Lately, we have all been bombarded by marketers of financial products. They are coming at you from Radio, Television, Newspapers, Billboards, and even the internet. Bank and Non-Bank lenders are seeking out potential borrowers through all means possible, offering discounts, savings, and negative feedback about all of their competitors.
So who is the best lender for you, one offering the greatest discounts, one with a branch near home, one who promises to cover all your exit fees, or the one with the best-looking mortgage broker? The answer is simple – none of the above!
Before deciding on the loan offer that best meets your needs you should take some time to define your specific needs. Do you need the stability of knowing that your loan repayments will not change for several years – if you do, then you should be comparing deals amongst the fixed rate home loans only?
Are you after a high-level Low Doc Home Loan or the cheapest Low Doc on the market? Sometimes the cheapest low doc will ask the borrower to provide more proof of income or only offer a loan of 60% of the value of your property.
First Home Buyers often need to find the lenders who will accept the lowest possible deposit – these will not necessarily be the lenders with the cheapest rates or the lowest fees.
Are you an active investor who would like to gain access to their property equity with the view to further investment? If that is your loan purpose you may need to compare lenders who can offer several loan splits as well as an offset account. Borrowers looking to upgrade their homes in the near future should only be comparing loans that are portable.
Alternatively, they should verify the applicable exit fees in the event of early mortgage repayment. Remember the highest exit penalties are generally applicable to Fixed Loan products. A couple of years ago when rates started going up many borrowers panicked and fixed their home loans at 8.5% or 9% for several years.
When some months later interest rates began to fall, many people attempted to refinance out of their fixed rate loans only to find out that their loan break fees are $100,000. When agreeing to fix the interest rate on your mortgage, you are doing so for better or for worse. If rates keep going up you stand to benefit, however, if rates begin to drop it is highly unlikely that you will be able to refinance to take advantage of the drop.
A home loan with a slightly higher rate that allows a borrower to consolidate unsecured debts into it or one that offers additional cashout – may in the long run be a better home loan deal for you than a basic no-fee lowest possible interest rate product. Beware of Brokers trying to sell you on a refinance because of the 80 basis points discount you will qualify for.
You need to understand – what is the rate you will be getting the discount from? How long will the discount apply? Are you able to find a better mortgage deal from another lender offering a smaller discount or a lower starting rate?
Check the product comparison rate. The home loan comparison rate is designed to reflect the true cost of the mortgage you are considering inclusive of all fees and charges. Beware of low-start home loans. They may seem very cheap but after the first 12 months can revert to a much higher rate and repayment amount.
Read the fine print before agreeing to any of these. Before proceeding with a Mortgage Refinance consider the potential savings. It is quite possible that a lender you are refinancing to has not passed on the previous rate increases announced by the RBA and may do so shortly after you come onboard.
HoneyHomeLoans.com.au are here to help you deal with these and other questions. Our brokers and associates will not try to offer you the cheapest loan on the market. What they will try to do is talk you through your situation and your requirements. Then they will search through the available home loan products to find the loan that is best for you in the long run.
Sometimes a loan that costs a little more upfront can offer you flexibility and a level of savings that is hard to quantify.
