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- How Much Can I Borrow?
- Refinance Your Home Loan
- Fixed Rate Home Loans
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- Variable Rate Home Loans
- Fixed vs Variable Interest
- Debt Consolidation
- Lenders Mortgage Insurance
- Home Equity Loans
- Interest Rates Information
- Mortgage Brokers
- First Home Buyers
- First Home Buyer Grant
- Stamp Duty
- What To Consider Before Buying
- Finance Tips For Renovators
- Pre-Renovation Checklist
- Renovating vs Buying a New Home
- Home Loans Comparison Guide
- Home Loan Application Checklist
- 10 Mortgage Repayment Tips
- About Home Loans
- Home Loan Lenders
- No Deposit Home Loans
Your Guide to Comparing Home Loans
Getting a home loan with the right features is easier if you know what you’re looking for, so it’s important that you first understand how you want to structure it.
To help you find a home loan that’s right for you, we’ve put together a list of things to ask yourself before you start comparing.
What interest rate works for you?
Interest rates can have a significant impact on your repayments, so one way to tailor a loan to suit your needs is to compare home loan interest rates types.
These can include:
- Fixed interest. With fixed rate home loans, your interest rate is set for an agreed period of time – typically one to five years. This can provide a degree of security if you’re working with a strict budget or you like to plan ahead.
- Variable interest. With a variable home loan rate, the interest you pay can fluctuate with market interest rates changes and lender pricing policies. This option might suit those who have the capacity to be flexible with their repayments.
- Split interest. Split interest means one portion of your home loan has fixed interest and one portion of your home loan has variable interest. This offers security while also taking advantage of interest rate cuts. Use this handy Split Loan Calculator to get an idea of your repayments under different fixed and variable rates.
Is flexibility important to you?
If you have the capacity to save or make extra repayments on top of your standard repayments, you may want to consider the following features:
- Offset accounts. Attaching an offset account to your home loan means the balance of your savings is taken off the principal before the interest is calculated. Your repayments will stay the same but you’ll be charged less interest, so more of your repayment will be going towards the principal of your home loan.
- Flexible repayments. Some home loans lock you in to set repayments, but a flexible repayment feature allows you to make additional repayments when you can. Use iSelect’s Extra Repayments Calculator to work out how much time and interest you could potentially save by making extra repayments.
- Redraw facilities. Home loans with redraw facilities allow you to access any extra money you’ve paid off your home loan on top of your minimum repayments. In the short term, you can make extra repayments to reduce the amount of interest you pay.
Are you staying put or planning to move?
If you’re planning to move, build or renovate, the following features may ease the transition:
- Bridging loan. With bridging finance, you can purchase a new home before the sale of your existing home.
- Loans for building. If you’re building a home from scratch, your loan requirements will be different to a standard home loan because you won’t need to draw on all of the money at once. Loans for building are generally divided into progress payments to cover the initial stages of building right up to completion.
- Loans for renovating. There are different ways to fund a renovation. If you have equity in your home, you can consider refinancing your existing loan. Alternatively, you might investigate a construction loan, which is similar to a building loan in that it allows you to draw funds at different stages of the renovation.
Is the loan for an investment or primary home?
When purchasing an investment property, your loan requirements won’t be the same as someone financing their primary residence. One such example is interest only home loans.
With standard home loans you generally pay off both the principal and interest, but an interest only loan is as it sounds: you only pay the interest.
This option is popular with investors as it keeps the repayments lower, but can also help with cash flow if you choose to go interest only on your primary home loan. Just remember, when you switch to paying off the principal loan your monthly repayments will likely be higher than you’re used to and may cost you more in the long run.
It’s worth noting that the Loan to Valuation Ratio (LVR), or the amount of money you are allowed to borrow compared to the value of the property, may not be as high with an investment property. You may also find that investment property interest rates can be higher.
What should you look for when comparing?
Researching your options for affordable home loans and enlisting the support of a mortgage broker can help you to find the right fit for you.
It’s also a good idea to ask for a key facts sheet from the lenders you are considering. The key facts sheet will have all the information you need, including the total amount owed over the life of the loan, repayment amounts and all of the fees and charges.
The key facts sheet will also include the comparison rate, which shows you the true cost of the loan including the interest rate, fees and charges. The comparison rate will help you compare different loans across different lenders.
As always, be sure to compare home loan offers to make sure you end up with the most suitable home loan for your lifestyle and budget.
Finding a great home loan is easier with the support of an iSelect mortgage broker. Call 13 19 20 to speak to one of our qualified brokers, or start comparing home loans now.