Showing home loans based on a loan of
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Advertised Rate

2.59

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2.42

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$648

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Borrow up to 60%
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Owner Occupied
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2.73

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Advertised Rate

2.69

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2.52

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$673

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Borrow up to 80%
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Owner Occupied
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2.48

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Advertised Rate

1.99

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Fixed - 2 years

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2.44

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$1,270

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Borrow up to 80%
Extra Repayments
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Owner Occupied
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3.99

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Advertised Rate

2.29

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Variable

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2.31

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$1,314

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Borrow up to 60%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.79

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Advertised Rate

2.39

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Variable

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2.41

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$1,329

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Features
Redraw facility
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.56

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Advertised Rate

2.45

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Variable

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2.48

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$1,338

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Features
Redraw facility
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.33

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Advertised Rate

2.59

% p.a

Variable

Comparison Rate*

2.48

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Company
Repayment

$1,359

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Features
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.93

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Advertised Rate

2.29

% p.a

Variable

Comparison Rate*

2.38

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Company
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$1,314

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Features
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

3.75

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Advertised Rate

2.74

% p.a

Variable

Comparison Rate*

2.74

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Company
Repayment

$1,382

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Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.76

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Advertised Rate

4.85

% p.a

Variable

Comparison Rate*

5.28

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Company
Repayment

$1,728

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Features
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Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

1.33

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Advertised Rate

2.09

% p.a

Fixed - 3 years

Comparison Rate*

2.60

% p.a

Company
Repayment

$1,285

monthly

Features
Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied
Real Time Rating™

2.87

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Learn more about home loans

What is the difference between an investment loan and an owner-occupier loan?

When you apply for a mortgage as an owner-occupier, your lender knows you will live in the property and use your personal income to manage your mortgage repayments. But if you’re an investor, tenants will live in the property and provide you with rental income. If you make improvements to the property, and/or property values in the area increase, you may also be able to benefit from capital growth on the property.

Investment home loans often offer flexible features and benefits, allowing investors to manage their payments to try and maximise their investment income. However, because investing in property is often more financially risky than simply owning your own home, investment home loans often have higher interest rates and fees than owner-occupier home loans.

Two-tier market: Why lenders charge investors higher rates

In 2014, the Australian Prudential Regulatory Authority (APRA) raised concerns about the growth of the investment housing market and the risk that this debt could destabilise Australia’s housing market and wider economy. Many lenders responded by changing the eligibility criteria for investor borrowers and by increasing investor rates. While APRA has since relaxed many of the regulations on investment lending, many lenders still charge higher rates to property investors, who they see as riskier customers to lend to than owner-occupiers.

Investors are seen as riskier borrowers because buying a property as an investment is different to buying a home to live in. There are no guarantees when investing; if you can’t find tenants for your property, or if it doesn’t increase in value, you could find yourself in financial trouble, leaving you unable to afford your loan. Plus, while an owner-occupier is less likely to risk losing the roof over their head, an investor may be more willing to risk their investment to try and maximise their returns.

How do I apply for an investment home loan?

Just like an owner-occupier, if you’re applying for a mortgage as an investor you’ll need to provide details of:

  • The value of the property you want to buy
  • How much you want to borrow
  • Your credit history (especially your history of making regular repayments on any other outstanding loans)
  • Your income and employment status

The lender will use this information to work out if you can comfortably afford the loan. The lender will only consider your current household income when making its calculations, even if you plan to supplement this with rental yields from the property. This is to help reduce the risk that you’ll default on your repayments if the property is unoccupied for some reason, such as during fallow months when you’re changing over tenants.

The lender will also consider the potential for your property to rise in value over time, as well as vacancy rates in your area and any trends in property prices.

TIP:

Keep in mind that there might be hefty expenses involved in preparing the property for occupation, which can eat into rental income. Make sure that your calculations are as accurate as possible so that you and the lender can be confident you can afford the loan.

Other types of investment loans

As well as standard mortgage loans, there are other loans available that may be useful to investors.  

You may be able to use your investment property to secure a line of credit. This works similarly to a credit card, where you can borrow and repay money as you need it, up to a pre-set limit, and only pay interest on what you’ve borrowed.  

If you have a self-managed super fund (SMSF), you may be able to buy an investment property to support the fund with its yield. This may require a special SMSF home loan with a higher interest rate. There are also a range of regulations to consider when investing in property with an SMSF, as any investments must benefit the fund, and not individual members. Contact the ATO and/or an SMSF specialist for more information.

