Loans | Finance | Mortgages

If you’re considering applying for a home loan, then you already know how daunting this process can be. You can save hundreds of Thousands by getting the right information about your home loan from the beginning. A home loan is like the ultimate ball and chain, except that your sentence usually last between 25-30 years. Taking out a mortgage is not something that you just want to rush into. You really need to do some homework to find the right home loan for you.

You have probably noticed that every bank and lending society advertise their home loan Interest rates in huge bold print everywhere you look. Sure this is one of the major actors that will drive your decision as to which company to use, but it shouldn’t be the only thing you consider. Lower interest rates means that you will be paying back less money each payment period, which is a win; win situation. The more money you can free up, the more you can look into other investment options with the spare cash, or you could choose to pay your mortgage down faster.

A few other big things you might want to consider when applying for your loan are.

Do they allow me to make extra home loan repayments?

Some institutions will encourage extra contribution towards your repayments; others do not allow it at all. This means that if you get that bit extra from your tax return or a bonus or even just choose to pay a bit extra each week to significantly reduce the life of your loan you can do that. If you can make extra repayments to your home loan it will mean massive savings over the life of the loan.
Here’s an example. If you take out a $300,000 home loan and pay an extra $200 per month. You will save $138,220.36 in interest alone. You will also have your home loan payed out 7 years and 5 months early. Definitely incentive to find a loan that allows extra repayments.

Do they use internet banking?

In this day and age it is almost mandatory that we all get on the Internet banking bandwagon. When making home loan repayments, the last thing we want to do is have to firstly find a car park near the bank and then stand in a queue every time a payment is due. Aaaaah, the beauty of Internet banking.

Can you get an offset account?

Put simply, an offset account is a savings account and a mortgage rolled into one. Your home loan is offset from the savings in your account, therefore reducing the amount of money that you owe, while still giving you access to your savings in an emergency. Put simply, if you borrow $300,000 and have $20,000 in savings, the interest is calculated on $280,000 instead of the full amount. This allows you to pay down the interest and the loan faster as it greatly reduces the repayments.

What are the ongoing fees?

This is a big thing to consider when applying for a home loan. Sure the interest rates may look enticing, but if you have a monthly fee whacked onto your home loan each month, it can be daunting. Some banks calculate fees annually, others quarterly and some monthly. Add up all the extra fees and see which product really works in your favour.

Some other things to consider when applying for a loan is the settlement costs, these will be revealed to you once you fill out the home loan application form. You will also receive information about the rates and terms associated with the home loan.

Hopefully you will consider all of these factors when looking into your home loan. The best advice I can give you is to shop around. Find a product that really works for you. Speak to a few mortgage brokers and ask all the questions. Get them to calculate your repayments with all the extra fees, interest rates and scenarios possible. Remember they’re meant to be working for you. A lot of them receive compensation from the financial institutions when they sell their products, so if they are being pushy about a certain product it might be wise to do some extra research. A mortgage is not something that you should go into lightly, especially if you can save hundreds of thousands by getting the right home loan for your situation.