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The Ultimate Guide to Home Loans in Australia: A Comprehensive Overview

Natasha Seymour

Investing in a home or rental property in the southwest of Western Australia, for example Bunbury and surrounds, opens you up to several different borrowing options. Your financial situation, your budgetary limits, lifestyle, location and a few other determining factors should all be thoroughly considered before selecting a home loan option. Ensuring you consult with a mortgage broker who has a firm grasp on the nature of the economic environment, interest rates and cycles is very important as well.

Begin your home ownership journey on the right foot with this comprehensive overview to the five home loans you can choose from when purchasing property in Australia.


Five home loans to choose from when buying a house in Bunbury and surrounds, Western Australia.


  1. Variable Rate Home Loans

    The most common home loan amongst Australians is the Variable Rate Home Loan.

    This mortgage option provides flexibility with the interest rate you pay on the amount borrowed. To understand this better, the Reserve Bank of Australia meets eight times a year to make decisions on the national cash rate. The banks usually following this decision and if the Reserve Bank increases the cash rate by half a percent then the bank will most likely pass that on and add that to your current interest rate. Although he banks can also reduce or increase rates out of cycle as well.  

    The advantage is that you can benefit from a lower interest rate during periods of financial stability in the economy, which allows Australian families to save more, go on holidays and upgrade your lifestyle in general. However, you should always expect and prepare for an increase in the interest rate. 


  2. Fixed Rate Home Loans

    For borrowers who prefer the comfort of knowing exactly what their interest rate and repayments are going to be for as long as they maintain it, a fixed-rate mortgage is the best option. 

    This type of loan locks in the interest rate so that you can plan and budget around what your payments will be, regardless of what the economy is doing. 

    The obvious drawback is that when others are benefiting from a change in the market leading to reduced interest rates, you will continue repaying the same amount. However, your mortgage broker at Allen Finance will always be available to advise you on refinancing options and whether it is a good time to do so.


  3. Interest-Only Home Loans

    If you are looking to build n investment property in the Western Australia’s southwest like Bunbury and surrounds, now could be great time to do so.


    Specific loan types are available to investment buyers to help lower initial payments and make the most of financial outcomes. This option is called an Interest-Only Home Loan and is a savvy option for property portfolio owners. 

    For the first year to first five years the lender will allow you to pay the interest only on your loan and only after the agreed period will the principal (total amount) payments be due. This makes your investment a more affordable option with reduced repayments upfront, freeing up cash-flow.


  4. Principal and Interest Home Loans

    If your primary focus when selecting your home loan type is whichever option helps you reduce the balance of your loan efficiently whilst building equity in your property, then a Principal and Interest Home Loan will fit you best.

    Paying down this loan involves regular repayments which cover the entirety of the loan including principal and interest. Building equity in your home, which is the difference between the current market value of the property and the amount still owed on the home loan, can put in you in a stronger financial position.


  5. Construction Loans

If you are in the market to build your home in Bunbury and surrounds, a Construction Loan is an essential option. 


You begin repaying your mortgage during the build of your home in stages, whilst still paying for another home to live in whilst you wait. A Construction Loan functions in a way that the funds are progressively released as the build advances. You are only charged on the interest until the total amount is drawn, making it a viable and affordable option for you to maintain. For example, a certain percentage of the full loan amount is released when your foundation/ slab gets laid. You will then be required to pay interest only on the amount that has been released, up until the next stage of your home has been completed.


 

If you’re interested in one or more of the options listed above or would like to hear more, speak to a friendly and local broker at Allen Finance below .



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