You can get a great rate on your home loan or refinance with DFS because we have strong relationships with over 40 specialist home loan lenders (and we love to negotiate with them for you!).
At DFS, we arrange all types of home loans for our clients. We’ll take the time to understand your individual needs before helping you get a suitable loan with the best possible terms and conditions.
We also take care of all the paperwork and dealing with the banks. We know the ropes, and will not only save you money, but also save you time. All of that, and our home loan sourcing services come at no cost!
There is a huge range of home loans and lenders in Australia. The type of home loan you need depends on your individual circumstances.
Read on to find out about the different types of home loans available, as well as their pros and cons.
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Principal and Interest
The amount you borrow is called the principal. With a principal and interest home loan, your repayments include both principal and interest repayments. You fully pay off the entire amount you owe (including interest) over the term of the loan.
Interest-only home loans only require you to just pay interest (usually for up to five years). At the end of the interest-only term, you still owe the same amount you borrowed (the principal). The amount you borrowed then usually reverts to a principal and interest repayment arrangement.
Interest only repayments are more affordable and could allow you to buy a home sooner.
The interest rate on variable rate home loans can go up or down based on market rate movements. Interest rates in Australia are currently at record lows.
The interest rate on fixed rate home loans stays the same for a fixed term (usually between one and five years), regardless of market rate movements. If variable rates increase, your rate won’t and you’ll be charged less interest.
A split rate home loan has part of the amount you owe on a fixed interest rate and the rest on a variable rate. It allows you to hedge your bets on market rate movements. If variable rates increase, the part of your loan that is on a fixed rate won’t.
A low deposit home loan is one that you can get with a low deposit (for example, 5% or less). However, you will be charged lenders’ mortgage insurance (LMI) to compensate the lender for the increased risk. You might also be charged a higher interest rate.
A low doc home loan is one that you can potentially get with minimal supporting documentation in your application. However, if you are approved, you are likely to be charged a higher interest rate to compensate the lender for the increased risk.
A guarantor home loan is one where a person (for example, one or both of your parents) agrees to become legally liable for your debt if you stop making your repayments.
Line of credit
A line of credit home loan allows you to withdraw the equity (ownership) that you have in your home up to a pre-set limit.
Home loan features
Many lenders offer a range of optional features with their products. Two of the most popular are offset accounts and redraw facilities.
An offset account can allow you to pay less interest. The amount you have deposited in your offset account is subtracted from the amount you owe on your home loan for interest calculation purposes.
A redraw facility allows you to withdraw repayments you make up to a pre-set limit if you need extra funds.
It’s important to understand that most lenders charge additional fees for optional home loan features. For the feature to be worthwhile, the benefits it provides needs to outweigh the costs. Different features will provide different benefits depending on your individual financial circumstances.
You should always look at the comparison interest rate on a lender’s product to work out the total cost of all fees and charges. Lenders usually advertise two rates on their products. The lower nominal rate is just the interest charge. The higher comparison rate includes both the interest rate and any additional fees and charges. It therefore reflects the true cost of a loan.
Lenders in Australia are legally required to provide you with the comparison rate on their products BEFORE you take out any loan.