Home Loan Rate – Australia

A loan is a form of debt incurred when someone, called a lender, lends an amount of money, called the principal, to another person, called the borrower. The borrower is then expected to repay an equal or greater amount of money at a later date. The money is usually expected to be repayed in regular payments of the same amount. 

In the majority of cases, the lender provides the loan at an additional cost, called interest. Without interest, there would be no financial incentive for the lender to provide the loan. In legal loans, all of these obligations are regulated by a contract. Most legal loans, such as mortgages, are obtained from financial institutions such as a bank. 

Loans are often used in major transactions such as home purchases and vehicle purchases since most buyers cannot afford to pay large amounts of money out of pocket. Often, the borrower will be required to put down a deposit on the loan in order to secure it. In cases where the loan to value ratio is high, the lender may also ask that the borrower pay mortgage insurance on the loan. 

There are several different types of loans available including standard variable loans, basic variable loans, fixed rate loans, line of credit loans, combination loans, discount variable loans, lo doc loans, and non-conforming loans. These different types of loans are detailed below. 

Standard variable loan

A standard variable home loan is a loan in which the interest rate changes throughout the duration of the loan. These types of loans may be combined with a package that allows them to eligible for a lower rate. A standard variable loan will also include a mortgage offset account. 

Basic variable loan

A basic variable loan is also a loan in which the interest rate can change throughout the duration of the loan. The interest rate for this type of loan will be similar to that of a standard variable loan, but will usually have a packaged loan discount. Basic variable loans typically have less features than the standard variable loan. 

Fixed rate loan

A fixed rate loan is a loan in which the interest rate is fixed over a set period of time. These loans usually penalize the borrower should they choose to exit the loan before it is set to end. The borrower will have to pay a “break cost,” which can be very expensive. If there is any chance that the borrower will repay the loan early, he or she should not take a fixed rate loan. 

Line of credit loan

A line of credit loan is a loan without a set amount. Instead, the borrower can draw any amount up to the credit limit at any time. There are no set repayments, and the loan will have a variable rate. Payments can be made toward the balance at any time. Some lenders ask that the borrower make at least one repayment each month, while others don’t ask for any payments until the credit limit has been reached. The required payment in the first case must usually at least equal the interest accrued in the previous month. 

Combination loan

A combination loan is an option offered by many lenders in which the borrower receives a professional package. The package includes multiple fixed rate loans, variable rate loans, and line of credit loans. The borrower will then be asked to pay an annual fee for the package. A common type of combination loan involves the borrower receiving a portion of a loan as a variable rate and the remainder as a fixed rate. This offers the borrower the benefit of not having to worry about rate increases on the fixed rate portion while still being able to make extra repayments on the variable rate loan without penalty. 

Discount variable loan

A discount variable loan is a variable rate loan that includes a lower interest rate. This discount will typically be more than the discount received with a packaged loan. The discount is typically valid for one year, so it is possible that this type of loan will work out to be more expensive in most cases. 

Lo Doc loan

A lo doc loan, or low documentation loan, is a loan in which the borrower is not required to provide tax returns or financial reports. This type of loan is most often used by borrowers that are self-employed and don’t have access to such paperwork. Most lenders do require some proof of income, however, which can be in the form of bank statements. 

Non-conforming loan

A non-conforming loan is a loan that does not require the borrower to meet the standard lending criteria. This type of loan is not usually available from mainstream lending institutions. A non-conforming loan is typically given to borrowers with credit problems or a history of late or missed repayments.

 Get more information about home loan types.

When you decide to purchase a piece of property, either as a residence or for financial investment purposes, you will most likely need to apply for a loan. Before you will be granted a loan, the bank will want to be certain that you have the ability to make the repayments. This typically requires you to produce tax documents and check stubs, but not everyone can do this.

Applying for mortgages can be an intimidating process, especially if you don’t have the documentation usually required by lenders. There are a lot of different types of loans available, but many of them aren’t accessible to individuals with little or no proof of income, such as those that are self-employed or work as independent contractors. However, there is an option available: the low doc home loan.

A low doc loan, also referred to as a low documentation loan, is a home loan in which the paperwork used in standard loans is not required. This type of loan is perfect for self-employed borrowers that don’t have the proof of income papers typically used in applications for standard loans. Generally, lenders of low doc loans will ask the applicant to provide some proof of income, such as recent bank statements. In addition, low doc home loans are only available for loan to ratio values up to 80%.

Lenders offering 80% low doc home loans may have varying requirements, however most lenders ask that the borrower meet the following basic criteria:

1. You have been self-employed for at least one year in the country of Australia.
2. You have had an ABN number for at least one year.

The idea behind these criteria is to make sure that the borrower has a steady source of income and can afford to make the repayments. Other requirements may also apply depending on the lender. However, understanding these other requirements can be tricky. The requirements for low doc loans with high loan to value ratios, usually between 60% and 80%, are fairly confusing. Below, you will find the details of some typical low doc loan situations.

Issue A:
Refinancing a loan without sufficient business activity statements, or BAS statements.

One option for solving this problem is to acquire a loan with a loan to value ratio between 60% and 70%. Loans for a loan to value ratio of up to 70% can be acquired from one of the major providers without trading statements or BAS statements. Instead, the applicant needs only provide a letter from an accountant confirming that the loan is affordable. In addition, there is no mortgage insurance is required. Some other providers may also provide low doc loans up to 70% loan to value ratio, but the qualifications are stricter.

Another option would be to acquire a loan for a loan to value ratio between 70% and 75%. This type of loan can be obtained through a regional bank with certain requirements. The applicant must have been GST registered for more than 2 years for a loan to value ratio of 75%, but only for one year if the loan to value ratio is 70% or less. This loan is only available if you will remain under $1,500,000 in total loans, including those you may have from other lenders. Not available to developers, primary producers, or builders.

The third solution is to look for a loan with a loan to value ratio between 75% and 80%. Though it is possible to find a loan of this type from providers who won’t ask for BAS statements, the rates and fees will likely be higher than for other loans. In addition, it is not easy to find lenders that will consider cash out loans.

Issue B:
Purchasing a home at 80% loan to value ratio without BAS statements.

In this case, you can get a loan from a non-bank lender, a second tier bank, regional bank, or even a major bank. You will need GST registration and ABN for one year or more. Fees and rate will be comparable among lending institutions.

Issue C:
Obtaining a loan when your exposure is too high with your current lender.

To solve this problem, you will need to engage in debt consolidation and then spread your loans out over several lending institutions so that you meet all of the requirements of each institution. In doing this, it will give you the ability to take out another loan.

Whether you are applying for home loans or personal loans, there are options available for getting the money you need. If you don’t fall under any of the aforementioned circumstances or if you have bad credit, you could also consider using a guarantor to increase your borrowing ability. A guarantor is someone that agrees to be responsible for your loan should you default on it. The guarantor’s assets will be taken into consideration when you apply, which can dramatically increase the amount of money for which you are eligible.

Learn more about low doc loans.