All Things Real Estate | Buying | Investing

Ep 2 – Home Loans

Aug 28, 2017 admin
38 /  

Choosing A Home Loan

Choosing the right home loan is as important as choosing the right home. Researching and understanding the home loan market will help you to choose the most appropriate loan for you. The fees and features offered by each lender differ and there is a multitude of variations available to suit your needs.

Factors to consider

There is intense competition amongst lenders who offer a variety of packages, options and methods of payment. The loan that appears to be the cheapest because it has the lowest interest rate may not necessarily be the cheapest in the long term when fees, ongoing charges and penalties are included. Similarly, if there are lots of features attached to the loan, you’ll usually pay for them via higher interest rates or more fees. “Depending on whether you’re a first home buyer, second homebuyer, are self-employed or thinking about renovating, refinancing or investing, your loan needs to accommodate your individual circumstances.

Features to Consider

Home loans have many different features, and it’s important not to judge a home loan solely on the interest rate and upfront establishment fees.” However, not every feature available in a loan package will suit your needs, but the more flexibility you can achieve the better, especially if your individual circumstances change. Some features to bear in mind are the ability to make additional repayments at no extra cost and the ability to make repayments via direct debit, ATMs, internet and phone banking services. Also, if you can re-fix your interest rate at no extra cost or split your loan to suit your situation. Some other factors include offset accounts and loan portability.

Finding the right lender

Speak with several lenders about your circumstances to work out the best type of loan. You can ask them to justify the rate, fees and method of repayment. Take into account what each lender is offering when making your decision. Try and find out as much as you can about them either from their website or by word of mouth. Often the best way of finding the right lender is from someone who already deals with them and recommends them.” Also, inquire about how post-settlement issues are handled to save you from possible stress down the track.

Asking the right questions

It is easy to get confused and overwhelmed by the huge array of home loans available. To overcome this, you’ll need to make a loan transparent, and understand all the costs and benefits before choosing. A good way to obtain further information about a loan is asking the right questions around what fees are likely to be payable, you must ask them to set out all the fees. Because if you say exit fees they may not discuss discharge, break or settlement fees with you. Therefore, it is of utmost importance to ask them the right questions in order to be able to make the best decision. Also, check for any hidden fees such as settlement, valuation or legal fees and don’t forget to read the fine print.

Get Pre-Approved

Most lenders will approve a loan in principle (‘pre-approval’), allowing you to be confident of your spending limit. Preapproval is only valid for a limited period and needs to be renewed after this period. Pre-approval does not guarantee loan approval. The lender still needs to make additional enquiries into your financial standing before approving the loan. You should speak to your lender about what pre-approval means.

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