Choosing a home loan

The range of home loans on offer for Australian consumers has soared over the past decade as strong property prices and increased competition between lenders have driven a rise in the variety of loans available - but what are the main options on the market for today's househunters?

With housing affordability a major issue across Australia, lenders have come up with a number of packages that consumers can use to reduce their overall costs, news.com.au said.

Among these are zero-deposit home loans, which according to the National Australia Bank's state general manager for retail banking Ann-Marie Chamberlain can help property buyers to secure their home faster by allowing them to borrow up to 100 per cent of the purchase price without providing a down payment.

"In the past, most banks required a minimum 10 per cent home loan deposit," she said.

There are also honeymoon loans, which include discounted repayments for up to three years in some cases, Ms Chamberlain added.

Another option for cutting housing overheads is using a 100 per cent off set account, Ms Chamberlain noted.

These accounts allow borrowers to reduce their interest payments by linking their savings account to their home loan and having interest rate calculated on the balance.

"Salaries, investment income and rental income should be credited directly into the offset account to immediately reduce the interest being charged. You can improve this facility even further through the use of a credit card with an interest-free period," she said.

Alternatively, borrowers who have made enough additional repayments may be able to apply for a repayment holiday to help them cope with major changes such as the birth of a child or a period of unemployment.

Providing consumers have enough funds in their loan account to meet their regular payments, Ms Chamberlain said, they may be able to take a repayment break of up to one year.

According to figures from the Australian Bureau of Statistics, total Australian home loans were worth around $19.46 billion in April.

Compare loan deals.

Latest Money News from Money-Au.com.au