LOAN SOLUTIONS TO SUIT YOUR NEEDS

STANDARD & DISCOUNTED VARIABLE INTEREST RATE LOANS
This type of solution is by far the most common among Australian borrowers. The interest rate is subject to market forces and can therefore go up or down. However, with a standard variable interest rate you have more flexibility than a fixed rate. This means you can repay extra amounts without incurring penalties and access these back via redraw. Typically these solutions had limited features attached but over recent times they come equipped with phone and internet banking, BPay, deposit books the option of additional loan splits and can be set up on Interest Only or Principal and Interest Repayments and repaid by salary/self crediting or automatic direct debit repayments.

FIXED INTEREST RATE LOANS
A fixed interest rate loan allows you to lock in the interest rate for a specific period of time, generally between one and five years, but with some lenders seven, ten and even fifteen years. After the fixed term expires the loan usually reverts to the standard variable rate at that time or you may choose to re-fix the loan for another term.

One advantage of these types of loans is the certainty of the monthly payments during the fixed period as the interest rate will not vary. However, a major disadvantage is that a large number of lenders will not allow you to make extra repayments without incurring a penalty fee, or if they do allow extra payments there is a limit. Also, if you decide to sell your home whilst on a fixed interest rate a penalty will generally apply.

Fixed rates should only be considered in the following circumstances:
• There is a strong upward pressure on interest rates and you wish to protect yourself from possible rate increases.
• You require a fixed monthly commitment for personal budget reasons.
• You intend keeping the property for the full term of the fixed rate.

LINE OF CREDIT LOANS
These loans provide the ultimate in flexibility and, along with 100% offset loans are rapidly gaining favour with borrowers. Your total income is deposited into the loan account thereby reducing the balance. As interest is charged daily on the outstanding balance then while ever that money sits in the loan account the interest charge will be lower. The easiest way to understand how these accounts work is to look at them like a savings account in reverse. The balance is always negative and the closer to zero you get the better off you are. Generally, these loans are best suited to people who have excess disposable income each month. Money to meet living expenses and bills can either be withdrawn directly from the account using the interest free credit card for ATM withdrawals, EFTPOS and VISA purchases or, alternatively you can access your funds via cheque book, telephone and internet banking. On the credit card due date the FULL amount is repaid by drawing the money from your Line of Credit account. One major danger with these loans is if you cannot budget and effectively manage your money you could find yourself owing the same amount of money in 20 years time. Therefore it is important to ensure you plan a realistic budget and stick to it. With all of the flexibility that these loans have comes the adage "You get what you pay for". The interest rates on these loans are usually on the higher side so this needs to be taken into account.

The benefits of this type of loan are:
• Flexibility to actively manage your finances the way you want.
• Can assist in repaying your loan in the shortest possible time utilising a disciplined debt reduction strategy.
• In most cases the facility has no term so you may need never apply for a loan again.
• Ideal for people who wish to borrow for investment and need flexibility.

100% OFFSET LOAN ACCOUNTS
A 100% offset account is a savings account linked to a loan account. No interest is paid to the offset account however the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. The result is less interest is charged to your loan. Savings interest is taxable, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill.

The interest rate applied to your offset account is the same as that applied to your loan account. This is a great rate and is much higher than you could earn on most savings accounts. The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Some of the key features of an offset account include access to ATM cards, phone and internet banking, deposit books the ability to make additional repayments at no penalty.

Shared Equity / EFM
This type of loan is usually identified where part of the traditional home loan is replaced with a shared equity partner. The most popular variety of this loan is an EFM – Equity Finance Mortgage. The EFM partner will provide up to 20% of the current value of your owner occupied property on an Interest Free and No monthly repayment basis. This can reduce your monthly loan repayments by more than 25%. In exchange for such a loan, the EFM partner will share the capital value increase (or decrease) of your property. When you sell or refinance your property, you repay the original loan and the appropriate share of the overall value. In some cases this type of loan can be taken up to 25 years, without any interest or repayments on the EFM portion.