Fixed vs variable rates: what is the difference?

Investment property buyers can choose between fixed or variable interest rates.

  • A fixed interest rate allows you to lock in a set repayment amount for a set period of time – usually between 1 and 5 years.
  • A variable interest rate can be changed by the lender to better suit the current economy, meaning your mortgage repayments could increase or decrease.

So which is the best option? It depends on your circumstances and preferences.

  • A fixed interest rate can keep your repayments stable for simpler budgeting, though you may miss out on interest savings if the lender lowers its variable rates, such as if the RBA cuts the cash rate.
  • A variable rate home loan could save you money if rates fall, though your minimum repayments could end up increasing if rates rise. Also, variable rate loans more often offer flexible home loan features, which could help you better manage your repayments and potentially save money on interest charges.

Interest-only investment home loans

Some lenders offer mortgages where you only need to pay the interest charges on the loan for a limited time, without reducing the principal amount you owe. This can help make your mortgage payments more affordable, which can make a big difference to your budget. However, because it also means your loan will take longer to pay off, you may end up paying more interest in total over the long term.

Some investors look for interest-only mortgages to help them minimise the cost of payments on their properties. This can allow an investor to maximise their rental yield and/or their capital gains relative to their spending on the loan.

Interest-only loans can be risky, both for investors and lenders. When the loan reverts to principal and interest payments, investors may struggle to afford these payments. There are also no guarantees that a property’s value will rise enough for you to enjoy capital gains from a sale.

Also, APRA previously placed caps on how many interest-only investment loans lenders could provide, as well as how much money could be loaned in these mortgages. While these limits have since been lifted, many lenders still charge higher rates and have stricter eligibility criteria for interest-only loans, as there’s a higher risk that the borrower could default when the loan reverts to principal and interest repayments.

What deposit do I need for an investment property?

Just like when you apply for a home loan as an owner-occupier, you’ll need to pay for a percentage of the property’s value upfront as a deposit to secure your mortgage. If you can afford a higher deposit, it may be easier to qualify for a loan with a lower interest rate or more flexible features.

The size of the deposit you’ll need may depend on the loan’s Loan to Value Ratio (LVR). For example, if a loan requires an LVR of 80 per cent, you’ll need to pay a deposit of at least 20 per cent of the property’s value.

Because investment home loans are often considered riskier than owner-occupier home loans, they often require higher deposits. Some have LVR requirements of 70 per cent or lower, meaning you’ll need to offer a deposit of 30 per cent or more of the property’s value to secure the investment mortgage.

Just like with owner-occupier home loans, if your deposit on an investment property is less than 20 per cent of the property’s value, the lender will take out Lender’s Mortgage Insurance (LMI) to cover the risk that you’ll default on your payments. LMI protects the lender, not you, and most lenders pass the cost of LMI on to borrowers – the lower your deposit, the more the LMI may cost, sometimes reaching tens of thousands of dollars.

What are the potential rewards of property investment?

Return on investment

The ultimate goal of investing in property is enjoying a return above the original investment. There are two main ways to achieve this:

  1. Rental income: The money your tenant pays you, usually on a monthly basis, to live in your property.
  2. Capital growth: The increase in value of your property over time. If your property sells for more than what you bought it for, you have achieved capital growth.

For example, if you bought a unit for $600,000 and later sold it for $750,000, your capital growth would be $150,000.

Less volatility

While no investment is ever 100 per cent safe, the property market is generally less volatile than other investment options, such as the share market, which can rapidly lose value due to circumstances beyond the investor’s control. Property transactions are also generally slower than share market transactions, so they can be more carefully considered.

Intergenerational wealth transfer

Some families make property investments in order to bestow wealth to their beneficiaries through these bricks and mortar assets.

Tax benefits

Property investors may be eligible for a number of tax benefits, including capital gains discounts, capital gains offsets, deductions for repairs and maintenance if and when the property is tenanted, and negative gearing. Contact the ATO and/or a tax accountant to learn more.

What is negative gearing?

If the annual costs of your investment property are higher than the annual returns you make from it, the property is said to be negatively geared. Likewise, if you make more in annual returns on a property than you pay in costs, your property is said to be positively geared.

