April 7, 2011
There are countless mortgage comparison facilities available, but what do you really need to know when you’re looking for a home loan? Here are some essential criteria to help you choose the best mortgage.
Remember, when determining your repayments, give yourself a buffer – can you still comfortably meet your repayments if interest rates go up by 2 percent?
Types of loans
- Introductory or honeymoon: Usually offers lower, fixed interest for the first year and then reverts to current standard variable rate.
- Standard variable-rate: Allows you to borrow the money for a set period of time, during which you make regular repayments. Ask your lender for a discount on the variable interest rate. Usually you can expect up to a 0.7% discount if you borrow a large amount of at least $250,000 or more if you borrow $500,000 plus.
- Basic variable-rate : Offers a lower interest rate than standard variable-rate loans, but has fewer features and may not allow extra loan repayments.
- Fixed-rate: The interest rate is fixed usually for between one and five years – great if interest rates go up, but costly if they go down.
- Split or combination: For example: with a $250,000 home loan you could have $100,000 on a variable rate, $50,000 on a two-year fixed rate and $100,000 on a five-year fixed rate.
- Transactional mortgage: This is the most flexible home loan as your mortgage is run like a bank account allowing you to make repayments but also to withdraw money. However, you will need to be disciplined, stick to a schedule of payments to reduce your loan and not over spend because you have easy access to cash.
- Online loans: Often have low interest rates, redraw facilities and the option to split your home loan between variable and fixed rates.
Related mortgage links