First Home Buyer Loans 

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Below are just some of the Benifits and Limitations of the following loans available to first time home buyers.

a)  Standard Variable Rate Home Loans
With this type of home loan the interest rate moves up and down depending on the interest rates in the market at the time. If rates go up, then so do the  repayments.

The type of loan offers a good deal of flexibility and can include features such as:
i)  an offset account
ii)  split loan (where part of the loan is at a fixed interest rate, and
      part is at a variable interest rate)
iii)  loan portability
iv)  offset account
v)  the ability to make extra payments

As the Basic Variable Loan generally has a lower interest rate, one would have to weigh up the benefits of the extra features provided with a Standard Variable Loan, as opposed to the lower interest rate of the Basic Variable Loan. In other words ‘features’ or ‘a lower interest rate’.

Should you need any further information on this type of home loan or any other type of home loan, please do not hesitate to contact us. The information we provide is obligation free.


Some Benefits
-Can make additional payments
-More flexible than the Basic Variable Home Loan
-Portability
-Redraw
-Range of other facilities available, such as an offset account,
-More features than the Basic Variable Home Loan


Some Limitations
-Interest rates are generally higher than the Basic variable Home Loan



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b) Basic variable Home Loan
Basic Variable Home Loans generally have a lower interest rate that than
Standard Variable Home Loans, but the features offered are very basic.
Although this is the case, it may be prudent to check what basic features
are actually offered. Some lenders offer more features than others, and
the available features may be sufficient for your requirements.


Like the Standard Variable Home Loan, the Basic Variable Home Loan has a variable interest rate.

For borrowers who are keen to find a loan with a low interest rate, the Basic Variable Home Loan is certainly one to consider.  It would not be suitable for borrowers who want to make extra repayments, and many lenders do not offer loan portability. So, it does not come packed with many features, but it does offer a low interest rate.


Some Benefits
-Offers a low interest rate

Some Limitations
-Generally less features than the Standard Variable Home Loan
-Less flexible than Standard Variable Home Loan
-Extra payments not allowed generally




c) Fixed Rate Home Loan
In this type of home loan, the interest rate is fixed for a certain period of time, ranging between 1 and 10 years. At the end of the fixed rate period, the interest rate will normally revert to a variable rate. Generally, Fixed Rate Home Loans charge a higher interest rate than Variable Rate Home Loans. Fixed Rate Loans are less flexible than Variable Rate Loans, and there are usually penalties to be paid to vary the repayment amount.

Many experts may say that in the long run variable rate home loans work out to cost less overall than fixed rate loans.  However, this would be cold comfort to a borrower who has a tight budget and who could not risk a rise in interest rates and an increased monthly loan repayment. For some borrowers, it may be prudent to fix the interest rate for a set period of time until they believe that they will be in a better financial situation to be able to cope with an interest rate rise, and thereafter go onto a variable rate. It can provide peace of mind.

A borrower looking for flexibility and certainty, may consider splitting the loan into a variable rate component and a fixed rate component. This is called a Split Home Loan.  Split Rate Home Loans are covered below.


Some Benefits
-Protection against interest rate rise
-Possibly savings if official interest rates rise
-Increased cash flow
-Lower monthly payments
-Peace of mind of having a set monthly payment for those on a tight budget


Some Limitations
-Possibly higher interest costs should official interest rates fall
-Less features
-High exit fees of a fixed rate loan
-Offers less flexibility
-Fixed interest rates can be higher than variable interest rates.




d) Split rate home loans
The Split Rate Home Loan is utilised by those borrowers who want to guard against rising interest rates but at the same time are willing to assume some of the risk. This type of home loan can be split 50/50, 60/40, 70/30, or in a number of other ways. The loan is split into two parts, where one part has a fixed interest rate and the other part has a variable interest rate.

There are two parts of this loan to consider. Lets first consider the fixed interest portion of the loan. With any fixed interest rate loan, if interest rates rise, the borrower saves. However, if interest rates fall, the borrower ends up paying a higher rate than the official interest rate. This is the chance one takes when locking in a fixed rate. 

One of the major benefits of having a split rate home loan is that the borrower can hedge some of the risk against interest rates rising. The fixed interest part of the loan gives some certainty to the monthly home loan repayment. At least the borrower knows that the home loan repayment for the fixed interest rate portion of the loan will not rise. And that is some comfort.

The floating or variable interest part of the loan provides flexibility with many of the add on features offered by a variable interest rate home loan, such as repayment flexibility, a redraw facility and an offset account. Although these features are good to have, the variable interest part of the loan is still vulnerable to a rise in interest rates.


Some Benefits
-Split Loan provides some hedge against rising interest rates
-Combine flexibility and added features of variable rate loan together with certainty of a fixed rate loan


Some Limitations
-If interest rates fall, the fixed part of the loan remains locked in at the higher rate





Our mortgage brokers operate in most areas in Sydney, including:

     >>  Sydney Upper North Shore
    >>  Sydney Lower North Shore
    >>  Sydney Northern Beaches
    >>   Sydney City
    >>  Sydney Eastern Suburbs
    >>  Sydney Inner West
    >>  Sydney Western Suburbs.



Home Loan Depot will provide you with the convenience of working with an Accredited Mortgage Broker as your single point of contact. Above is only some of the home loans available to you. The broker will guide you through the maze of home loan products so as to find the loan that best fits your needs.  Our brokers can answer just about any questions you have and can provide you with information to help you make the right home loan choice.

Let us take the hassle out of the home loan process!  We are happy to give you a NO Obligation consultation to assess your home loan needs.


If you have any queries or questions, please do not hesitate to contact us.
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First Home Buyer Loans are for buyers who are eligible for the First Home Owners Grant (FHOG). The interest rate can be variable, fixed or split. The payments can be principle and interest,  or just interest only. There are a number of different types of First Home Buyer Loans available with various types of add on features.

Benefits and Limitations of some of the loans available to First Home Buyers.

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