The most important aspect of home loan (or any loan, for that matter) is the interest rate. There are three types of interest rates you can choose from, namely: variable interest rate, fixed interest rate and split interest rate.
In a fixed interest rate, the interest rate remains the same throughout the term of the loan. On the other hand, the interest rate in variable home loan varies depending on the market rates.
Variable interest rate offers lower payments at the initial stages of the loan, but the payments may increase depending on the changes in the interest rate.
In split interest rate, a part of your loan is fixed while the other part is variable.
You must choose the interest rate that best suits your needs.
The next important thing to consider is the home loan repayments. You can choose from either principal and interest repayments, or interest-only repayments.
In principal and interest repayments, you have to make regular payments of the amount borrowed as well as the interest charged by the lender.
In interest only repayments, you are only required to pay the interest for an agreed period of time. It can be a good option if you are on a tight budget. The principal amount will be paid after the agreed term of interest payment is over.
If you do not have a deposit of 20% of the total value of the home, then Lender’s Mortgage Insurance payment is necessary. Loan mortgage insurance protects the lender from financial loss in case you are unable to repay your home loan.
You are required to pay fees on different features of a loan. These fees may include:
Lenders will generally offer an advertised rate or comparison rate. Advertised rate is the current rate of interest without any fees. Comparison rate includes the average monthly payments, charges and fees that might have to be incurred.
Some lenders may give a honeymoon rate. In the honeymoon rate, a lower interest rate is paid for a short period at the beginning of the loan.
Home loan features are important to consider as these can ease the repayments and provide you with more options. Some important features to consider are:
If the borrower plans to get a home loan, we can help them. At Josh Financial Services, we are committed to helping people find the right mortgage. Call us today at 1300 537 000 or book a free consultation to get a complete understanding of the home loan process from experts.