When you're buying a home, choosing the right home loan can save you thousands of dollars over the life of your loan. With so many Home Loan options available from banks and lenders across Australia, the application process can feel overwhelming. That's where understanding loan comparison comes in handy.
As experienced Mortgage Brokers, we help clients nationwide access Home Loan options that suit their unique financial situation. Let's walk through what you need to know when comparing home loans.
Understanding Interest Rates
The interest rate is often the first thing people look at, and for good reason. Even a small difference in your home loan interest rate can mean thousands of dollars in savings or extra costs.
You'll encounter two main types:
• Variable interest rate: This can change over time based on market conditions and lender decisions
• Fixed interest rate: Your rate stays the same for a set period, usually 1-5 years
Some borrowers choose a split loan, combining both fixed interest rate home loan portions with variable home loan rates. When calculating home loan repayments, remember that variable rates offer flexibility, while fixed rates provide certainty.
Loan Amount and Borrowing Capacity
Your borrowing capacity depends on several factors including your income, expenses, and existing debts. Lenders will assess your financial situation through bank statements and other documents during the Home Loan application process.
The loan amount you qualify for affects your loan to value ratio (LVR). If your LVR is above 80%, you'll typically need to pay lenders mortgage insurance (LMI), which protects the lender if you can't meet repayments.
Additional Costs to Consider
When comparing loans, look beyond the interest rate. Consider:
• Application and ongoing fees
• Stamp duty (varies by state)
• LMI if your deposit is less than 20%
• Valuation and legal fees
Some lenders offer interest rate discounts for certain professions or if you hold other products with them.
Features That Add Value
Offset Account: This links to your home loan and can reduce the interest you pay. Money in your offset account effectively earns interest at your home loan rate.
Redraw Facility: Allows you to access extra repayments you've made on your loan.
Home Loan pre-approval: Getting pre-approved gives you confidence when house hunting and shows sellers you're a serious buyer.
The Application Process
A streamlined application process can make a significant difference, especially in today's fast-moving property market. Some lenders offer quicker processing times, which can be crucial when you're applying for a home loan in competitive situations.
To get pre-approved, you'll need to provide:
• Proof of income
• Bank statements
• Details of your assets and liabilities
• Identification documents
Using Your Home Equity
If you already own property, you might be able to use your home equity to access better loan terms or borrow for investment purposes. This is where having a Home Finance & Mortgage Broker becomes valuable – we can help you understand how to leverage your equity effectively.
Why Work with Mortgage Brokers?
Mortgage Brokers have relationships with multiple lenders, giving you access to a wider range of products than going directly to a single bank. We can compare Home Loan Rates across different lenders and find options that match your specific needs.
We also understand the nuances of different lenders' policies. Some might be more flexible with certain types of income, while others might offer better rates for specific loan amounts or property types.
Making Your Decision
When you apply for a home loan, remember that the lowest rate isn't always the winner. Consider:
• Total cost over the loan term
• Flexibility of features
• Lender's reputation and service quality
• Your ability to make extra repayments
• Whether the loan grows with your needs
The property market can move quickly, so having your finances sorted early gives you an advantage when the right property comes along.
At Personalised Finance, we work with clients across Australia to find home loan solutions that fit their unique circumstances. Our team understands that every borrower's situation is different, and we're here to guide you through the comparison process.
Call one of our team or book an appointment at a time that works for you. Let's find the home loan that's right for your journey into property ownership.
