How to Choose the Best Home Loan for You
Taking out a home loan is a huge financial commitment and it is particularly important to choose a loan that suits your needs, so you can make repayments on your terms without worrying about hidden fees or excessive interest.
Yet it can be bewildering to navigate all the different loan options available and pinpoint the loan that is best for you.
It is important to keep in mind that lenders are determined to minimize their risk so for every benefit they offer to make the loan seem enticing, there is always another fact protecting their investment.
So you need to look at the loan package as a whole rather than being drawn to one particular feature.
Choose the right structure for your circumstances
You need to consider your financial needs and your plans for the property as you want the loan’s features to cater to your circumstances. For example, you will require different features and flexibility from your loan if the property is to be a family home rather than an investment, your first home or second home, or if you are planning to renovate. You also want a loan that is compatible with the size of deposit you can afford. Most lenders will only agree to lend 80% of the value of the property unless you agree to pay lender’s mortgage insurance (LMI) which can be expensive.
Additional payments without fees
One key feature to look out for is the ability to make additional payments at no extra cost. This enables you to make faster progress on your mortgage, and gives you the flexibility to pay more if you happen to have extra funds, such as an annual bonus from work. A home loan that penalizes you for making extra payments is apt to be more costly in the long term.
Flexibility to adjust interest rate
It is also useful to know that you can adjust your interest rate or split your loan at no extra cost if your situation or the market changes. You don’t want to be penalized financially for seeking out a more suitable loan structure.
Ultimately, you need strong communication and a trustworthy relationship with your lender to ensure your home loan matches your needs, and that you can change your options as your circumstances change. Alternately, you can discuss your loan requirements with a mortgage broker who will stay one step ahead of the market and help you find the home loan that is the best fit for you.