Standard Variable

It is the standard home loan product which primary financial institutions like banks and building societies offer. Rates rise and fall according to Reserve Bank rates.

Advantages: Rates decrease in times of lower interest rates. Typically, additional repayments can be made without penalties. Lenders can add features.

Disadvantages: Repayments increase in times of high interest rates. May incur a higher interest rate to cover various options and benefits available.

Basic Variable

Similar to standard variables, but they have a lower rate of interest and fewer features.

Advantages: Lower interest rates, so you can pay off the loan faster. If loan flexibility and a redraw facility are less important to you, the lower rate of interest may appeal.

Disadvantages: Features are limited and interest rates fluctuate


Fixed Rates

Rates and payments are fixed over a specified period. The terms of these loans are usually from one to five years.

Advantages: Rates will not rise above agreed rate. Repayments are simple to budget and remain contant over the period.

Disadvantages: You get no benefit if variable interest rates drop. Addtional repayments may not be allowed or could be restriicted. If you later decide to repay the loan in full, there is usually a penalty. The fixed rate may be higher than the variable rate.


Low-doc

Low-documentation loans target people who don't have the normal supporting paperwork to apply for a home loan.

Advantages: Ideal for small businesses without a lot of records and for people who may not have tax forms and similar documents.

Disadvantages: Doc-doc loans typiccally attract around a 1% higher than standard variable rate - higher establishment fees and ongoing fees generally apply.


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