falls behind on their repayments, the lender might chase the guarantor for payment. In some circumstances, the lender might even seize and sell the guarantor’s property to recoup their money.