How to Get the Best Home Loan

While a home loan is a big financial commitment, the process of applying for one should not be overwhelming. Technology has made comparing lenders and applying for a home loan more straightforward. The most complicated aspect is deciding which home loan is right for you.

If you are just starting on your home loan journey, some of the terminology can be tricky. Here are some common phrases to get you started:

  • Variable home loans have interest rates that rise and fall with market rates. The repayment amounts are uncertain, but this loan type can give you the option to make extra repayments and the interest rates may fall below the fixed interest rates.
  • A fixed rate loan has a predetermined interest rate, at least for the first 1 – 5 years, and benefit by providing you with more certainty of your repayments. However, you do not benefit from falls in the interest rate, and you can incur costly fees if you want to refinance during the fixed rate period.
  • If you cannot decide between the above two options, choose a split loan. One part of the loan is paid with a fixed interest rate, with the remainder being paid on a variable one.

Your loan may also be a principal or interest loan – interest-only repayments allow you to only pay off the interest charged on your loan for a second period rather than the money you borrowed. While it may be more affordable at the outset, you will pay more interest over the life of the loan. It will also delay building any equity in your home, as you are not actually paying off the property until you pay off the principal. Principal and interest repayments cover both the amount you borrowed – the principal – and the interest and will help you own your home sooner.

Some other home loan features that are important to consider are offset accounts, redraw facilities, and home loan portability. These features can allow you to pay less interest, make extra repayments and access those funds later, or avoid break cost fees on your next property.

If you have a home loan question, you can reach our Customer Success team via phone on 1300 403 204 or message the team at https://smarthomedeposit.com.au/contact-us.html. We look forward to helping you achieve your Smart Home Deposit goals!