Major Types of Home Loans by Purpose

A house loan can be taken out for a variety of reasons, from those looking to get their feet on the property ladder to those expanding their portfolio with investment properties.

Owner-Occupier Home Loan

Loans for owner occupiers are for those who wish to reside in their own home and intend to 'occupy' it. As a result, the lender will not ask for rent receipts in order to prove that the property generates income, because the owner does not plan to rent out the property or use it as an investment property at first. Homeowner loans are also commonly used for financing and debt consolidation, as well as major renovations of a home. Loan packages like these and many more are readily available at trustable financing firms like Star Home Loans.

Bridging Home Loan

People who are in the process of moving between homes can use bridge loans to help 'bridge the gap,' which is a special type of short-term loan. Bridging loans can help you cover the purchase of a new property as you arrange the sale of your current one when you have bought a new property and plan to sell your current one. Star Home Loans is a big name providing these loans to people throughout Australia. Bridge loans are normally interest-only loans, and their value is determined by the equity value of your present property. If your existing property is not sold within a specific timeframe, lenders usually charge a higher interest rate as a condition of the loan.

Construction Home Loan

Those who are beginning the process of building a home should consider a construction home loan from some credible sources like Star Home Loans. During the various stages of the construction process, lenders will make progress payments once the construction loan has been approved. An interest-only construction loan is commonly taken out during construction and then converted to a standard loan with principal and interest at the end of construction. During the 'drawn down' process, only the amount of funds that have been used will be charged interest and repaid. Once the property is fully built, a portion of the total loan amount will be based on the property's value. You can consult Star Home Loans for further information.

Reverse Mortgage

Borrowers who are 60 and older are eligible for reverse mortgages. Your equity in your home can be converted into cash with this type of loan. The loan usually comes either as a lump sum or as recurring payments based upon your usable equity. Retirees looking to increase their income often choose the latter option. It's important to keep in mind that reverse mortgages only permit you to borrow a specific percentage of the value of your property; as you age, your percentage will increase. Reverse mortgages allow you to keep ownership of your home and pay back the loan in part or in full at any time, as needed. In the long run, your debts will increase and your equity in your home will decrease if you apply for a reverse mortgage. The home will still be able to be left to your heirs, but any remaining loan balance will have to be paid off. Another important point to be aware of is that reverse mortgage interest rates are quite high.

Line of Credit Home Loan

People can borrow money when they already own a home using a line of credit, or a loan against their equity. The equity in a home represents the difference between the current value of the house and how much you still owe on the mortgage; it represents the value you personally owe on the house, not the lender. The use of a line of credit loan is very similar to that of a credit card, in that you are able to borrow money up to a certain pre-decided limit without having to apply for another loan every time you use it. 

A typical loan from a bank is 80 percent of your home's value, minus the debt you still owe on it. This is called your usable equity. Depending on its use, line of credit loans can be used for anything from home renovations to large purchases such as a car. They may also be suitable for investors who need funds on hand for any future opportunities. In most cases, you will pay interest only on the amount you have drawn from the loan. You can borrow from the loan any time if you wish, and you can pay money into it at any time.

Investment Home Loan

When you borrow money to purchase a rental property, it is called an investment loan. The terms, conditions, and features of investment loans can differ from one to the next. Loan-to-value ratios are often lower on these loans, meaning you may have to put down more money than you would have otherwise paid while applying for just another regular home loan. 

Refinancing Home Loan

Home refinancing is a loan that is designed for borrowers who wish to switch from one mortgage to another. Switching your mortgage could be for a number of reasons. There is a possibility that you will find a loan with lower interest rates or better features from another lender. A refinance can also make financial sense if you are planning on selling your home and moving to another one, if you are enlarging your loan to renovate your existing property, or if you are attempting to consolidate debts.

First Home Buyer Home Loan

People looking to purchase a home for the first time can take advantage of a first home buyer loan. Home loan providers are often willing to offer special offers to attract first-time homebuyers, so home loan providers can fit a number of interest categories and offerings into their home loan offerings to attract first-time home buyers. You might receive rebates on the home’s purchase price or some sort of waiver in the costs of conveyancing, or you might be provided with a guarantee of no annual or ongoing fees. There are other schemes as well in Australia, meant for first-time buyers, such as the First Home Super Saver Scheme (FHSS) and the First Home Loan Deposit Scheme (FHLDS).