Buying a property, which loan type?

Most loans require regular periodic payments of principal and interest over a fixed term, although you can choose an ?interest only? loan, and pay the principal in a lump sum at the end of the loan term. ?Bridging loans? are interest only loans used short-term to, for example, buy a new home before completing the sale of your existing house.

Loan types include:

?Variable interest (rates rise and fall with market changes)
?Fixed interest (interest rates are agreed when the loan is accepted, and cannot change)
?Capped interest (rates can fall, but cannot rise above an agreed cap)
?Split (fixed interest on part of the loan, variable on the balance)
?Fixed for a period (referred to as a ?honeymoon? period) then variable.
?Line of credit: Like a cheque account with an overdraft. You can deposit as much as you like to the account whenever you please, and draw from it to pay all your expenses. The balance rises and falls, and interest is calculated on the daily balance. Limits and minimum deposit rules may apply.

?Basic? loans are inflexible, but inexpensive. ?Standard? loans and special loan packages have features such as redraw and offset, and allow you to make extra payments or pay out the loan early without penalty.
Redraw options and line of credit loans offer advantages for good money managers, but avoid them if you might be tempted to overspend!