Finding the right mortgage structure is essential to applying for a home loan. First home buyers should read about their options below and ask our expert mortgage brokers for assistance.
Fixed Interest Rate
Set from the beginning what your monthly payments will be at a fixed interest rate. Lenders often have competitive rates and you may choose to fix rates for a few months or a few years. This makes it easy to budget but you can lose out if the market rate drops.
Floating rates means your interest rate changes with the market. These rates are usually a bit higher than fixed rates, though can drop below them, saving you lots of money. There is also no penalty for paying extra when you can.
Mixed Fixed and Floating Rates
Many split their home loan into a few segments and fix some while leaving other floating. This enables you to make extra payments if you can.
Repayment Structure for Home Loans
This is the most straightforward repayment structure for home loans, with predetermined monthly payments.
Pay only the interest, rather than the principle, for a period of time. This means you’ll have more cash at hand, but ultimately costs you more in the long run.
Best for those who have uneven income and are very good at controlling their finances, a revolving credit account calculates interest based on how much money is in your account on a daily basis. Your pay goes straight in and you pay bills and regular expenses directly from this account. You can pay off your mortgage faster, but it is a little more complex.
Straight Line Mortgages
A reducing, or straight line mortgage, means we start payments high and reduce them over time by paying mainly principle first. This works well for those who expect to have a loss of income in the near future.
Figuring out what kind of loan repayment structure and interest type is right for you can be tough. iLender will help guide you through your options, and help first home buyers understand the best way to pay off their mortgage.