If you’re anything like the property obsessed peeps here at Mozo, then you’ve probably been hanging out for the property selling and buying season for some time now.
For buyers it means far greater choice when it comes to your next home or investment purchase. And for sellers, there are typically way more buyers out there to help you get the price you want.
While you probably don’t think you have a lot in common with each other, whether you’re a buyer or a seller in the market for a mortgage there is one thing you’ll both need to arm yourself with - a killer home loan deal.
Having personally gone through the process recently, I’ve compiled the ultimate checklist for nabbing the best home loan for you. And it all comes down to making some decisions...
Here’s something to think about: In Mozo’s home loan database right now, there are 84 different home loan lenders. That’s a whole lot of choice!
But who to choose - should you go with the familiar face of a big bank or with one of the challenger brands run entirely online?
a) Big bank: If you need access to branches and like the helping hand of a bank manager to take you through the entire home loan process, then going with a major bank could be just for you.
b) Online lender: Running entirely online, you’ll need to be comfortable with applying for and managing your home loan with the click of a mouse but in return, you’ll generally receive far lower rates than what the big banks can offer.
Want proof? Let’s compare how much a homebuyer could save on a $600k mortgage if they went for UBank, Australia's Best Online Bank in the Mozo Experts Choice Awards, over the big four.
|UBank UHomeLoan Offer - 3.64%||Average big four rate - 4.66%||Difference|
|Interest paid over 30 years||$386,895||$515,070||$128,175|
You get the picture, there’s some significant savings to be made by going for an online lender.
With both fixed and variable rates sitting under the 4% mark now, choosing the type of interest rate you go for should really come down to whether you want repayment security or if you want the flexibility of the features that come with a variable rate.
a) Variable rate: Your interest rate may change with the market, but hey this could work in your favour as rates are tipped to drop again this November. You’ll also gain access to more flexible features like a 100% offset account (more on this below).
b) Fixed rate: This option is perfect if you want security against rate increases down the track (because they won’t stay low forever) and also want to know what your repayments will be each month.
c) Split rate: It does exactly what it says on the tin, as your loan is split between a fixed and variable rate. So on the fixed portion your rate will remain the same, providing you with repayment certainty and on the variable portion you’ll benefit from any rate drops and gain access to features like fee free extra repayments or an offset facility.
Interest rates are usually the main consideration, and of course, it’s an important aspect as it determines what your home loan repayments will be and the interest you pay. But what about features that provide you with flexibility and will work for you as your life changes?
a) Extra repayments: Whether it’s a work promotion, bonus or bumper tax return, when you come into extra cash, this feature will allow you to pump it straight into your home loan, meaning you’ll pay less interest and reduce the term of the loan.
b) Redraw facility: Want even more flexibility? If you go for a home loan with an extra repayments facility, make sure it also gives you the option to redraw on that cash. Because you never know when you’ll suddenly need to access it to pay for an unexpected expense like a new car or an addition to the family.
c) Offset account: An alternative option to an extra repayments facility is an offset account, which brings down the interest you pay, as the balance in the account is offset daily against the home loan principal. This option is popular for investors who want easy access to their funds but keep in mind you’ll have to rule out the fixed rate loan option, if this feature is a must, as it’s generally only available with variable or split home loans.
By now, you should have a good idea of the type of home loan that you’re after. The next step? Comparison of course, and with 482 home loans waiting for you to compare right now in the Mozo database, you’ll have plenty of choice.
Happy spring property selling and buying season!Home loan tips