With spring property season just around the corner, if you’re looking at buying property in the next few months, it’s time to get your game face on.
You will undoubtedly be spending a lot of time trawling through the countless property listings and visiting open houses to find the perfect property but don’t stop there, now is the time to also shop around for the best home loan deal.
Too often I see buyers only fixed on negotiating over the property sale price and then just taking out a standard rate home loan. A few thousand dollars off the price of the house is really nothing compared to the tens of thousands you could save over the life of your mortgage with a lower interest rate.
Let’s look at the following example for a $500,000 mortgage over 25 years. Say you take out the ANZ Simplicity Plus Home Loan with no upfront fees and an interest rate of 5.18%, your monthly repayments would be $2,976 per month. But if you chose market leader loans.com.au’s blackboard special home loan with an interest rate of 4.54% and $520 upfront fees, your monthly repayments would be $2,791 per month, a $185 monthly saving. This might not sound like much but over 25 years, that’s a saving of $55,010.
5 mortgage shopping musts:
1. Preapproval. Before getting your hopes up over that federation cottage, get loan preapproval. Not only will this help you to better narrow your property search but it will also give you real specifics to work with like knowing the interest rate you’ll get and the fees you’ll need to pay. If your loan to value ratio is more than 80% then you’ll need to factor in a cost between 1.5 – 3.5% of the full amount for lenders mortgage insurance.
2. Fixed, variable or split? Rates are at record lows, so when you’re considering a new home loan get your lender to run a few repayment scenarios looking at 100% variable, fixed and split options so that you can choose one that’s going to work best for you. Timing the market is next to impossible so it’s about setting up the repayment structure that’s going to suit your plans for the future and is cost effective in the long run.
3. Flexibility. Not everyone needs a bells and whistles home loan but having some flexibility in repayments and features like an offset account can make a massive difference to how much interest you’ll pay over the life of your home loan.
4. Remove yourself emotionally. It is a common tactic at property auctions to have someone else do your bidding for you so that you don’t pay too much but you can also do this when negotiating your home loan. Don’t assume that the bank’s published rate is it, you can almost always get a better deal. If you are not comfortable or good at negotiating talk with a mortgage broker or one of Mozo’s home loan experts that can do the haggling for you.
5. Hold off on changes. When you apply for a home loan, your finances will come under serious scrutiny by the bank. Many home loan pre-approvals are given on a conditional basis so during the home buying process it’s important for you to keep your finances and life steady. This means don’t change jobs, buy new cars and hold off applying for that new store card until after you’ve secured your home loan.