Negative gearing can effectively lower your taxable income, which can offer tax benefits under the right circumstances. However, there are also risks involved, so it’s important to consult a financial adviser and/or a tax accountant before you look seriously at negative gearing.

What are the risks of property investment?

Negative capital growth

Not all property markets rise and there is a risk that your investment may not yield the results you expect. This risk may be more pronounced in areas that are exposed to boom and bust sectors, such as mining.

Costs outweigh return

Sometimes property investors have to spend a lot to prepare their investment property for tenants, or to help improve the property’s value for sale. These costs could outweigh the return you receive on your investment if they do not improve the property’s capital growth or rentability.

Unable to sell or lease

If your investment property doesn’t appeal to buyers or renters, you may not receive a return on your investment.

Where should I invest?

Unlike when you buy a property as an owner-occupier, an investment property does not have to match your taste or even be located in an area where you’d like to live. However, there are other factors to consider, including:

  • Growth factors: Have property values in the local area increased or decreased in recent years? While past performance does not guarantee future performance, this can give you a better idea of what you could expect from your investment.
  • Economic factors: Is the property located in an area exposed to one industry? If so, is that industry growing or declining?
  • Social factors: Is the area appealing to potential renters? Does it have good public transport infrastructure? Is it close to schools and medical facilities?

Frequently asked questions

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

Do first-time home loan applicants qualify for tax benefits?

If you’re a first-time homebuyer applying for a home loan, you could qualify for some tax deductions, but only if your property is a source of income for you. For instance, if you rent out the property, you could get tax deductions on the cost of constructing or renovating it, the loss in value of depreciating assets such as furniture or electrical fixtures, and the home loan interest. 

Homeowners using their property as a residence could also get a tax deduction if a part or all of it is used for business. These deductions include tax write-offs for depreciating assets and deductions for operating expenses like utilities’ payments and service charges for phones and the internet. However, people running businesses from their residences don’t qualify for a tax deduction on the interest paid on their home loans.

Is a second mortgage tax deductible?

If you take out a loan to invest in a property, you can claim a tax deduction on the interest you pay as long as the property is earning income. In other words, if you rent the property for the entire year, you can claim a tax deduction for 12 months of interest payments. But, if you use the home for six months and rent it for the other six months, you can claim deduction only for 50 per cent of the interest amount.

You also get tax benefits for items that lose value over the years. But, the entire amount is not allowed as a tax deduction in the same year; instead you’ll have to claim a portion each year over a number of years. 

Additional borrowing costs, such as maintenance fees, stamp duty, offset account setting up fees, Lenders Mortgage Insurance (LMI), and establishment fees, can also be claimed as tax deductions.

Before you claim second mortgage tax deductions, it’s often worth checking with an experienced tax expert.

What is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

How to use the ME Bank reverse mortgage calculator?

You can access the equity in your home to help you fund your needs during your senior years. A ME Bank reverse mortgage allows you to tap into the equity you’ve built up in your home while you continue living in your house. You can also use the funds to pay for your move to a retirement home and repay the loan when you sell the property.

Generally, if you’re 60 years old, you can borrow up to 15 per cent of the property value. If you are older than 75 years, the amount you can access increases to up to 30 per cent. You can use a reverse mortgage calculator to know how much you can borrow.

To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

How is interest charged on a reverse mortgage from IMB Bank?

An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.

No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

What is equity? How can I use equity in my home loan?

Equity refers to the difference between what your property is worth and how much you owe on it. Essentially, it is the amount you have repaid on your home loan to date, although if your property has gone up in value it can sometimes be a lot more.

You can use the equity in your home loan to finance renovations on your existing property or as a deposit on an investment property. It can also be accessed for other investment opportunities or smaller purchases, such as a car or holiday, using a redraw facility.

Once you are over 65 you can even use the equity in your home loan as a source of income by taking out a reverse mortgage. This will let you access the equity in your loan in the form of regular payments which will be paid back to the bank following your death by selling your property. But like all financial products, it’s best to seek professional advice before you sign on the dotted line.

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How do I calculate monthly mortgage repayments?

Work out your mortgage repayments using a home loan calculator that takes into account your deposit size, property value and interest rate. This is divided by the loan term you choose (for example, there are 360 months in a 30-year mortgage) to determine the monthly repayments over this time frame.

Over the course of your loan, your monthly repayment amount will be affected by changes to your interest rate, plus any circumstances where you opt to pay interest-only for a period of time, instead of principal and interest.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.