The BankSA Fixed Rate Loan allows you to secure a mortgage with a five per cent deposit, making it suitable for first home buyers who may not have a large deposit saved. Another plus for first home buyers is that parents are able to sign as guarantors.
Repayments on this loan can be made on a principal and interest or interest only basis. While standard repayments can be made on a weekly, fortnightly or monthly basis, interest-only repayments can only be made monthly.
The loan also offers the ability to make extra repayments which you can access using a redraw facility. Extra repayments are capped at a certain amount per year during the fixed period.
For borrowers wishing to take advantage of an offset account, the BankSA Fixed Rate Loan offers a partial offset facility. This can assist in reducing the amount of interest paid over the life of the loan, though not set at 100 per cent.
The BankSA Fixed Rate Loan has many attractive features for first home buyers attempting to get into the housing market. While these features are there to be used they should be used with caution. Having a five per cent deposit when taking out a mortgage, while permitted by this loan, will make the overall repayments larger and cost more in interest over the life of the loan.
Similarly, using interest only repayments, as a way of reducing repayment size while you settle into paying your mortgage, will only prolong the life of your mortgage and lead to a higher overall amount being paid to the bank. So while the BankSA Fixed Rate Loan may be the first time mortgage you need, be aware of the long term costs involved.