Every mortgage features its own set of rates and rules to decipher. Here is a comprehensive guide of what you can likely expect to find in Australia’s home loans today.
Fixed vs. Variable rate
One of the first decisions to make on your mortgage is whether your interest rate will be variable or fixed for a certain term. A variable interest rate will move along with the market and is sensitive to Reserve Bank decisions about the national cash rate. Fixing your rate will mean that it cannot change even if variable rates in the markets begin to increase, but the flip side is that you can get stuck with a higher rate while others decrease.
Term of your loan
A shorter term for your loan will require higher repayments, but save you more interest in the long term. Most borrowers elect to have terms higher than 15 or 20 years, to give them some room to breathe throughout the repayment years.
Throughout the life of your loan, you may be fortunate enough to receive an excess of savings, whether from salary boosts or less spending. Most people use this opportunity to repay big lumps off their mortgage, but forget that they will need to enable this mortgage feature to retire their loan before its time.
Depending on your lifestyle and income, you can choose to repay your mortgage in weekly, fortnightly, or monthly instalments. Choosing more frequent repayments will actually save you a few dollars each time, but it is far better to have a schedule that suits your needs, rather than risk missing a payment.
Line of credit
This type of mortgage allows you to use the equity of your home for other purposes. You can think of it as being able to borrow from your home loan to spend or invest. However, you will need to avoid the temptation of using the feature too often, lest you extend your home loan even further.
There are even more mortgage features and special types out there in the market. Customise the perfect one for your dream home by comparing home loans online.