Tips to Choose the Best Home Loan

At some point in time, most people will need to take out a personal loan to achieve a life goal.

One of the most popular loans is home loans because buying a house requires a significant amount of money, which most people do not have in cash.

When looking for a home loan, there are valuable tips home buyers should consider to keep the loans affordable and manageable.

The most important of these is the loan’s interest rate, which determines your overall loan repayment amount. Home loans also come with various features and options, such as an offset account and redraw facility, so considering these could also reduce your mortgage repayments and loan cost.

Here, we explore the best home loan tips to give you a good idea of what to look at before settling on a particular loan.

Home Loan Tips to Save You Money

Aim for the Lowest Interest Rate on Your Home Loan

An interest rate difference of even 0.1% could save you thousands of dollars over the length of your mortgage. Always opt for the lowest interest rate possible to ensure that you take advantage of these savings.

Choose the Shortest Loan Term You Can Afford

The home loan term is the length of time the lender gives you to repay the loan. This period determines how much interest you’ll pay and how much your overall loan repayment will be.

Opting for the shortest loan repayment period possible may mean more significant monthly mortgage repayments but will save you money in the long run.

Choose Your Loan Type Wisely

Home loans can feature a:

• Fixed interest rate: These provide peace of mind since the interest rate remains the same for the loan term.
• Variable interest rate: These offer flexibility. The interest rate can rise or fall with the official cash rate, and market changes could help if your circumstances change.
• Partially fixed rate: This offers both predictability and flexibility. A portion of the loan has a variable rate, and the remaining balance is on a fixed rate.

Choose your loan type depending on your preferences and financial circumstances to ensure you can afford your loan over time.

Consider Whether Your Home Loan Is Principal or Interest-Only

Home loan repayment structures are available in two primary forms: principal and interest-only.

Principal home loans require regular loan repayments on the principal or amount borrowed plus the interest on that amount over the agreed loan term.

However, with interest-only home loans, the loan repayments only cover the interest on the principal and do not reduce the debt. Their initial repayments may be lower, but they increase after the interest-only period is over.

Only choose an interest-only home loan if you are sure you can afford the subsequent larger monthly repayments.

Only Opt for Essential Mortgage Features and Options

Home loans with more features and options typically cost more.

Features such as credit cards, redraw facilities, and offset account facilities may mean that you end up paying more for your loan once you settle the mortgage.

Consider whether these features are worth it before making a decision. You may be better off financially with a home loan with limited options and features.

Use a Mortgage Broker

A mortgage broker completes all the loan applications, so you don’t have to. They are industry professionals with the expertise and experience to help you pick the best home loan for your circumstances.

Mortgage brokers can help you instantly compare:

• Loan interest rates from various lenders
• Application fees from multiple lenders
• The loan comparison rate, including the interest rate and fees
• Loan term lengths
• Monthly repayments
• Ongoing costs for administering your home loan
• Loan features, such as redraw facilities, additional repayments, offset account features, and line of credit.

For a fee, mortgage brokers will negotiate these loan terms and features with lenders on your behalf. They will also summarize your home loan choices so you can instantly compare loans from different lenders.

Their expertise will save you valuable time and money and prevent you from falling for expensive traps, such as hidden fees and expensive loan options.

We hope these home loan tips will enable you to get started on the process of purchasing your dream house or your next investment property.

Our home loan advisors are always ready to help you make a decision on your home loan and guide you in the process of choosing a home loan. Contact us today or set up an appointment online for further home loan tips and advice.