If you are looking to purchase your first home, and have never applied for a loan before, or if your current mortgage is ten years old, you may be feeling a little uneasy about being asked to choose and compare amongst the available home loans.
Your choice should be based on the home loan features that are important to you.
Cheap Home Loans
Everyone is looking for a cheap home loan. However what is cheap for one borrower may be very expensive for another. The cost of your home loan is defined by more than just the interest rate and the fees that are being charged. What about the missed opportunity cost if you are not able to make extra repayments on your home loan, or you do not have access to a redraw facility. Sure interest rate and set up fees are important but you need to consider the full list of loan features that you need to ensure that you maximize the benefits you can have from your mortgage.
Finding this type of loan would help you avoid financial crisis later on. But when the need arise, you’d want to find out more about payday loans beforehand.
A redraw facility is very important as it enable you to have access to the available equity in your home loan for any worthwhile purpose. It may be used to pay a deposit on a new investment property, cover some unforeseen shortage of funds. What is the cost to your family budget if you are not able to have access to these funds when you need them?
Loan splits are not available with all home loans. However having these splits will allow a borrower to track monies spent on different projects some of which may be tax deductible. Not having an adequate number of loan splits may also limit the ability to track ones tax deductions and be a costly omission.
To fix or not to fix
The decision to fix your home loan or keep it variable is made based on more than just the current interest rate. Many fixed rate home loans will limit a borrower’s ability to repay some or all of the loan during the fixed period. Therefore if there is a chance that early repayment may occur – fixing the loan is not a good idea. On the other hand, a fixed rate home loan will protect the borrower from potential rate rises.
Interest Only Payments
Interest only is a great feature especially for investment loans. This will allow the borrower to repay a minimum amount for up to five years of the loan – making the holding costs of property investment more affordable.
Bank or Non-Bank Lenders
Many borrowers are concerned with approaching non-bank lenders for a home loan. They are afraid that these smaller lenders are less stable and may in some way offer them an inferior product. Nothing is further from the truth. In fact, many of the non-bank lenders in Australia have amongst the best home loan products on offer and should be considered by all when choosing a home loan.