When shopping for a new home loan, the number one question or concern people have is the interest rate. While interest rates are vital, many homeowners overlook significant long-term benefits by ignoring other loan features and fees. When choosing a mortgage loan, it’s important to look beyond the interest rate, focus on your financial objectives, and review all aspects of a loan.
First, consider the option of an offset account with deposited savings attached to the home loan which significantly reduces the amount of interest accumulated on the loan. For instance, a $150,000 loan at 5.5% for 30 years with an offset account of $10,000 created at the time of the loan will reduce your interest owed by over $21,500. Furthermore, the loan term is reduced to 26 years and 6 months.
Families should also consider a loan redraw facility which enables borrowers to place their savings into the loan, but also to withdraw funds if needed. Users of a loan redraw facility have the advantage of saving money, but bypassing the taxes charged on interest earned in a traditional savings account. Users should be aware that there may be a fee for withdrawing money so transactions should be carefully chosen.
Borrowers must also determine the type of rate that best suits their needs. Homeowners that require certainty over the course of their repayment term should opt for a fixed rate term. Fixed rate provides the peace of mind of knowing exactly what your payment will be every month. However, if rates fall during the life of the loan, your rate will remain the same meaning the loan could end up costing more than a variable rate loan.
Other factors to consider include fees, such application cost, annual accounting fees, and early repayments fees, and the term of the loan, for example, a 25 versus 30 year loan.
Choosing the right home loan for your situation is difficult. Fortunately, the knowledgeable staff to Mortgage Masters is here to help.
Mortgage Masters are expert mortgage brokers in Newcastle, Maitland and Hunter Valley. Get the best mortgage advice – Contact us today to begin your home loan search.