Mortgage Types

Getting your mortgage structure right is one of the most important steps in the home-buying journey.

When it’s done well, it can save you thousands over the life of your loan – and when it’s not, it can cost you just as much. That’s where our advisers come in.

We take the time to understand your lifestyle, goals, and plans for the future, then design a mortgage structure that truly works for you.

Floating Mortgage

A Floating (variable rate) mortgage offers maximum flexibility and is ideal if you want the freedom to pay off your loan faster.

While the interest rate can move up or down at any time, these changes are closely linked to the Official Cash Rate. With a floating mortgage, you can make extra repayments or pay off the loan in full at any time without penalty. Many banks also allow you to redraw funds if you’ve paid more than the required minimum, giving you easy access to your money when you need it.

Fixed Rate Loan

Fixed rate loans are funds lent over a set term (between 6 months, and up to 10 years with some lenders) with a set interest rate. This allows the borrower to know exactly what their monthly repayments will be should their circumstances change, giving you certainty.

Some lenders may impose early repayment penalties if lump sum reductions are made to your loan, or you pay the loan out in full. However, a fixed rate loan is ideal in a rising interest rate market as this guarantees you of your interest rate repayments for a set time.

Revolving Credit

A revolving credit provides the borrower with access to the equity in their home or investment properties whenever they wish.

It is similar to an overdraft facility in that the funds can be drawn up to the original loan approved at any time.

The interest rate on such a facility is usually a variable rate that fluctuates with the market. A revolving credit is a great option for self-employed/contractors, if your income is irregular, or if you’re planning a family, as it provides the borrower with easy access to funds ensuring peace of mind in times of need.

Interest-Only Mortgage

Interest-only terms are available to clients in most instances, as long as their equity position is 20-30% of their current property value, although some banks won’t allow interest-only payments on lending secured by the family home.

The interest only-terms can vary, depending on the lender, to a maximum term of 5 years.

Off-set Mortgage

An off-set mortgage gives you interest savings similar to a revolving credit, but instead of having to put your surplus funds in one account, it lets you use up to 10 different savings accounts to “off-set” the balance on a floating loan linked to those accounts.

If you like to keep separate accounts for different purposes such as renovation savings, holiday savings etc, then this product is great for you.

Tideover Finance

This is available to borrowers who wish to purchase a new home now, and sell your current home later.

The interest rate is usually the same as a Standard variable loan.

A tideover finance loan ensures that the borrower will not miss out on a desired property because they haven’t sold their current home.

Low Equity Margin

If you’re borrowing more than 80% of the purchase price of your new home, the bank may apply what’s called a low equity margin. This is a small premium added to your mortgage interest rate while your equity is lower.

For many buyers, this can actually be a smart alternative to paying a large one-off low equity fee. If you plan to pay down your loan quickly or add value to the property through renovations, the overall cost of a low equity margin can be significantly lower over time.

In most cases, the margin stays in place until your fixed rate comes up for renewal. Even if your loan drops below an 80% loan-to-value ratio (LVR) during the fixed term, the margin usually can’t be removed unless the loan is restructured, which may involve break costs. One notable exception is ASB, which allows the margin to be moved mid fixed term once sufficient equity is reached.

Typically, low equity margins sit around 0.25%-0.35% for loans between 80% and 85% LVR. For lending between 85% and 90% LVR, margins can increase to around 0.75%.

Low equity margins are added on top of the bank’s standard or negotiated interest rate.

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