Thinking about a loan for a life event such as getting married, buying a new home, building a starter home, or anything else can be confusing. There is a lot of jargon surrounding loans and an increasingly complex market. Without some good advice from a mortgage advisor, you might end up taking on too much debt and getting into financial hot water, or you might just need to pay more than you expected, or should, based on market conditions. Get ahead of the game by doing your research first.
The Loan Type
It’s important to assess your needs when thinking about getting a loan. Taking on debt is a big responsibility. You want to ensure that you can comfortably take on the responsibility and get the best deal you can.
Loans vary in type. There are basic loans with an affordable rate and minimum features, Home Loans that come with a range of financial products, and Line of Credit loans that give you access to money like a credit card. Talk to a loan advisor about your circumstances to choose the best option.
The Interest Rates
Simply choosing the loan option with the lowest interest rate may not be your best option. When it comes to interest rates, it’s a little more complicated than choosing the cheapest option. Consider the difference between fixed and variable rates of interest and how each could benefit you based on your circumstances. There are also Split Home Loans that give you the best of both worlds.
The Comparison Rate
When considering your loan options, you won’t want to be without The comparison rate. The comparison rate is a tool that allows borrowers to efficiently compare different loan products and assess their viability based on individual circumstances. It is used to recalculate the listed interest rates to take account of different fees and charges relevant to individuals. This is excellent for deciding on the best loan for you; however, there are some disadvantages. Some comparison rates are ‘polished’ and do not include variable rates.
The Fees
It’s easy to forget about the loan fees when making your agreement, but they can make a big difference to how quickly your loan can be paid back and how much spare cash you have available to spend. Regular fees, establishment fees, and exit fees all must be considered when making your loan agreement. When consulting with your broker, make sure you mention fees and how they will affect the loan term. Be aware that some fees are also hidden and can give you an unsavory surprise down the line.
The Features
Loans with features are recommended as they give you more options within the term of the agreement. Redraw facilities, repayment holidays, offset accounts, and probability are all very useful when and if your circumstances change. Be aware, however, that loans with features tend to be more expensive. They will provide you with a range of flexible options, but their interest rates will be higher, and they take longer to pay back than standard loans.
Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au
Disclaimer: While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action in relation to the matters dealt within this publication, you should seek professional advice.