What kind of Home Loan do I apply for?
It isn’t always easy to decide which type of home loan will benefit you the most or to apply for. The wide range of lenders available and the flexibility of most loans in regards to fixed or variable rates, extras including redraw facilities or offset accounts means this decision can prove difficult! However, the key in the decision making is to understand the costs or savings on the rates and additional features – before finding the lender that will be the cheapest and meet your specific criteria.
So, before jumping into a loan you need to determine:
1) The options really come down to Fixed or variable and do you want an offset account? What are the costs associated with these loans in your circumstances.
2) Or do you want a split loan where you can secure some of the home loan on a fixed rate for peace of mind in case interest rates increase and leave some on variable to provide flexibility in case rates decrease?
3) Understand what your affordability is. How much per month can you realistically afford? Then what will lenders lend to you? Lenders vary due to different criteria and servicing metrics.
4) How is your credit report? Do you have a good Credit Score? Have you had poor payment history in the past 2 years or any past court judgements or defaults?
5) What deposit or equity do you have? This affects the interest rate and possible fees and lenders mortgage insurance. This also can change across different lenders and products?
A broker can take the answers to these questions and approach a range of lenders, and provide a fair comparison of the costs associated with the loan criteria you are after. If you apply directly or research online for the cheapest home loan, this may not always be the right one for you.
The right lender or product for you is more about you than the product. Your income, expenses, credit history and deposit or equity all plays a huge part in who may be the best lender for you and what products they offer at what rate and fees is really the question. Chat with a local broker to know more and get a true comparison to meet your needs.