Choosing the right loan

June 13, 2020

Don’t you wish shopping for a loan was as exciting as shopping for shoes or well a gaming console. Unfortunately, it does not seem like so much fun, but just being slightly aware and vigilant would help you find a deal that would make it worth your while.

So lets just quickly list a few key things to consider while shopping for a home loan

What type of a buyer are you? What is the intention for buying this property? Do you want to buy a property as an investment or as a place to live in? This fundamental question is crucial in selecting both a property and a loan to suit your needs.

While as an investor you might be looking for an in-demand apartment in a high-growth property area. But if you are an owner-occupier, you’re probably looking for a home in a specific area with features that match your lifestyle.

The lenders will also want to know if your intentions are ‘owner-occupier’ or as an investor, because owner-occupiers are seen as more stable customers.

What type of interest rate do you want? Fixed or Variable or Split  

The interest rate on your mortgage is the rate at which the bank will charge you interest on the amount you have borrowed.

A fixed home loan is a loan where the interest rate is set for a certain amount of time. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term.

A variable home loan has an interest rate that can and will change over the course of your loan.

The upside of variable rates is that they are typically more flexible and might let you make extra repayments or offer offset accounts.

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate It offers the best of both worlds, allowing you to make extra repayments in the variable portion of the loan and still giving you the security of a fixed rate.

What type of fees are involved?

Just like taxes, fees are unavoidable. And home loans are notorious for them.

Application fees: lenders may charge an upfront establishment fee and application fee. Ask the lender to waive these fees, or at least try to negotiate a discount.

Property valuation fees: lenders may also charge for a valuation of the property.

Monthly or annual fees: high ongoing fees can have an impact on how quickly you can pay back the loan.

Lender's mortgage insurance (LMI) can apply if you don't have a 20% deposit and it can cost you thousands of dollars. Try to have as high a deposit as possible; even a small difference in the deposit can make a difference in the LMI cost.

Break fees: Break fees are charged when a customer terminates a fixed-rate mortgage. The amount you are charged is determined at the time you decide to break the loan and is typically based on how much your bank stands to lose by you breaking the contract.

While there’s no right or wrong answer, it really depends on how you want to manage your finances so keep these pointers in mind for getting the best loan for you.

And you can always call or reach out to the team at Euphoria Loans to help you find a deal that works best for you.