Guide 2. A beginner's guide to mortgage loans

Home Loans

If you’re buying a home, the financing options available to you can be overwhelming. While working with an experienced broker is the best way to navigate the various options available, we’ve provided a guide to the basic types of mortgage loans.

Fixed rate loan vs. standard variable loan
The first thing you should discuss with your mortgage broker when applying for a mortgage is whether you should opt for a fixed rate or a standard variable loan. The initial interest on a fixed-rate loan may be higher than that of a standard variable loan. However, the interest rate of a fixed loan will never increase. While the standard variable loan’s interest rate might be lower, the rate can increase if interest rates rise. However, if you’re only planning on staying in the house for a couple of years, a variable-rate loan can save you money. Exactly which of the two is right for you can be determined by discussing the options with your mortgage broker.

Introductory loans
While standard variable loans are not necessarily a bad thing, introductory loans can be. Many lending institutions will draw you in with an extremely low initial interest rate. However, that interest rate can skyrocket and usually does. The initial interest rate usually only applies to the loan for a year. After that year, the interest rate will revert to the standard interest rate, which can be substantially higher than the rate you signed up for. Your mortgage broker can help you stay away from these types of introductory loans.

Interest-only loans
When you obtain an interest-only loan, your payments are considerably lower than they would be on a traditional loan; however, you’re not paying off any of the principal balance on your home. This type of loan will allow you to get more house for your money and is great for people who expect to be making more money in the near future, when they can refinance to a traditional principal and interest type loan. Interest only loans vary in regards to their terms and their rates. It’s important to discuss current terms with your mortgage broker so you fully understand the numbers behind this type of loan.

Construction loans
If you’re building your home instead of buying your home, you’re likely to need a construction loan. Most construction loans work like a line of credit, with you drawing money off of the loan as construction of the home progresses. Each lender may have differences in the way they handle their construction loans. A qualified mortgage broker can help you find the construction loan that’s right for you.

Regardless of whether you go with a fixed-rate loan, a standard variable loan, an interest-only loan, an introductory-rate loan or a construction loan, it’s extremely important to work with the help of an experienced and qualified mortgage broker. A professional mortgage broker will help you find the loan that best suits your needs and can make sure that you fully understand the loan you are applying for.

Return

Important points to note:
(1) All information on Artog is of a general nature only and does not take into account your individual circumstances. (2) Artog does not hold an ASFL and does not give advice. All views expressed should be considered general comments that reflect the views of the operators of the Artog site only and should not be considered to be advice. (3) The Artog service provides general travel information and a price comparison only. No features or benefits have been compared and the results of this service are not a recommendation or endorsement of any particular product. (4) Artog is not an insurer, and does not act on behalf of any insurers. (5) The Artog comparison does not compare all available travel insurers. (6) In some instances, Artog may earn a referral fee/commission of up to 20% from an insurer if you purchase a policy as a result of using our service; this does not impact the price you pay. (7) Artog has used its best endeavours to ensure the accuracy of this information. (8) Not all policies are the same and insurers may provide different cover under different circumstances. As such, PLEASE CONFIRM ALL POLICY DETAILS with the insurer (including but not limited to: your information that has been submitted, policy features, benefits, coverage, terms and conditions) PRIOR TO YOUR PURCHASE!