Mortgage loan can not only be used to consolidate and pay off the sundry high interest loans that keep widening the hole in your pocket, but they can also be used as investments for further profits. With the interest rates being all time low for the past two decades and the competition among the lenders to lure the borrowers growing fierce by the day, you can make hay while the sun shines.
Mortgage loans can be utilized to finance education—an invaluable investment by itself— renovate and make additions to the home for rental purposes, buy new homes, start new business ventures such as investment in booming real estate market and so on.
The mortgage lenders are coming up with ingenious mortgage loan plans and offering new facilities such as discounted, and in some cases, even free property evaluation, preliminary legal counseling, and much more. The lenders are softening the earlier stringent mortgage loan conditions and offering new products tailored to the needs of the individual customers. Clients, even with bad debts and adverse credit history, are being accommodated in one plan or the other.
Though the basic interest rate options, viz, the fixed and variable interest rates remain the same, variations on these two interest rate schemes are being offered to fit a multitude of the mortgage loan needs. For example, the fixed interest loan term was earlier offered for one to five years. It was reviewed thereafter either for reversal to variable loan or extension for a new loan term at the new fixed rate of interest which could be higher than the previous rate. Now there are plans for extending the five year fixed interest loan term to fifteen years. For those hate rebudgeting their incomes and expenditure after every short interval, such products are a great draw.
Similarly there are variable plans for mortgage loans. For example, there is a Basic Variable Plan. The biggest benefit of this product is the relatively lower rate of interest compared with other variable loan plans. With lower rate of interest, the repayments are also low and the savings can be diverted to more productive uses. Like all variable loans, the interest rates and repayment amounts vary from term to term since they are tied with the interest rate changes made by the Reserve Bank of Australia.
Another important product in the category of variable loans rates is the Standard Variable Loan. This is the most preferred loan for the borrowers due to its flexibility. It offers two choices. One is that your interest rate follows the national interest rate fluctuations. The other and the more attractive option is to split your total loan into fixed and variable components. You get the benefits of both the products as the risks associated exclusively with one product are reduced through the gains from the other. If the rate of interest rises, you gain through the fixed rates and if they fall, you gain through the variable plan. There is also a facility of making over-repayments without attracting any penalties as is generally the practice in many other repayment plans. You can also redraw additional funds paid off on a loan principal. The standard variable term is usually fixed or the time period is 20 to 30 years.
There are more flexible mortgage loan plans also. For example, while in most cases you cannot increase your repayments to pay off your loan earlier than agreed schedule without attracting penalties, there are lenders who provide for full repayment flexibility with more refinance facility. For example, you can over pay as much as you like and with the repayments that your build up, you can borrow more money, take repayment holidays or pay less for certain periods. Of course, all these facilities are subject to conditions.