1. Do your research, don’t only rely on recommendations from friends or even trustworthy third parties when it comes to choosing the right home loan.
2. Review the range of financial comparison websites now available to compare what home loans are currently available. It’s never been easier to understand what is on offer. Often smaller lenders will be more competitive than the big banks.
3. Dig deeper into the most attractive options, noting how the current offers match your own borrowing needs. Define your own preference to risk, managing wealth and the implications of your own life stage and your expectations for the future.
4. Fixed or Variable? Typically, the common strategy for mortgages in Australia has been to find the lowest variable interest rate possible and to increase your repayments to as much as you can afford. Currently however, fixed rates are dipping down to match or even go below variable rates. Accordingly, the number of borrowers applying for fixed rate home loans has soared in recent months. Fixed rate borrowers should however be aware of the loss of redraw and offset facilities, and the potential for interest rates to stay low for a few years yet.
5. A low interest rate isn’t the only consideration when choosing a home loan. Take into consideration the fees, features, flexibility, structure and level of service relating to each loan offering.
6. The level of service provided by mortgage providers is key and often overlooked. An engaged, approachable lending expert can provide important advice long into the future of the loan, saving you more than a slightly lower interest rate.
7. Use a mortgage calculator to evaluate the difference in monthly repayments and factor in your own estimates on rate rises, but be sure to leave yourself a buffer of ideally at least 2% when deciding how much to borrow.
7. At this point in your research you may consider approaching a Mortgage Broker to help you identify your specific needs and to present mortgage options that best match them. When choosing a broker, it’s important to consider the following:
– Does the broker deal with a range of lenders, ensuring your options are limited?
– Ask if some lenders pay the broker greater commissions than others, so you can be sure you are being presented with the best mortgage for you.
– Request confirmation of any fees in writing.
– Closely review the long-term costs of the loan personally, don’t take a broker’s word completely at face value.
– Be sure the broker is a member of the Mortgage Industry Association of Australia, the professional body that regulates members and has a defined complaints process.