Whether you are a Sydney first home buyer or already own a property, getting the best home loan finance to suit your needs means knowing what options are out there.
Your current financial situation and long-term financial goals will play a role in helping you decide which is the best home loan option for you. This applies where you are taking out a new loan or looking for the best refinance home loans.
Principal-and-interest loans
This is a common form of repaying a home loan in Sydney that pays off both the amount you initially borrowed, the principal, as well as the interest charges. Paying both principal and interest together means you are accumulating equity as the amount you owe compared to the value of the home will start decreasing.
Interest-only loans
When paying an interest-only loan, your repayments cover only the interest on your loan for a set period. The advantage of this is that your monthly repayments will be lower during this period. But your loan may take longer to pay off as you will not have touched your principal amount during the interest-only period
Fixed-rate home loans
A fixed-rate loan is a set interest rate for a certain period. When that period is finished, you may choose another fixed period or move on to a variable-rate mortgage.
A fixed-rate home loan in Sydney gives you certainty to know exactly how much your monthly repayments will be for that period, allowing you to plan and prepare. For less risk-averse people, this could be a good option as it gives you security.
However, if market interest rates fall you will not see any benefits as your interest rate has been fixed. You also run the risk of paying break costs if you need to exit the loan before the fixed-rate period is up.
For Sydney first home buyers, a fixed-rate mortgage might be a good option for you if you like to know in advance what your monthly repayments will be.
Variable-rate home loan
A variable rate home loan in Sydney, opposite to a fixed-rate, changes interest rates throughout the lifespan of the loan according to economic trends. If rates go up, your home loan will too. But, if rates decrease, so will your home loan rates. This means your monthly repayments will fluctuate as the economy changes.
While this is a more risky option, it can mean that you get to take advantage of lower rates. Plus, if you have the means, you are able to make additional payments and pay off your loan sooner.
Variable-rate home loans generally have the option of offset accounts or redraw facilities.
For Sydney first home buyers that are more open to risk, this may be the option suited to your needs.
Split loan
A split loan is a mix of both variable and fixed-rate. This allows you to fix a certain portion of the loan at a set interest rate while the remaining amount is at a variable rate. You can choose how much you’d like to allocate.
Whether you are looking for the best refinance home loan or you are a Sydney first home buyer, a split loan may suit your needs as it allows you to take advantage of the benefits of both fixed-rate and variable-rate mortgages.
Construction home loan
A construction loan is a specialised loan aimed at people building a new home from scratch or significantly renovating an existing home. For Sydney first home buyers, this may be a good option if you are looking to buy land and build your new home.
Unlike regular home loans that pay out the full amount all at once, a construction loan pays out in sections as and when the building activities have progressed. This allows you to manage spending and keep track of expenses.
You will need to provide a lot of paperwork for a construction loan, including council plans and permits, proof of insurance and extensive quotations on building activities
Guarantor home loans
As a Sydney first home buyer, you might find yourself in the situation of not having enough money saved for the deposit on your new home. In this case, you can opt for a guarantor home loan in which a member of your family will sign assurance that they will be responsible for the loan if you are not able to make payments.
Your family member will sign over a portion of the equity in their own home as the guarantee.
As a result, the lender will accept you putting down a smaller deposit (or even no deposit), allowing you to enter the market ahead of schedule.
Bridging loan
This can be a good option for current homeowners as it is a form of short-term finance that allows you to buy a property to live in before you have sold your existing property. This provides you the convenience to move into your new home while waiting for your previous home to sell.
Home loan options
For Sydney first home buyers or those looking for the best refinance home loans, there are many options available and choosing the best home loan involves understanding what is available and which will suit your needs.
Principal-and-interest loans build equity over time while interest-only loans offer lower initial payments. Fixed-rate loans provide stability for those who want predictability and variable-rate loans offer potential cost savings as the economy fluctuates. The split loan combines the benefits of both.
Construction loans suit those building from scratch, while guarantor loans and bridging loans provide solutions for unique financial situations.
Whether you are a first home buyer or looking to refinance, Loan Station is an experienced finance broker that is here to help with any home loan in Sydney. Get in touch today.
