Are Housing Loan Interest Rates Right for Buying?

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Posted date: December 3, 2010 | Tags: , | No comment

If you’re wondering if housing loan interest rates are right for home buyers, the answer is yes! When it comes to housing loans, the good news is the options are wide open for buyers to find the perfect loan package for your new mortgage.

Housing Loan interest rates have risen recently, but that certainly doesn’t mean that buying your new home is off the table. In fact, with a wide variety of loan types and packages, you can still find a reasonable home loan for your circumstances. By educating yourself on housing loans, you’ll see that interest rates are only one piece of the puzzle.

Different types of Housing Loans

A variable interest rate home loan could be the perfect type of  housing loan right now. With a variable interest rate loan, the rate charged by your lender will fluctuate according to the Reserve Bank’s cash rate and lender pricing. The two most common variable interest rate home loans are the standard variable home loan and the basic variable home loan.

Housing Loan Interest Rates- Standard Variable Interest Loan

A standard variable interest loan allow you to make extra payments without penalties. This can result in a great deal of savings on interest throughout the life of your loan. A standard variable interest rate loan is also a great option if you have an offset account you can link to your loan. An offset account is a regular savings account, in that your money is yours and you save as you choose, but by linking it to your mortgage, any money in that account is deferred from interest on your mortgage. If you have 200,000 in your offset account, then $200,000 of your mortgage is not charged interest. Again, this can result in significant savings over the life of your loan.

Housing Loan Interest Rates- Basic Variable Interest Loan

The basic variable interest loan also allows your interest rate to fluctuate to keep pace with the Reserve Bank. It doesn’t have the options and features of the Standard Variable, but the upside is you will typically receive a lower interest rate in return for fewer bells and whistles.

Housing Loan Interest Rates- Fixed Rate Loans

If the changes in the Reserve Bank make you uncomfortable and you prefer the stability of an unchanging interest rate, then a fixed rate loan is for you. You can budget ahead without needing to have a reserve available in the event of a change with a fixed rate loan. For many people, this is the most stable home mortgage option.

Housing Loan Interest Rates- Honeymoon Loans

One way to work with housing loan interest rates is to consider a honeymoon loan or introductory rate loan product. With a honeymoon loan, your initial interest rate is lower- and often significantly lower- than standard housing loan interest rates. While the interest rate will eventually rise, this can be the perfect way to acclimate your budget to a mortgage payment. By paying a lower introductory interest rate, your mortgage payment will be a bit lower for the first year or so of your mortgage, which gives you several months to assimilate that mortgage payment in your budget.

Home Loan Interest Rates- Lo Doc Loans

If you are self-employed, then a low documentation loan (Lo-Doc) might be the answer you are looking for.  This type of loan requires much less substantiating paperwork than other loans. You may have to have a larger deposit and you may face a higher interest rate with a Lo Doc loan, but for certain borrowers, this is the perfect option. Make sure you ask about a Lo Doc loans- especially if you are self-employed.

Home loan interest rates will rise and fall- and there isn’t much the home buyer can do about that. However, with the wide variety of loan options available, it is always possible to find the perfect home loan for your new home.