A loan with a redraw facility allows access to advance or extra payments made to the loan account. You can make extra payments to the loan, helping to reduce interest costs, whilst still having access to the funds in the future. A fee is often charged when the funds are redrawn and some lenders have minimum redraw limits.
Tip: Always try and apply for an extra $5000 or more which you can pay straight back into the loan after settlement. These funds will then be available for redraw.
A loan with a normal transactional account linked to it with any funds deposited into that account, offsetting the balance on the home loan and thereby reducing the interest charged on the mortgage. For example, if your home loan balance is $150 000.00 and you have $ 10 000.00 in your offset account, you will only be charged interest on $140 000.00.
These style loan features suit borrowers with good disposable income and frugal spending habits. All monies earned be it salary, rent or investment income can be deposited directly into the offset account to immediately reduce the interest being charged on the home loan. It is also possible to delay expense withdrawals from this account by utilising a credit card for monthly bills, thus enhancing the benefit of an offset account.
Mortgage offset is tax effective because the account itself earns no interest thereby legally minimising taxable income. Please refer to your financial planner or accountant before making tax related decisions.
These are normally principal and interest loans which are also used as transaction accounts. All income is paid directly into the home loan and living expenses are withdrawn from the loan, similar to a line-of-credit in operation except that the loan is reducing or amortizing. This loan is suited to borrowers who don’t have 20% deposit funds and yet have fairly high disposable income.
It is possible to combine different loan types from one lender. The usual scenario is to have 50% of the loan variable to allow flexible repayments with potential for redraw, the other 50% fixed in order to reduce the risk of rising or fluctuating interest rates. However, any combination is possible. Investors may wish to separate tax-deductible debt from non-tax deductible debt via the use of a combination loan. Entry costs on combination loans differ significantly, so please check with our consultants.
Interest only loans require no principal payments. The maximum term allowed is usually 5 years with either a variable or a fixed rate option. These loans are useful for investments where the interest charged is deductible and the investor is not looking to reduce the loan balance because possibly other non-tax deductible debts are held.
These loans allow a borrower to bridge the time gap between the sale of their home and the purchase of another. Particularly useful if the purchase property has to settle prior to the sale of the existing home. Lenders qualify your maximum borrowings based on the final debt after sale, whilst taking into account interest charges that will occur on the whole debt for six to twelve months. This can be an expensive form of financing and it is imperative you talk to one of our consultants to confirm suitability.
A loan that has been approved to a certain limit for a certain borrower. Drawn down of the loan being subject to the borrower locating a suitable property as security for the loan. This is an excellent start to property purchasing, allowing borrowers confidence in their bid for contract acceptance.
These loans are used by investors traditionally at the end of the financial year. The product offers a discounted fixed rate loan that allows the customer to pay all of their interest for the next financial year in advance. It is a tax effective strategy of property investment.