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Today, there are hundreds of home loan products in the market. But, did you know too much choice could be confounding for Australian home buyers? According to a survey, 37 percent Australians found deciding between too many options to be an impediment to being financially savvy.

 
How to find the right home loan
 


Wondering how to find the right home loan?

Just like the fingers in your hand, all home loans are different, and different home loan products are suitable for different circumstances. Thus, before you pick a home loan product, you must be aware of what you need from your mortgage so that you choose one that matches your expectations.

For example, consider the following questions: Do you want the certainty of fixed repayments or the flexibility that comes with a variable rate home loan? Do you prefer a principal and interest rate mortgage, which is usually a better option for owner-occupiers, or an interest-only mortgage suits your circumstances well? Do you need a line of credit or a credit card linked to your home loan?

Dazed at the number of options available to you? Don’t be overwhelmed. Choosing a home loan with the features and services you need is not difficult. Here are a few tips on how to choose the right home loan to finance your home:

 
Scratch beneath the surface, or, look beyond the interest rate – For many home buyers, a low-interest rate is a priority when shopping for a mortgage. However, according to experts, choosing a home loan just because it is cheaper than its counterparts is not a great idea.

The interest rate, at the outset, does not reflect the true cost of a loan because it does not consider the ongoing fees and the cost of setting up the loan. For a more accurate understanding, it is better to use comparison rates as they take into account the initial interest rates, setup or application fees as well as ongoing fees, etc…, than merely looking at standard advertised rates.

But, that’s not all. Above all, it should be the loan features that guide you to your decision.

 
Look at the extras – Many mortgages come with extras such as offset accounts, lines of credit, extra redraws, and flexible repayments. Some others are devoid of the bells and whistles – which could be the reason for a lower rate of interest. As a savvy home borrower, before you make a choice, think whether you need these extras in your home loan or not. For example, the ability to make additional repayments or having an offset account linked to your mortgage could potentially save you a lot of money in interest. Whether you opt for a vanilla low-rate mortgage or pay to have some of these essential features in your home loan will depend on your financial situation and future goals.

 
To fix or not to fix – With a lot of noise about potential rate hikes in the future, another dilemma faced by home borrowers is whether to fix their home loan or not. A fixed rate of interest is a good choice for borrowers who need certainty for budgeting their finances. However, it could be quite expensive to prepay or break a fixed-rate mortgage if you choose to refinance or sell your home within the fixed period. On the other hand, a variable rate mortgage comes loaded with features, but, if the interest rates hike, your repayment amount would automatically increase, too. It is possible to divide your home loan into fixed and variable rate components as well.

Click here to read more about fixed, variable and split rate home loans.

 
Don’t be shy of seeking help: As a home borrower, it is possible you don’t know exactly which loan features are right for your circumstances. However, the least you can do is to be clear about what you want to achieve with your home loan. Based on this information, your lender or mortgage broker can suggest a home loan well-suited to meet your objectives.

According to Siobhan Hayden, COO, HashChing, “If you can identify which type of borrower you are, your broker can find the most suitable product.”

The reason? Well, mortgage brokers deal with home loans on a daily basis and have a deep understanding of various home loan features and how they can help a borrower in a particular situation.

It is, therefore, better to ask for help than make a decision you might regret. At present, nearly 60 percent home loans of all new residential lending in Australia is introduced through mortgage brokers. This number is only predicted to grow in the future. In case you are wondering why mortgage brokers are so popular, you’d be glad to know that a good broker not only helps you make informed financial choices but also prepares and lodges your home loan application on your behalf in a timely manner. Thus, while the broker does all the legwork, you are left with more time for things you enjoy doing – such as searching for a property or ideas to do up your new home!

If you are planning to buy a home or have any home loan queries, post them here for a quick resolution by experts in a transparent manner, at no cost to you.

 
HashChing is a borrower-friendly online mortgage marketplace that helps you own your home sooner through more choice and savings on home loans. Start by comparing hundreds of broker pre-negotiated home loan deals here.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.