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Researching what sort of loan will suit your budget and lifestyle isn't easy, "Finding the right loan" will give you an overview of the different types of loans so you can see the whole picture.
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Compare the types of Home Loans



In this section, we'll give you an overview of the different types of loans so you can see the whole picture. A home loan consultant can help you figure out what loans would suit you best, if you'd like you can make an appointment online with a RAMS Home Loan Specialist

Introductory or Honeymoon Home Loan

An Introductory or Honeymoon loan offers a low interest rate for the first year of the loan. The rate may be fixed, variable or capped, which means if interest rates rise your rate will not go up, but if rates dip then the rate goes down and you will benefit. Once the introductory period ends the interest rate on your home loan will normally revert to the standard variable rate.

The main advantage of an introductory rate is that it can offer borrowers a chance to reduce the principal interest quickly by making extra repayments in the introductory period. The disadvantage is that sometimes what you save upfront is loaded back through a higher ongoing rate.
Standard Variable Home Loan
A Standard Variable Rate Home Loan used to be the most common type of home loan. The interest rate is variable so if the Reserve Bank changes the official interest rate, the interest rate for this type of loan will usually change accordingly. This type of loan is traditionally the most flexible and may include optional features such as the ability to make extra repayments, to redraw funds or to split your loan. Increasingly, the standard variable home loan rate will usually be the base rate of which the home loan lender discounts off.

Basic Variable Home Loan
Basic Variable Rate Home Loans generally offer a lower interest rate but with less features than a standard variable rate loan. As with all variable rate loans, the interest may be increased or decreased as official rates are changed, but it usually has more restrictions than the standard variable loan. You have to pay a fee to make extra payments or withdrawals, so the lower rate maybe offset by other costs.

Fixed Rate Home Loan
A Fixed Rate Home Loan gives you the certainty of a fixed interest rate, which means your loan repayments won’t change while the loan is fixed – from six months to as much as 10 years. However, fixed rate loans usually do not allow you to make higher repayments should you wish to pay your loan off faster, and if you want to cancel the loan before the end of the term you could incur penalty fees. Once the fixed rate period is finished the interest rate usually reverts to a variable rate.

No Deposit Home Loan
A No Deposit Home Loan is perfect for first-time property owners with low equity. Some lenders allow you to borrow up to 100 per cent of the purchase price of the property while still providing a full range of home loan features. NB: some lenders may charge higher rates for a no-deposit home loan.

All-In-One Home Loan
The All-In-One loan is essentially a transaction account and a home loan combined. It allows you to pay your salary or other income into the account and then withdraw your money as you need it. This loan’s primary benefit is that it enables you to decrease the interest you pay by keeping your funds in the account for as long as possible.

Do note however, that the interest rate on an All-In-One loan may be higher and it may include extra monthly access fees. Get your home loan consultant to look at whether what you save with this loan will be worth the higher interest rate and/or fees.
  
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Line Of Credit / Equity Home Loan
A line of credit works like an overdraft cheque account and provides increased flexibility. The lender assigns you a credit limit secured against your property, and when you need money you draw against that limit. Arguably the biggest advantage of a line of credit is that you always have ready access to money, which makes this type of loan attractive to investors. Like All-In-One home loans, line of credit/equity home loans are best suited to financially disciplined borrowers and the interest rate is generally higher.

Split Loan, Fixed / Variable Loan
Concerned about interest rates, but dislike the inflexibility of a fixed rate loan? Then you can try a split variable/fixed loan, which has the advantage of features like accelerated repayments, redraw and mortgage offset, without exposing your entire loan to interest rate movements. Some lenders also allow other splits, such as a basic or a line of credit.

Low Doc Home Loan
A Low Doc Home Loan is useful for borrowers who cannot substantiate their level of income using the conventional documentation required by most lenders. Low doc loans are specifically designed for self-employed people wanting to purchase a home, saving them the time and effort of finding the necessary documentation required for other types of home loans. Many low doc home loans afford borrowers the option to switch to a conventional variable rate product after a set period of time and upon provision of up-to-date finances.

Non-Conforming Loans / Sub-Prime Loans
Non-conforming loans, also sometimes known as sub-prime loans, are for those who don’t qualify for a conventional home loan because they have a poor credit history or other problem that do not conform with standard home loan lending requirements. These can include:

  • Credit impaired: Borrowers with a history of loan default or bankruptcy.
  • Unstable income: Borrowers with unstable employment or infrequent/variable income.
  • Non residents: Australian citizens living overseas or non-Australian residents buying investment property in Australia.
  • Security impaired: Borrowers wishing to secure their loan against properties not normally appropriate as security, eg, company title or serviced apartments.
  • Recent arrivals: New Australian residents without a borrowing record here.
  • Older borrowers: Borrowers for whom a 25-year repayment term is too long.
  • Recent arrivals: New Australian residents without a borrowing record here.
  • Older borrowers: Borrowers for whom a 25-year repayment term is too long.

Home Loan Comparison Rates


Comparison rates help potential home buyers work out the true cost of any loan. These rates include both the interest rate and loan’s fees and charges. For instance, if a lender’s advertised rate is 7.7 per cent, once the fees and charges are included its comparison rate may be 8.75 per cent.

  • Comparison rates are calculated to a formula specified by law, based on the amount and term of the loan, frequency of repayments and the interest rate. They also include the fees and charges associated with the loan but the downside is they do not include government fees such as stamp duty or mortgage registration fees.
  • When a lender advertises an interest rate for a regulated loan, they must include the comparison rate in their advertisement.


To find out about pre-approval, what question you should ask your lender or what documentation you may need to bring.

Go to the next page:

Some questions to ask a home loan consultant

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The real cost of buying