Home loans are not merely about signing a contract for a quarter of a century and adhering to a payment plan. Rather, it’s now about obtaining a sense of security and flexibility! There are several loan choices that provide these advantages, although they may come at an additional cost. Of course, regardless of which home loan you pick, the primary factor to consider is still the interest rate.
That said, let’s talk about what you need to know to pick the right home loan:
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The Types of Home Loans Available
There are three main types of home loans you can find: basic loans, standard loans, and home loan packages.
A basic loan is a straightforward financial product, usually with a lower interest rate than other loan products. It may not have a lot of features and may not have a redraw facility. However, if you don’t need to make extra repayments or access them later, this kind of loan may be suitable for you.
Standard loans provide more flexibility than basic ones. You can pull out any extra money you may have paid in and have the option to switch to a fixed-rate loan or even divide the loan into a fixed and variable portion. Additionally, many of these loans include a 100% offset account. However, you may be able to find a loan with a lower interest rate and comparable features.
A home loan package is an arrangement that offers a reduced interest rate on the loan, up to 1.2%, which is lower than the rate on many regular loans. This package typically includes a free bank account and a no-annual-fee credit card. However, there is a package fee of up to $400 a year.
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Fixed and Variable Interest Rates
When interest rates are low, fixed-rate loans can be appealing because they offer a consistent rate throughout the loan’s term. However, these loans generally come with limited flexibility. If you decide to pay off the loan early or move to a different location, you may have to pay high break costs. Some fixed-rate loans allow for extra payments, but there might be restrictions, and some loans don’t allow for extra payments at all. This can end up costing you more in the long run if you have to pay a high amount of interest.
On that note, don’t try to outsmart the bank. They’ve been in the loans business for far longer than you, and it is super hard for you to predict whether you can save on a fixed rate for the next couple of years.
Rather than simply accepting the interest rate you are given, consider if you are able to afford a higher rate. If not, then splitting the loan may be a worthwhile option. With a split loan, you have the advantage of extra payments in the variable part while also having the protection of a fixed rate.
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Regular Fees and Charges
When choosing a mortgage, there are several costs to consider besides just the interest rate. Make sure to look at the fees and charges as well, as they can add up significantly. Don’t hesitate to ask your lender for a better deal; often, they will offer discounts on the interest rate and waive certain fees if you are looking to borrow a significant sum of money.
Meanwhile, pay attention to comparison rates which take into account various fees. Also, pay attention to other fees like application fees and lender’s mortgage insurance to fully understand what you have to pay.
Conclusion
Overall, these are just some of the many things you need to consider when picking a home loan. Remember, what works for you may not work for others, so always be sure to understand exactly what you need to pick the right home loan. Additionally, you can always work with expert lenders to help you understand which options will work best for you now and in the future to help you finally own your dream home.
Wealthy You is an Australian mortgage company that offers a wide variety of mortgage solutions to meet any financial needs. If you are looking for the best home loans, reach out to us today!
