3 Factors to Look at When Comparing Home Loans
Interest rates for home loans continue to be low, encouraging first-time home buyers and investors alike to take advantage of the low rates while maximising their borrowings. In case you’ve set your eye on a Clarke & Humel property such as the houses for sale Northern Beaches has to offer and are actively shopping for home loans, here are 3 factors you should consider when comparing home loans from lenders.
Getting a home loan is one way to help you afford your dream home or investment property for your future. Interest rates vary depending on whether it is calculated for both the principal and interest, or for interest-only. Whether you are planning on becoming an owner-occupier or purchasing an investment property, rates will vary still.
Lenders also offer mortgage rates based on variable or fixed options, and sometimes special rates courtesy of honeymoon or introductory offers are available. Pay attention to the duration, fees, and terms and conditions of the interest rate itself.
While interest rates are one of the top considerations for choosing a lender, it shouldn’t be your sole one.
Taking a home loan will also have you pay both upfront charges and recurring fees as the home loan is paid off. When calculated along with the interest rate, these fees can change the way you look at a home loan package.
Upfront charges include application or establishment fees which can vary from $150 - $700 but is sometimes waived by the lender. You will also pay a valuation fee that can range from $100 - $300 for the valuation of the property you’re taking out a loan for. Lenders will try to gauge its market value to determine whether the loan amount and loan-to-value (LVR) you have are commensurate to the property value.
Title-related fees include the conveyancing fee for transferring the title under your name and search processing fee to look up the property title.
Government costs will cover your stamp duty tax for the mortgage and is variable depending on the property value, your buyer status, and region you are in.
Meanwhile, legal costs will cover all the legal document processing regarding your mortgage.
Lastly, you may be required to also pay a lenders mortgage insurance (LMI) in case your loan-to-value (LVR) is over 80%. This insurance will depend on the property’s market value so that more expensive properties fetch a costlier LMI.
Aside from these one-time fees at the start of your home loan, you will also have to consider the ongoing costs for a home loan. Take note that these ongoing costs may vary from lender to lender so ask your preferred lender for their comprehensive list for ongoing costs.
This set of recurring fees may include a monthly service fee for providing your loan and can be anywhere from $5-$15. If you took a special discount on interest rates, you may also get an annual fee.
If you make extra repayments that will shorten the payment horizon for your home loan, you may also pay repayment charges. If your home loan has a redraw facility feature and you redraw those extra repayments, you may also be charged a redraw fee.
On the other side of the coin, if you fall behind on your mortgage, you will incur late payment fees.
A switching fee may be charged if and when you change your home loan from a fixed rate payment plan into a variable interest home loan or vice versa. If it’s the property you’re switching up, then you may have to pay a portability fee.
Last but not the least is the discharge fee which you will pay once your mortgage has been settled, or you’re transferring to another lender or refinancing your property.
Considering these fees along with interest rate can give you a better picture of what to expect when it comes to starting a home loan and your monthly payments over your chosen payment time horizon.
Last but not the least, consider the flexibility of the home loan products. Carefully examine the features that come with the home loans such as the number of extra repayments allowed, the required LVR, or owner-occupied requirements. For example, taking out a home loan for a property for sale in Manly may fetch a different interest rate product than investment-grade apartments for sale Northern Beaches is offering.
You can also check whether the home loan package has a redraw facility or offset account for your mortgage. A redraw facility helps you shorten the number of years you need to pay off your loan while an offset account can help lower the interest rate on your loan.
We hope we have given you a comprehensive list of what to look at when taking out a home loan for your desired property. If however you already have a chosen home loan product and lender, and you’re just looking for the right property for sale Northern Beaches has to offer, don’t hesitate to get in touch with us and we’ll assist you in finding that dream home of yours.