How To Find The Best Home Loan

How To Find The Best Home Loan

 

Whether you are buying your home or building an investment portfolio, finding the best home loan starts with a clear understanding of your needs and objectives – not just now, but in the foreseeable future too.

 

The best home loan is rarely the one with the lowest rate. You can’t start looking for it, unless you have answer the questions below.

 

1) What do I need the loan for? Is it to buy a principal home or an investment property?

2) What are my objectives – e.g. pay it off sooner, open up cash flow to invest further?

3) Will my circumstances change during the course of the loan?

4) How will I use the loan? What features will suit those needs?

 

This will help you decide what features you need.

 

Loan Considerations For Home Buyers

If you want to buy your own home, there are a number of different features you may want to consider depending on your needs and how you are likely to use the loan.

 

Options For A Repayment Flexibility

It is important to remember that circumstances change. Having a home loan that offers flexibility through these times can help to prevent against financial strain and mortgage related stress.

 

A perfect example of a foreseeable change that many young couples need to consider is that of having children.

 

When income is suddenly reduced, the option to reduce mortgage repayments may be desirable.

 

Will You Need A Repayment Holiday?

Many lenders offer what is called a ‘repayment holiday’. This allows the borrower to make reduced repayments over a certain period of time as they adjust to a new lifestyle.

 

Will You Want An Offset Account?

An offset facility is another feature that many home owners find useful.

 

It’s basically an everyday transaction account with the same interest rate as your mortgage.

 

The more money you hold in there, the less overall interest you pay on your mortgage.

 

Meanwhile, you can access the money whenever you need it.

 

Will You Need To Redraw Into The Loan?

A redraw facility allows borrowers to take money out of the loan to spend – much in the same way as a credit card.

What Is The Cost?

The best idea of cost can be found in the comparison rate. It’s intended to represent a truer cost of repayments once foreseeable fees and charges are factored in.

 

If you want to figure out how much your repayments will be each month, using the comparison rate will give you a more accurate figure than interest rate alone.

 

How Will You Use The Loan?

Say, you had a loan that offered five free redraws each month, but you were making 10, those extra redraws would come at an extra cost. Knowing how you are likely to use the loan will help you know what features to look for.

 

Investors Have Different Needs

Property investors should look beyond rates and focus on lender’s policies when choosing the right loan.

 

If you want to build a property portfolio, it is important to choose lenders with policies that will allow for maximum flexibility.

 

Investors are also much more likely to need to review their loan regularly in order to maximise tax benefits or release equity.

 

What Policies Should Investors Look For?

Investors should ask the following when looking for the best loan:

 

  • How does the lender assess rental income in order to help service the loan?
  • Is an interest only period available and for what portion of the loan?
  • What are the lender’s policies around revaluing properties to release equity?
  • How much equity can be released?

 

How to find out which lender offers what?

A finance strategist can compare the different policies across lenders to find the best loan for your needs.

 

While many banks have great lending managers who will analyse your needs to find the best loan product, they are limited to recommending their own products.

 

Strategists, on the other hand, have access to a wider range of products and an in depth knowledge of the different policies across lenders. They will find the most balanced product for your needs.

Where Can I Find The Lowest Home Loan Rate?

Where Can I Find The Lowest Home Loan Rate?

 

If you want to find the lowest rate home loan, you may be doing yourself a disservice.

 

Like most consumer products, a cheaper price doesn’t necessarily mean the best value. In fact, the cheapest product on the shelf may be the worst on offer.

 

Finance is no different. Many loan products that advertise a low interest rate are lacking in other features.

 

This is why it is important to look beyond rates and find a loan that is suited to your needs.

 

Keep in mind the needs of an investor are different to those of a home buyer.

 

Ditch The Comparison Sites

Comparison sites are useful for comparing rates, but they don’t compare what’s actually important – the back end and features.

 

Some mortgage brokers are the same, being stuck in an interest rates mentality, forgetting about the structure of the loan.

 

For example most people wouldn’t choose a phone plan just because it is the cheapest one out there. Instead, they would consider the ways in which they use their phone, and then choose the package that offers the best value for their needs.

 

Loans should be no different. And, since you will be entering into a mortgage that may take 30 years to pay off, it is important to think of how your needs may change over the long term.

 

You don’t want to have to break your contract early and pay out the remaining interest charges.

 

Consider Your Needs

You may be a home-buyer wanting to apply an offset account. You may be a property investor looking to release equity in a year’s time.  Either way, you will need to choose a loan that will allow you to fulfil your short and long term goals.

 

Will you need to redraw into the mortgage from time to time? Will you want to make extra repayments? Will you want to revalue your property to release equity within six months of the purchase date? Do you need to fix rates for a set period?

 

When it comes to questions such as these, comparison sites may not give you the answers you are looking for.

 

The cost of not considering these questions is often unexpected nasty surprises such as hidden fees, charges or exit costs.

 

How To Find The Best Loan

While it can be hard to sift through the credit policies of all the lenders available, a finance strategist can help you narrow it down.

 

By getting a clear idea of your goals, and developing an understanding of how you will need to use your loan, they can do the sorting for you.

 

Contrary to popular belief, most mortgage brokers don’t charge extra in the form of higher interest rates. If they do, and they don’t disclose it, they are dodgy – plain and simple.

 

Instead, brokers are remunerated through a commission that is paid by the lender.

 

A good mortgage strategist will save you hours of your precious time. Going through a good broker will give you piece of mind that you have the best loan product for your needs.

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