Structuring Your Mortgage

Once your loan is approved, the banks offer a number of options when it comes to structuring your borrowings.

If you are looking to structure for Investment purposes then my advice is always to talk to your Accountant first but for standard borrowings for your own home and, after taking advice from your Accountant for an Investment property, they are a number of different variations to choose from.

A brief summary of the different options below:

Floating Term Loan

  • Can be paid-off over up to 30 years
  • The interest rate is floating meaning that it rises and falls with the current Bank rate
  • You can make lump-sum deposits without penalty
  • Anything you pay off the principle you cannot draw out again

Fixed Term Loan

  • Can be paid-off over up to 30 years
  • The interest rate is fixed anywhere from 6 months to 5 years and the advantage is that you know exactly how much you need to repay each month for the term of the fixed period without worrying about what the current rates are doing
  • You can make lump-sum deposits but you may attract a fixed-rate penalty if the current interest rates are lower than what you are fixed at
  • Anything you pay off the principle you cannot draw out again

Revolving Credit

  • Can be paid-off over up to 30 years
  • Is interest-only for the life of the facility
  • The interest rate is floating meaning that it rises and falls with the current Bank rate
  • The facility amount is set, meaning that if you have an amount of $50,000 approved then you can pay down $40,000 one day and draw it back out the next without any penalty or reduction in limit
  • You only pay interest on what is outstanding
  • A good product for those who have inconsistent income and appreciate flexibility

Find out more about revolving credit….

There are different combinations of the above which can be personalised to create the most effective structure for every individual situation.

Read other articles by Jon Purdey:

Lo Doc Loans – Old Products Made New

The Good News about Bad Credit

I can’t Afford a Deposit