Before you go out and start looking at what property you want to buy, it's important to have the right home loan for your personal circumstances. Here’s a checklist of the things that you will need to consider before you choose a home loan:
- Choose your lender – Look for the lender who will give you various options, preferably one who can offer access to a wide range of funds not just from the Banks, but also Non-Banks and wholesale lenders. Learn about who they are and how they operate, including ongoing service once your loan has settled. The right lender can help you save time, money, and confusion.
- Deposit – The type of loans and features available may be limited by the amount of deposit you have available. Some selected lenders have access to products, which allow the borrower to purchase a property with very minimal savings in the form of 100% loan products
- Fees – When choosing a loan weigh up the effect of any ongoing costs. Ongoing monthly and annual fees can affect the true cost of your loan.
- Fixed or variable interest rate – Traditionally fixed rates offer you peace of mind of knowing what your repayments will be for a set period of time and that a rate rise will not affect your cash flow for that period. However sometimes you lose the flexibility and features of a variable product. Some lenders now have access to a product which can offer you the best of both worlds - such as our Future Proof home Loan. That is fixing your loan whilst maintaining the benefits of a flexible product. These can be a great feature if you come into some extra cash and can effectively help pay off your home sooner.
- Introduction rates – lenders offer a discounted rate for a short period of time then a shock to the system after the introduction period is over. When considering these types of loans ensure the features, flexibility and the real long term cost of the loan are taken into account when selecting your lender
- Mortgage Insurance – a mortgage insurance premium may be applicable when a loan amount exceeds 80% of the property value. This premium is a once- off cost payable by the borrower. But note, it protects the Lender not you.
- Know your Mortgage Options – It is essential that you compare the loan features and their benefits rather than just relying on the products interest rate. A fully featured loan used correctly may enable to pay off your loan faster which could result in saving you thousands of dollars in interest repayments. The following are fundamental features to consider to help you save money long term:
- Additional repayments (unlimited)
- Salary crediting
- Free Internet and phone banking
- Free unlimited redraw
- No ongoing fees and charges
- Flexibility to substitute your home without refinancing the loan
- Offset – An offset home loan or mortgage offset is a feature on a loan that has become increasingly popular. An offset is a savings account linked to your mortgage in such a way that the interest earned on your savings is applied to reduce the interest on your mortgage. Selected lenders are now allowing borrowers to fix their loan and have the benefits of an offset account, this was not heard of a year ago, giving the borrowers peace of mind plus a low rate and the flexibility of saving thousands in interest. This product is also ideal for investment properties not just owner occupied.
- Lines of Credit - if structured correctly a LOC can be very effective in paying your loan off sooner. Despite the benefits these loans are not recommended to all borrowers, cause if not managed correctly, you will never reduce your loan. Your mortgage provider should be able to demonstrate how it may work for your particular situation by looking at your whole situation and then helping you with your options.
- Loan Portability- On average, most people will live in their home for a period of 7-10 years before they buy their next home. Loan portability allows you to transfer your existing loan from one property to another. Thus avoiding application and exit fees (where applicable), and allowing you can keep the all the features of your existing loan, such as ATM cards, online banking and interest rates, without the inconvience of needing to reapply. Different lenders have different rules when it comes to loan portability, but is generally offered as part of variable rate home loans.
Your lender should have an extensive selection of products and can provide regular loan health checks to ensure you still have the best product to suit your needs and to even ‘keep you in the know’ for this ever changing market place.