Home loans come with different types of loan repayments. It’s important to understand the different options, so you can chose the repayment type that best suits you.
Standard loan repayments
The majority of home loans are set according to a loan term, and an interest rate.
For example, a loan may have a 30 year term, which means you have 30 years to pay it back – with interest. Repayments are calculated to cover the interest charged to your loan, plus some of the ‘principal’ part of the loan (the amount you initially borrow).
This is called a ‘principal and interest’ loan.
Loan repayments and variable interest rates
With most lenders, if you have a variable interest rate on your home loan, your repayments will go up or down when the lender’s variable interest rate goes up or down. This is because the interest being charged to your loan is applied at that variable rate, but your loan term stays the same.
So, if interest rates go up, you’ll need to make bigger repayments to pay off the loan by the required time. If interest rates go down, you can make smaller repayments to pay off the loan by the required time.
Generally, this won’t apply if you have a HomeStart loan, as repayments on a HomeStart loan aren’t linked to interest rates.
Loan repayments and fixed interest rates
With most lenders, if you have a fixed interest rate on your home loan, in most cases your repayments won’t change for the length of time you have the rate fixed. This is because you’ve ‘locked in’ an interest rate to be charged to your loan for a set amount of time.
If you have a fixed rate HomeStart Loan, repayments will still be set according to the repayment safeguard.
HomeStart loan repayments
At HomeStart, we offer a Repayment Safeguard to help protect you against interest rate changes. We work out your initial repayments based on your financial situation, not just interest rates. Usually, the only change you’ll need to manage is an adjustment for inflation once every 12 months.
So if interest rates go down, you’ll be paying off your loan faster. If they go up, it’ll take longer. Either way, you’ll stress less.
You can also make voluntary repayments, change your repayment frequency, choose a split interest rate, and even take a repayment holiday if you’re eligible.
To hear more about how HomeStart structures its repayments, watch this testimonial that explains the Repayment Safeguard.
To find out how much repayments could be on a HomeStart loan, visit our website
To find out how much repayments could be on a HomeStart loan, visit our online calculator