Pros:

• When interest rates fall, repayments fall
• You can make additional payments without penalty
• Often with more features
• Flexible

Cons:

• When interest rates rise, so do your repayments

Lenders now offer basic variable loans with lower interest rates, but with fewer features than a standard variable loan. The interest rates and repayments vary over the term of the loan.

Pros:

• Usually have a low interest rate
• Repayments are also lower

Cons:

• May not offer the features or flexibility of other loans (not portable)

Fixed rate loans protect you against interest rate changes for an agreed time, so you have peace of mind knowing your repayments won’t increase. However, you won’t benefit if rates go down during the fixed term.

Pros:

• When interest rates rise, your repayments won’t

Cons:

• Reduced flexibility
• Extra repayments can mean early repayment costs

The interest rate is usually low to attract borrowers. Also known as a honeymoon loan, this rate generally lasts only for a few years before it rises. Rates can be fixed or capped. Most revert to the standard rates.

Pros:

• Usually the lowest available rates
• When payments are made at the introductory rate, the principal can be reduced quickly
• Some lenders provide an offset account against these loans

Cons:

• Payments usually increase after the introductory period

A 100% offset account is a savings account linked to a loan account. No interest is paid to the offset account but instead the balance of your offset account is deducted from your loan account before the interest on your home loan is calculated. Therefore less interest is charged to your loan.

Pros:

• Savings interest is taxable, but because your offset account balance is used instead to reduce your loan interest, no tax is payable, so you are effectively reducing your tax bill.
• The interest rate on your offset account is the same as that applied to your loan account.
• This is a great rate and is much higher than you could earn on most savings accounts. The interest rate moves with your loan account rate ensuring you get maximum benefit from every dollar in your offset account.

Cons:

• You may have higher monthly fees attached to the account.
• You may need a minimum balance in the account.

A low-doc or no-doc loan is ideally suited for investors or self-employed borrowers looking to refinance, purchase or renovate. No tax returns or financial reports are required.

Pros:

• Simple income declaration form
• No tax return required
• No financial records required
• Fully serviceable loan options, redraws, line of credit, variable or fixed rates, P&I or interest only loans

Cons:

• Generally a higher interest rate

This type of loan revolves around credit secured against a residential property, allowing access to funds when needed. These products are creative ways to raise funds for investment by providing cash up to a pre-arranged limit.

Pros:

• Use the money you need and pay it back when you can
• Interest rates tend to be lower than credit cards or personal loans

Cons:

• Possibly reduces equity in your residential property