Home loans aren’t all your run of the mill, standard mortgages – they are as varied as they are readily available to first time buyers. With so many different types to choose from, deciding on the right type can be pretty challenging for an applicant – and to make the decision easier, here’s a closer look at some of the most common types of home loans.
A typical or conventional mortgage
This is the most popular type of home loan – mainly due to the fact that it’s also the most versatile. In most cases, banks in Australia will ask for between 10 and 20% to act as a deposit and the most appealing factor relating to this type of loan is that it can be repaid at a convenient rate of between 15 and 30 years.
Although not available from many lenders – an FHA home loan can be ideal for first time home buyers, especially those that might have a poor credit score. With options to put as little as 3.5% down as a deposit, they can be pretty attractive – but as the interest rates are somewhat higher than those of conventional mortgages, plenty of people only really consider these solutions as a last resort.
For those that have served in Australia’s armed forces, VA mortgages can become an option. They offer a very appealing zero percent deposit option, but as the veterans must meet a particular range of criteria; it’s not an option for everyone.
ARM, or adjustable rate mortgage, is what most people refer to as a variable mortgage. In Australia, this type of home loan is very common – coming in second in popularity to conventional mortgages. As the rates can fluctuate from time to time, it’s not uncommon for borrowers that sign up to these types of mortgage deals to consider refinancing when the opportunity arises.
Fixed rate loans
FRLs are typically only available for a limited amount of time, whereby the loan will usually switch back to a regular variable rate. Some borrowers find the option to know exactly what they can expect to pay back far more reassuring that guess work – but if variable interest rates ever drop, then that could mean that people with these types of mortgages end up missing out on the savings.
These are just a selection of the home loans that are typically available from banks in Melbourne, Sydney and around Australia in general. For more information it may be worth contacting a mortgage broker, or getting in touch with a loans officer at a bank.