When thinking about taking out a home loan, there are several factors to consider. Do you want to live in the property? Are you buying it as an investment? Or, are you refinancing your home? Your answers determine whether you need to apply for either an owner-occupied loan or an investment loan.
So, regardless of whether you are buying your first home, an investment property or are looking to re-mortgage your existing property, you are after the best deal right?
Preparation Is Everything
Now, you don’t need a PhD in mortgage repayment calculators to sniff out a great deal. Rather, you need to understand the steps you should prepare to help you get the best possible rate available.
Similarly, you need to think about what type of payment plan you prefer. Home loans come in two basic flavours, fixed or variable interest rate.
Fixed rate loans work for anyone on a budget or who prefers to know exactly what their repayments are going to be each month. A variable rate loan can work for you as you may pay back less in total if interest rates fluctuate, particularly downwards.
Take your time and compare mortgages from a few lenders. As you compare, remember the type of mortgage you select can determine the interest rate you end up paying.
Similarly, factor in the size of your deposit, your credit rating, the amount you are looking to borrow and the term of your loan.
7 Steps To Comparing Mortgages
Here are a few simple steps that would help you compare mortgages successfully.
- Be Clear About What You Want
This may seem basic but you would be surprised how many prospective borrowers really haven’t considered what they want from a mortgage
Would you be happy with a standard fixed rate mortgage or would you prefer to opt for a tracker mortgage? While a fixed rate offers more clarity and security, the total price tends to be higher than is the case with a tracker mortgage.
Before you let your mouse do the clicking on a mortgage comparison website, take the time to decide what form of mortgage you are comfortable with.
- Compare Oranges With Oranges
Here’s a tip. Only compare the same offers on a mortgage payoff calculator. Don’t compare a fixed rate mortgage from one lender with the cost of a tracker mortgage from another. You’ll only end up even more confused than when you started. Take your time and work through comparable loan products.
As you work through the comparisons, you will discover different lenders will offer you different terms and prices. Lenders all have different criteria and preferred borrower profiles which reflect their individual business models.
- Consult A Mortgage Broker
Brokers have more expertise and experience in comparing mortgage products from different lenders. Brokers are essentially middleman working between you and potential lenders.
A broker will not only track down a good deal for you, they will also find one that best reflects your needs and circumstances. They will also save you a lot of time and aggravation comparing mortgage products.
- Look For Rates That Reflect Your Deposit
The size of your deposit is one of the key determining factors when it comes to shopping around for a mortgage. The rates you will be offered when making a 30 per cent deposit will be more attractive compared to the rates you will be offered when you make a 10 per cent deposit. Don’t waste your time chasing rates you won’t qualify for.
- Identify Your Purchase Expenses And Be Realistic
One area banks are scrutinizing more these days are a potential borrower’s living expenses. Don’t just consider your deposit when comparing mortgage quotes.
Factor in the other expenses associated with purchasing a property such as solicitor’s fees, stamp duty, property survey fees, insurance and moving costs. Once you have included these in your budget, you can finalise the size of the deposit you can afford to make. - Prepare A Budget For Your Loan
Last minute surprises are never pleasant when it comes to taking out a mortgage. Build all your costs into a budget for your mortgage loan. Make sure you understand what your monthly repayments are, the interest rate applied to your loan and your lender’s fee structure.
- Lock And Load
Once you have made your final comparisons, it is time to obtain a preapproval. The key to obtaining a mortgage that works for you is to do your research and explore your options in a structured way. There is no point in rushing your due diligence. Take your time, collect as much information as you can, especially when it comes to the full cost of your loan, its interest rates, fees and duration.
If you are still not sure you can or want to track down a loan on your own, consult a reputable broker to help you out.
Final Observation
Whether you happen to be a first-time homebuyer, a property investor or an existing property owner looking to re-mortgage your loan, take the time to explore your options before you choose a loan that’s right for you.