How to choose the right home loan?
Choosing the right home loan can be challenging, it’s important to select a home loan that fits your needs. Flexibility in a home loan is vital, especially as circumstances in the future are likely to change be it personal or financial.
Comparing home loans between various banks and lenders can be quiet difficult. Placing a value on loan features and flexibility is not easy. That’s why the best way to compare between various home loan options is to draw a list of features required in the ideal home loan. Some important points to consider are:
- Marking additional repayments – can result in significant savings in interest.
- Ability to switch to a fixed rate – when interest rates rise. Some lenders charge a fee or make you pay out the loan and establish a new one.
- Redraw – so you can access the amount you are in advance on your mortgage. Some lenders charge a fee for this after a certain number of withdrawals.
- Offset account – You deposit money in an account and receive interest in the form of a reduction in the interest due on your loan. Because offset accounts don’t actually pay you any money, they don’t add to your taxable income – so, like redraw facilities, they offer tax advantages.
- Refix – lets you lock into another fixed rate at the end of the fixed rate period. Some lenders charge a fee for this.
- Interest only – Paying interest only can be a useful feature for investors. It’s usually available for five years but some loans offer it for up to ten years.
Types of home loans
There are three main types:
- Basic loans: no frills loans with few features and a low interest rate. May offer redraw but there can be restrictions and fees so a basic loan may not suit if you want to make extra repayments and access them later.
- Standard loans: offer more flexibility than basic loans. You can redraw any extra money you’ve paid in, for example, and have the option to switch to a fixed rate, or split the loan into a fixed and variable portion. They also often offer a 100% offset account. But they come at the cost of a higher interest rate.
- Home loan package: standard loan with an interest rate discount of up to 1.2% depending on your loan amount, cheaper than many basic loans. The package normally includes a free transaction account and no annual fee credit card. However, high package fees apply of up to $400 per year.
If you are looking to buy a home to live in you really cannot afford to not put in a call to Hunter Galloway to see if we can help you. Please call us on 1300 088 065 or enquire online and one of our mortgage brokers will go through the special discounts with you.