Basic Variable Home Loan Advantages & Mr Smith Case Study Law Assignment Help

Assignment Task

Each loan option has its advantages and disadvantages, I’ll briefly explain, Mr Smith.
A “no-frills loans” is essentially your Basic Variable Home Loan and great if you just want a straight forward loan. It offers some flexibility with the interest rate and is ideal if you aren’t really interested in added features such as an offset for example. This loan usually allows extra payments and payouts which means you can apply for this loan with some comfort in knowing that you can shop around in the future without incurring harsh penalties. A Honeymoon Loan offers first home buyer borrowers, such as yourself, a lower interest rate in the first year of your loan. This is an interesting offer worth considering however the interest rate does revert back to the standard rate after one year so the savings only occur then. Afterwards, if you do want to change your loan to a cheaper or more flexible loan, you will incur breakage costs. A professional package is a type of loan that caters to high income earners as it bundles several products together to provide a saving. This is generally on the basis that the borrower has several loans and commitments with the lender and it is harder for them to leave so the lender will bundle up other products such as insurances, credit cards and discount interest rates. This is advantageous to the target cliental however due to applicable annual fees and the nature of you being a first home buyer, this particular package would not benefit you greatly. A line of credit provides access to an amount of credit as agreed with your bank, usually secured against the equity in the home you purchase. Having a line of credit saves in loan fees and you can pay the minimum amount and possibly have interest capitalised on the loan. Interest rates are higher, however and disciplined money management is required. Lines of Credit are discouraged by lenders for residential so it might not be a current option. Most variable rate loans provide redraw and/or offset features nowadays so Lines of Credit are not as popular. It depends on your desired purpose however it would not be my first port of call.

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