Choosing the best home loan
When choosing a home loan (mortgage) and looking for a good deal on a home loan, the interest rate matters. A home loan is a long-term debt, so even a small difference in interest adds up over time.
However, while the interest rate is important, the cheapest rate might not be the best home loan for your requirements, other factors need to be considered before choosing a lender, you need to understand the 3 P's....
What is the lenders policy? All lenders have their own policies, and these can vary from lender to lender. If you do not meet the lenders policy, this will cause your home loan application will be declined.
However, if you are using using the services of a Mortgage Broker, with their knowledge of lender policies, your home loan application is more likely to be approved.
These are the features in a home loan. With the help of a good Mortgage Broker, they will advise you of what features you may need in your home loan such as: a variable rate or a fixed rate, a basic home loan or a loan with an offset account, a construction loan or a bridging loan.
While most lenders products are similar, there are some differences.
For example: some lenders may allow redraw on fixed rate while othe lenders do not.
This is the interest rate. When you have considered the lender Policy and the products with the features you need, then you can seek a mortgage lender with the best interest rate.
Home loan Features
Home loans come with different options and features. These can offer flexibility or let you pay off your loan faster. Some options could cost you more, so make sure they're worth it.
Home loans are available in many different variations. There are introductory rates (AKA honeymoon rate), fixed and variable rates offered by hundreds of lenders. Repayment types with interest-only (I/O) or principal & interest (P&I). The fees and features offered by each lender differ and there is a multitude of variations available to suit your needs.
Your Home Loan Consultant has access to over 25 lenders and over a hundred different loan products to choose from.
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Standard Variable Loan
Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.
- Lump-sum payments can be made without incurring a penalty.
- If interest rates fall, your repayments will fall.
- Often offer extra features.
- If interest rates rise your repayments will rise.
Basic Variable Loan
Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.
- Relatively low-interest rate.
- Lower repayments.
- Many of these loans do not have the same features or flexibility as other variable loans.
Under a fixed-rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However, you won’t benefit if rates go down during the fixed term.
- Guaranteed Rate, if interest rates rise your repayments won’t.
- Reduced flexibility.
- Extra repayments may incur a fee or be limited.
Members of certain professions are as seen as favourable candidates for lending by some banks. As such these lenders may extend to you what is known as a professional package. This may include features such as reduced interest rates, no or reduced fees and so on. Typically this type of package was offered to doctors and the like but they are now more prevalent. You may find you are eligible for a professional package and it’s benefits. Talk to one of our consultants to find out.
100% Offset Loan Account
A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.
- Can save you a substantial amount of interest if used correctly.
- Operates like a normal transaction account and has a cheque book, ATM card, etc. attached.
- May have higher monthly fees attached to the account.
- May require a minimum balance in the account
A bridging loan is a short term loan (often no longer than 12 months) designed to allow you to finance the purchase of a new property before you have sold your existing property.
- This allows you to secure the property before you sell your existing property.
- When making an offer for the new property, there is no need to have a clause in the contract " subject to selling your existing property" making your purchse offer more likely to be accepted.
- If you can not sell your existing property, you take the risk of having to manage the finances on both properties.
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Can't talk right now! Schedule a time that is convenient to you and we will give you a call at that time.