How do mortgages work in australia

You're almost finished - want help finding the right home loan? I want to refinance I want to buy a home. Ask an expert for help Home loan guide. Home Loan Guide Everything you need to know about mortgages and finding the right home loan. Loan amount. Loan purpose Refinance. Overview Features Fees Other Filters. More details. Fast online application No Nano fees. Buying a home Buy first and then sell or sell first, then buy? House inspection checklist: 8 things to look for when buying a house What auction clearance rates tell us about the housing market 11 Steps in buying a house.

More for Buying a home. Home loan types Best features of an owner-occupier home loan — explained. Read more about Fixed vs Variable home loans. When borrowing money from a lender or bank, you can choose to pay just the interest on the loan or both the interest and the principal the actual amount borrowed. If you choose to pay only the interest on the loan, your repayments will be much lower freeing up cash for things like renovations and other expenses.

However, a lender or bank will always assess your ability to pay back both interest and principle in order to qualify for the loan as interest-only loans have a limited life span of up to 5 years. Read more about interest only loans.

The interest rate is usually low to attract borrowers. Also known as a honeymoon rate, this rate generally lasts only for around 12 months before it rises. Rates can be fixed or capped. Most revert to the standard rates at the end of the honeymoon period. Read more about introductory loans here. Whilst it can be difficult to receive a home loan as a pensioner due to being considered risky by lenders, it is still possible to get a mortgage despite the challenges involved.

If you are on a pension or applying for a home loan at an older age, you may be limited in the amount of funds you can borrow, this is due to a higher risk being associated by lenders when processing the loan application. The types of home loans available for pensioners can include reverse, mortgages, line of credit home loans and investment loans. Read more about home loans on age and disability pensions here. Once you have owned a property for a while and you have built up some equity by making repayments, you can then apply for a loan called a line of credit.

This type of loan allows you to access the funds whenever it is needed. This product is a handy and creative way to manage your cash as the money can be used for virtually anything and paid back on your terms. As long you have more cash coming in than going out these accounts can be useful.

However, they can be very costly if the balance of the line of credit is not regularly reduced as it can have higher interest rates and reduce the equity in your home.

Read more about line of credit loans here. As the name suggests, a low-doc loan is a loan suited to borrowers who may find it difficult to provide the paperwork needed for a traditional home loan. This type of loan usually appeals to investors and people who are self-employed as lenders will use other sources of documentation to consider your suitability for a loan.

Read more about low doc loans here. Mortgages in Australia and New Zealand. The Australia mortgage system In order to secure a mortgage in Australia, you will need to be an Australian or a resident. When assessing overseas people for a mortgage, banks split them into three divisions. Division 1 — Permanent Residence. Lenders will provide you with identical mortgage facilities to New Zealand citizens. Division 2 — Work Permit. Division 3 — Holiday Homes. Lenders will apply very similar rules to overseas people on holiday to the lending rules applied to people in Division 2.

Lending terms Lenders in Australia and New Zealand typically offer loan terms of up to 25 years, but some will offer longer. Fixed- or variable-rate?