Don’t just consider interest rates when choosing your mortgage. Think about all your personal circumstances and your plans for the future to help determine what is the best home loan for you.
Think about these eleven things when getting the mortgage equation right for you!
1. How much you want to borrow. Make sure you can meet the repayment on this amount if interest rates rise.
2. Just because a bank is willing to lend you a large pile of money does not mean it makes financial sense to take on a home loan of that size!
3. Were you considering a fixed or variable interest rate? If you are prefer the certainty knowing your maximum monthly mortgage payment, and prefer not to sweating out the impact of impact of interest-rate changes on your family budget, a fixed home loan is probably more to your taste.
4. Review the comparison mortgage rate. This is the real cost the loan will be, and all banks are legally provided to give these. Don’t be afraid to shop around.
5. How long will you need the loan? Consider the term of the loan carefully, because how long you lock your home loan in for will effect your repayment amounts and what interest you pay.
6. How often will you be able to make repayments to your mortgage? Making weekly payments will help reduce your loan’s principle, however fortnightly or monthly exist too.
7. Does the mortgage come with an offset account? Offset accounts are great to join up to your mortgage. These savings accounts essentially help you to reduce your interest on your home loan
8. Can you get a redraw facility? This will allow you to squirrel away extra savings, and make extra payments when you have the cash. But the true benefit of the withdraw facility is that you’ve got the option (just try not to use it!) of withdrawing on those extra payments if you need them.
9. Have you considered a split rate? The option to split between a fixed and variable loan rate gives even more flexibility, particularly if combined with an offset account or redraw facility.
10. What will be your repayment method? Will you pay back the principal with interest, or interest only? If the loan is for investment purposes consider an interest only loan. While there are no tax advantages, your payment amount will change considerably, as will the length of the loan.
11. Check out all the fees involved in the home loan. As well as the establishment fee and monthly fees, look for those hidden fees. Examples of hidden fees in a mortgage include charges for making additional payments, and account keeping fees. While some of these make sense others are clearly a ploy to grab cash from customers. Don’t be afraid to negotiate, but this must be done before you sign the mortgage contract.