Expert advice on home loan tips (and pitfalls)
As Australians rush to enter the property market and take advantage of the low interest rates currently on offer, it is hardly surprising that new home loans are being taken out at record levels.
But wait a minute, because we’re not talking about a small loan here – we’re probably talking about a six-figure loan that you’ll pay off over several decades! That’s why a little research and additional know-how could really pay off.
So whether you’re a first-time home buyer, a budding investor, or an existing homeowner looking to refinance, here are some tips and pitfalls from the Mozo experts that you’ll want to keep in mind when comparing home loans.
Expert advice on mortgage lending
1. Take advantage of advantageous rates: Mortgage rates are currently at some of their lowest points in years, but not all lenders offer the same offers. To get a really low rate, you may need to look beyond the big banks to an online lender or a challenger bank.
2. Make the most of the features: Many loans come with features like offset accounts, reprocessing facilities, and additional repayments. If you like the idea of paying off your loan faster, reducing the interest you pay, or just having extra flexibility, these features may be worth using.
3. Weigh a fixed rate versus a variable rate: Are you looking for repayment certainty? A fixed home loan that lets you lock in a rate for several years can be ideal. Conversely, a variable rate can give you additional flexibility and a wider range of features. Otherwise, for the best of both worlds, many lenders allow you to divide your loan into fixed and variable portions.
Home loan pitfalls to avoid
1. Beware of return rates: Many borrowers lock in fixed rates when they are low, but one thing to watch out for is the rate of return you will pay after the fixed period. These are often much higher, so it may be worth comparing your options before the end of the set period or renegotiating with your lender.
2. Beware of ongoing charges: Most lenders charge a one-time upfront or release fee, but there are also ongoing costs like annual service fees that can really add up over time. That’s why comparison fares (which factor in fares and fees) are a handy guide.
3. Loyalty doesn’t pay: If you want to keep your rate as low as possible, loyalty to your lender is unlikely to be your best tactic. Many lenders don’t pass their best rates on to existing customers, which means your rate may become less competitive over time. So be sure to review your offer regularly and, if you’re not happy, don’t be afraid to change!
^ See information on the Mozo Experts Choice Home Loans Awards
Mozo provides general product information. We do not consider your personal goals, financial situation or needs, and we do not recommend any specific product. You should make your own decision after reading the PDS or offering documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we do not cover every product on the market. If you decide to apply for a product through our website, you will be dealing directly with the supplier of that product and not with Mozo.