Looking to buy a property? Here’s the lowdown on the bonds available

Julie Brownlee, Fsp Invest, 06 Mar. 2015

Tags: bonds, types of bonds, property, buying property, investing in property,



For most people, when it comes buying a property it means going to the bank for a bond.

So what are your options when it comes to the different bonds?

Let’s take a closer look…



The different types of bonds available


Banks provide a wide variety of different bonds for property buyers.

Here are the main types available…

Tracker bonds
This type of bond tracks the prime interest rate.

With this type of bond, if the Reserve Bank raises rates, the interest on your bond also rises. On the other hand, if the Reserve Bank reduces interest rates, the interest on your bond will fall.

You can expect to pay around 0.5% more than the current prime rate.

Variable bonds
This type of bond is similar to a tracker bond. But when interest rates rise and fall, the interest rate on your bond might lag the move.

With this type of bond you can look to pay between 0.25% and 1% above the current prime rate.

Capped bonds
As the name suggests, the interest rate on this kind of bond is capped at a certain level.

This type of bond can be beneficial if interest rates start to rise a lot. If rates fall, the rate should also fall.

Discounted bonds
This type of bond is good for a first-time buyer. For a set period at the start of the bond agreement, you’ll benefit from a discount to the prime interest rate.

This means your payment will initially be low.

Fixed-rate bonds
As the name suggests, this type of bond offers a fixed-rate for the first few years. This means you know how much you’re going to pay over that period.

After the fixed-rate time period is over, the rate will rise to the standard variable rate.

So there you have it. The lowdown on the bonds available if you’re looking to buy a property.

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