As the Australian housing marketing continues to improve every month, more and more people are again seeing this as a great opportunity to better their financial future.
It’s not a surprise to hear that the financial aspects are generally what people tend to struggle with the most as there are just so many options to chose from and ways to do things.
When choosing the right home loan for you situation, there are many different factors to consider. Your Mortgage Broker or Bank should be able to help you find the best possible option for you, but it’s always good to do a little research of your own.
Principal + Interest vs Interest Only Loans
Most people will take out a Principal + Interest home loan but there may be times when an Interest only loan will be better suited to your needs.
For example, an Interest Only loan may be a better idea if you’re planning on renovating and re-selling the property in a relatively short time frame.
Variable, Fixed and Split Rates
ASIC provides the following definition:
- Variable interest rate – The interest rate on your loan can go up or down, usually in line with a change to the official cash rate (but lenders may make changes independently of cash rate changes).
- Fixed interest rate – The interest rate on your loan will remain unchanged for the fixed period. This is usually 2-5 years, after which your loan will usually revert to a variable rate loan.
- Split loan – This is where part of your loan is variable and part is fixed.
Initial Payment Options
One of the biggest issues people can face is the initial deposit required by most lenders. This can require up to 20% of the loan amount! Some banks will still offer loans with as little as a 5% deposit however typically zero-deposit home loans are quite risky and are becoming less common.
Aside from the points listed above, many financial institutions will offer other benefits as an incentive to take a loan with them. These can include offset accounts, Frequent Flyer miles or even charity donations on your behalf.
As a borrower it’s vital to understand all of your financing options to make the best decision. Working with a qualified person, whom you trust, goes a long way.
Buying a home is one of the biggest decisions any of us will make and can set you up for a solid financial future.
If you’re interested in discussing what options might be best for your particular situation, give us a call.
Mortgage Masters are expert mortgage brokers in Newcastle, Maitland and Hunter Valley. Get the best mortgage advice by contacting us today!