Mortgage Products

Principal & Interest:

This is the most popular loan structure available. The loan is usually taken over an agreed fixed term such as 25 or 30 years and paid off in regular installments. Each installment consists of a principal repayment and interest component. As the loan progresses, the balance between the principal and interest adjusts with more of the principal being repaid along with the interest component reducing. This is the most common form of mortgage facility for residential home loans. Loans can be taken out for a shorter period of time, however this means that the monthly payments will be higher than for a loan with longer period of time. Obviously with a shorter term, means less interest is payable too!

Another feature of these loans is that interest on these facilities can be either at the variable rate which adjusts up and down with the Reserve bank index rate, or the client can elect to lock the rate in on a fixed percentage for a pre-determined period of time from one to five years (with some banking institutions offering up to ten years). Where the rate is variable, the borrower can also make payments more frequently, and in varying amounts. In recent years due to competition with other lenders the flexibility of this facility has increased dramatically, allowing borrowers to redraw the unused equity acquired in their facility, along with other benefits which will described below.

Interest Only:

This facility is also very popular where the borrower only pays for the interest on the mortgage facility. There is no principal reduction calculated in the repayment so that when the loan is discharged, it will be for the same amount for which it was taken out. This type of facility has been very popular with property investors in the past where they have relied upon capital gain in the value of their property to make a profit. These facilities can either be secured as a Fixed interest facility or as a variable interest facility, depending upon the borrowers requirements. It should be remembered that with a fixed interest facility NO principal capital repayments can be made during the "Fixed Period" of the loan, without "breaking" the facility which could incur expensive "Break Costs". Discussion with Secured Home Equity / Finance Here staff members may assist you with any decisions you need to make in ascertaining as to whether you should take this course of action.

Line of Credit:

This type of facility is a variation of the Interest Only facility described above. The main difference here is that the facility operates like the old traditional bank overdraft, where the balance of the facility can increase or decrease depending upon the borrowers requirements. Interest is usually calculated on the daily balance, payable at the end of every month. Quite often these these facilities have either a Cheque Book and/or Credit Card attached to them. This type of facility can not have a fixed interest facility, and must be utilised with a variable interest rate arrangement.

Construction Facility:

This type of facility is used to assist the borrower to provide the necessary funds to allow them to complete the construction of a building by way of draw down or progress payments. These facilities can be either a loan where the interest is capitalised (for example the interest payments are added to the loan over the prescribed period) or the borrower pays the interest on the outstanding amount, as the draw-downs increase the loan balance, so does the monthly interest payments (a little like the Line of Credit mentioned previously). Not all lenders will provide both facilities, it will usually be an either or position, which means the borrower will have to choose what type of facility they require and then find the appropriate financier who will provide the required loan arrangement. Secured Home Equity / Finance Here can assist potential borrowers in explaining the various products available in the marketplace and various effects each product type may have on a borrowers position. In most cases, the number of lenders who will provide this type of facility is limited. Further to this many of these will insist that the property be constructed by a licensed builder, and they will insist on seeing and confirming a building contract from a reputable licensed builder. The number of lenders who will provide construction funding for "owner builder" projects is extremely limited, and the borrower may require an unconventional lender to assist with their project, usually at a higher cost due to the "risk" factor. Butler hardy Corporate Finance staff can assist you in this area providing valuable information to assist you with your decision process.

Other Benefits:

The products such as Principal & Interest, Interest Only and Line of Credit, with many lenders have additional benefits as follows;

• Multiple Accounts,
• Redraw Facilities
• Internet Banking Access
• Telephone Banking Access
• Portability
• Structured Repayment Facilities
• Off-Set Accounts
• Mixed Accounts

An explanation for these are set out below;

Multiple Accounts: This is where the borrower can have more than one account tied a mortgage. Some lenders will allow as many as 50+ accounts, although one would imagine you would need a computer to manage them. It is quite common for borrowers to have between two to six accounts, with any more accounts being the exception than the rule. The majority of lenders will permit up to six accounts simultaneously.

Redraw Facilities: This feature of a loan allows the borrower to re-borrow any equity that they have accumulated over the life of the loan. Most lenders today offer this facility as part of the loan features. However new borrowers should check with their proposed lender or mortgage professional that the loan offers this feature. Most loans arranged through Secured Home Equity / Finance Here offer this feature as standard. This feature is not usually available on "no-frill" loans, fixed rate loans and fixed rate interest only term loans.

Internet Banking Access: With the advent of the computer age, many lenders now offer internet access for the borrower to check their loan and in many cases manage their account, by requesting additional payments, redraws, and in some cases other banking services such as Bpay and payments to third parties. In most cases, there is no fee charged by the lender to the borrower for this service as it is a cost saving for the lender to have their borrower manage their account themselves.

Telephone Banking Access: A more basic service provided by most lenders allowing borrowers to obtain vital information about their loan. In some cases where internet banking is not available, the loan management can be arranged through the lender's customer service officer. It does also offer a more personalised service in this respect. Most lenders who do not have a branch network will provide the very minimum of Telephone Banking Access with many also now providing Internet Banking Access as an alternative for the Internet savvy.

Portability: One of the features offered by a number of lenders is loan facility portability. What is meant by this that a loan facility can be transferred from one property to the next without interrupting payment amounts and the term left remaining. As long as the new property meets loan to value ratios, and the loan amount required does not exceed the original amount borrowed, this can be good option where the borrower does not have to go through the loan approval process again. Again Secured Home Equity / Finance Here can provide additional information on these types of products and the financial institutions who offer it.

Structured Repayment Facilities: This simply means that the normal loan payment structure that most people are used to, can be varied for those borrowers whose circumstances permit them to have unusual repayment arrangements. This could apply to seasonal workers, whose bulk income may come only in six months of the year, so payments are structured to be large during this period, with the payments during the off-season income being reduced considerably if not completely waived. Another scenario, is where payments may be made either quarterly, six monthly or even yearly (annually), or even a combination of all. A further example, is where a borrower may pre-pay interest for twelve months to obtain a tax deduction for that financial year on a business loan. Secured Home Equity / Finance Here can advise potential borrowers of their options in this area. This is also a specialised area as not all lenders offer this type of facility. This will require professional assistance which the staff of Secured Home Equity / Finance Here can assist you with.



Off-Set Accounts: Off-set accounts are a specialist area, and not offered by all lenders. Essentially this means should a borrower have two accounts with the same financier, one being a mortgage account and the other a credit savings account, then any interest earned in the savings account can be used to off-set the interest being charged on the mortgage loan account, as the name implies. This is a specialist area, and may require advice from a Licensed Financial Planner due to the "Investment" considerations of the Savings Account. Secured Home Equity / Finance Here is not a licensed Financial Planner, and should you require advice in this area, we will refer you to a business partner who is a Licensed Financial Planner, who can provide additional information to our clients in this area.

Mixed Accounts: These are similar to the Multiple Accounts mentioned earlier, except that rather than being accounts of the same type, the borrower may want to have a mix of accounts such as part fixed interest, part variable interest, part interest only, part principal and interest, part Line of Credit. Again most lenders will offer these arrangements, although a small premium maybe paid with an interest rate difference for the convenience of such a facility. Again Secured Home Equity / Finance Here staff members will be able to assist potential borrowers in explaining the various products provided by a range of participating lenders.