Buying a new home will always be an exciting process and while you may feel happy about the idea of moving somewhere new, this process won’t be without its challenges. Choosing the home loan that will be used to secure your house will be one of the toughest challenges of them all, and this is what this article is going to be focusing on. By exploring the elements you should be looking for in your mortgage, it should provide you with a good insight into this product and the decision you should make.
The Type Of Repayments
There are two common types of repayment structures for mortgages in Australia. These are known as principal and interest loans and interest-only loans, and they both work quite differently. You will almost always want to go for a principal and interest loan for your mortgage, but how exactly do they vary?
- Principal and Interest: A principal and interest loan will force you to make repayments including both interest and a small chunk of the money you’ve borrowed. This ensures that your mortgage slowly gets smaller.
- Interest-only: With an interest-only loan, you will spend several years at the start of the loan only paying the interest generated on it. Your repayments will go up once this period ends, and you will always end up spending more on your mortgage.
A Short But Affordable Term
Alongside getting the right type of loan, it’s also worth thinking about the agreement you make when you apply for your home finance. It will always be best to aim to have the shortest term you can when you’re getting a loan like this. Having a 20-year mortgage will make it feel more expensive than a 30-year one, but you will shave 10-years from the whole process. Most mortgage providers are happy for you to make early repayments.
The Best Interest Rates
Small changes in interest rates can often leave you saving thousands of dollars over the course of your mortgage. This makes it well worth looking for the best rate you can find, while also choosing a loan that offers the right type of rate. Your credit rating will impact the rates you are able to get, with the best being reserved for those deemed to be the lowest risk.
- Fixed Interest Rate: A fixed interest rate will last for around 5 years, with the chance to either negotiate a new rate or move to a flexible interest rate plan. This will be good for those worried about rates going up but could be bad if rates start to go down.
- Flexible Interest Rate: Flexible interest rates are based on the current market. They will usually be assessed once a year, going up or down depending on the state of the economy. You will benefit if rates go down when you have a mortgage like this.
- Partially Fixed Interest Rate: Partially fixed interest rates give you the best of both worlds. You will split your loan into two chunks; a fixed and a flexible one, with the chance to choose the ratio used for the split.
Excellent Customer Feedback
The experience you have with a mortgage will vary from lender to lender, and it’s always worth doing some research to make sure that you’re picking one with plenty of happy customers. Review websites have made this a lot easier over the last few years, giving you the chance to read about the time other people have had. The best companies will have plenty of excellent reviews, with a long trail of satisfied clients left behind them.
Things To Avoid
Many of the things you have to look out for when you’re looking at mortgages are features that need to be avoided. You can end up spending far more than you need to if you’re not careful, with many people finding themselves in the trap of unmanageable loans when they take on a mortgage that they can’t handle.
Mortgages often come with a range of features and perks that are designed to make them more appealing. Some of these may be useful to you, but many of them will not. It’s worth making sure that you’re not paying extra for features that you won’t end up using, as even small monthly payments can add up to a small fortune.
Home loans that come with repayments that grow over their term can be extremely difficult to manage. Having your monthly outgoings grow will be hard to account for, and you will often end up paying more if you choose a loan that works like this. Thankfully, most mortgage providers simply don’t offer options like this, nowadays.
The Australian government has worked hard to create schemes that protect citizen’s rights when they borrow money. You will only ever have protection like this if your debt is from a certified lender, though, and this means that you need to make sure that the company providing your mortgage is allowed to do so. Ignoring this could leave you in a very tight spot.
Guarantor loans are designed for those who can’t get a loan on their own. Instead of using your credit rating and personal finances, the lender will agree that your guarantor will pay your debt if you fail to do so. Going down this route can put your guarantor in financial jeopardy if you find yourself struggling, and this isn’t fair, even if they’ve agreed to it.
Knowing what to look for in your mortgage can be a challenge. Home loans are complicated products, and most people will only use them once or twice in their lifetime. Securing house and land packages Sydney will take the right mortgage. The expert team at Meridian Homes can help you to choose and apply for your home loan, while also providing countless luxurious house options for you to choose from.