With the wide variety of home loan providers offering a range of products, choosing the right home loan is not always a simple decision to make. For most of us the exercise of finding the right loan is not only exhaustive –it’s also confusing.
Through our mortgage broker service, we can review your existing loan/s or help arrange a new home or investment loan from a panel of over 30 lenders.
Here are a few simple steps you should consider when shopping for the right loan.
STEP 1 – Determine your current and future situation
When trying to identify the right loan, it’s always a good idea to start by fully assessing your current and future circumstances. This will certainly help when it comes time to selecting the features that you will need in the loan.
Here are a few questions you should ask yourself that may help contribute towards your needs analysis:
- What is the exact purpose of the loan?
- How much of a deposit have I saved?
- What is my credit history like?
- What are my total assets and liabilities?
- What is my total income and is it likely to change in the near future?
- Do I plan on having a family in the near future?
- Do I plan on renovating or extending my home any time soon?
- Am I looking at investing in property or shares at some point?
- Am I disciplined at sticking to a budget?
- Do I plan on moving homes in the future?
- Am I planning on retiring soon?
STEP 2 – Decide on the features you would like to see in your loan
By determining your current and future situation, you are more than half way there in identifying the features or flexibility you may require in a loan product. Here are a few more questions to ask yourself. Do you want:
- The absolute cheapest interest rate without any of the bells or whistles some products may offer?
- A loan with a low introductory rate?
- A fixed or a variable rate loan?
- A line of credit?
- A split loan facility?
- A 100% offset facility?
- The ability to redraw any additional payments made against the loan?
- Internet access to your loan account?
- Phone banking access to you loan account?
- Repayments to be directly debited from your account?
- A flexible repayment schedule that includes weekly, fortnightly or monthly options?
- The ability to make additional payments?
- Your loan to be portable so that in the event you sell your home, the loan moves with you?
- Additional benefits such as a free credit card and discounts on other products or services?
STEP 3 – Make a decision on the right product and lender
Now that you have narrowed down on your personal situation and the key features you would like in a loan, it is time to select the right product and the lender that supplies it. When selecting the right product and lender, give some thought to the following:
- How much will the lender allow me to borrow? Your total borrowing capacity may vary considerably from lender to lender due to the fact that they all use of different assessment models.
- Do I require lenders mortgage insurance?
- Do I want to take out a loan with the major lenders only? Or am I happy to deal with the lender that supplies the product that best fits my requirements?
- What interest rates available?
- What are the total fees and charges associated with each loan?
- Will I be locked into the loan for any given period?
- Are there any break costs if I want to close out the loan before the full term?
- If I am looking at a fixed rate product, will the lender lock-in the interest rate at the time the loan is approved or will it be locked-in on the settlement date? – interest rates may change within the approval to settlement period.
- Shopping for the right home loan that suits your individual requirements is no mean feat. It requires a considerable amount of time, thought and research. By answering the questions listed in steps 1 and 2 you will have a much clearer understanding the features and flexibility you require in a loan.
It will also help reduce the loan interview time considerably. Step 3 will assist with your comparative research of loan offers available in the market place.
Whether you plan on conducting your own research, or using the professional services of a mortgage broker – take the time consider your current and future needs as well as the features and flexibility you are looking for it may very well save you the cost and stress of refinancing your loan down the track.