Home and Investment Loans
With hundreds of mortgage products on offer, it’s not easy to pick the right loan. In fact, it can be downright baffling thanks to the sheer range of options and features that various products can offer – not to mention the interest rate. So where do you start and why do you need to compare home loans?
Before you get too confused by the range of options available on our Home Loan Finder, there are a few questions you should ask before you apply for a particular product.
The main things you need to consider are:
- How long do you want your loan for?
- Do you need to be able to make extra repayments?
- Do you need to be able to redraw any extra repayments you have made?
- Do you need easy access to your funds via an offset account or ATM access to your loan?
- Would you like the security of knowing exactly what your repayments are each month?
- Would you like to be protected from interest rate fluctuations?
Key among these are:
- Loan term?
- Basic Loan or Fully Featured?
- Principal and interest or interest-only?
- Fixed or variable?
The upside of taking a longer term is that your mortgage repayments will be lower compared with a shorter term loan. If your cash flow is tight, this will help you get over the financial difficulties. The downside of having a longer term mortgage is that you’ll end up paying more interest and will be in debt for longer. However if you choose a loan that allows unlimited principal reductions the term of the loan can be shortened or payed out when ever funds are available
Basic Loan or Fully Featured?
The upside of basic variable loans is that they tend to be a lot cheaper (lower interest rates) compared with the feature standard variable loans. Many lenders have also started adding flexible features such as redraw in their basic loan offerings but usually repayments are made by direct debit from a separate account. This type of loan has minimal features and generally doesn’t offer an offset account, repayment atm card, cheque book or Bpay. If you are after a simple loan that is easy to use, then the basic home loan would be well suited to you.
Fully Featured loans, are normally priced above basic loans, can offer valuable features such as offset or all-in one facilities where you can deposit your pay and have access to direct debit and online payments.
An offset or all-in-one facility allows you to have a savings account, the balance of which directly offsets your mortgage principal. This enables borrowers to cut interest costs substantially if they have a sizeable savings balance and income.
Principal and Interest or Interest Only?
By paying principal and interest as opposed to just paying interest only, you will end up paying a lot less interest and you can build up your home equity a lot quicker. The downside is that your mortgage repayments will be higher.
Fixed or Variable?
A fixed-rate loan is best for people who like the security of knowing their repayments. A variable loan is best for those who like to keep their interest costs to the very minimum, and who are happy to gamble on the future direction of interest rates
Fixed rate loans can also have substantial exit fees or break costs which are levied if borrowers repay their loan early. Some fixed rate loans also restrict borrowers from making extra repayments as such if you are thinking of selling or refinancing you should not fix your loan. The vast majority of Australian borrowers prefer to take their chances with variable rate loans, due to their added flexibility and features available. A split Loan allows your loan to have multiple loan accounts where you can set up a loan as half fixed, half variable. This allows you to make extra repayments on the variable portion.
What are the costs to you to complete?
There are several costs you may incur when buying a home. You should discuss these costs with your mortgage broker or conveyancer before signing the contract to buy a property.
- Purchase stamp duty: State Government Charge
- Registration fees: This is a government fee of around $200 for registering the change of name on the property title and registering the new mortgage on the title.
- Conveyancing / legal fees: Expect to pay between $1,000 and $1,500 to your solicitor or Convayancer for your conveyancing costs for a standard first purchase
- Lender fees: Some lenders charge application or establishment fees, Lenders Legals and Title Insurance.
- Lenders Mortgage Insurance: This is the other major cost of buying your first home with a low deposit. LMI can range up to 3.5% of the loan amount
If you are still confused we have mortgage brokers that specialise in all Home Loans. Please complete our Express Enquiry Form on this page or call us and you can discuss your situation with an expert.
If you wish to proceed, then we will help you to complete all the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the on-going communication between all parties until your home purchase is settled