For most Australians, a home loan is the most significant debt that you will ever owe. It may take 25 to 30 years to pay off this debt, which is why you need to compare all your options when shopping for a home loan.
The following tips may help you find the best terms for a home loan and lower your monthly repayments.
Pay Attention to the Comparison Rates
As you start comparing home loan options, one of the first details to examine is the comparison rate. While the lender may highlight their fixed rate or variable rate terms, the comparison rate offers a more accurate figure for comparing home loans.
The Australian government now requires lenders to display a comparison rate when advertising their fixed or variable rate home loans. The comparison rate includes all the fees that are applied to the loan, giving you a better indicator for comparing the advertised interest rates from multiple lenders. Canstar and Lendi, for example, offer useful comparisons of home loans, which you may benefit from.
Pay Attention to the Loan Term
Lenders may advertise their interest rates for a specific loan term that varies from the loan terms announced from other lenders. As the loan terms can impact your monthly repayments, you should ensure that you are applying for a loan that suits your goals.
If you want lower monthly repayments, you may prefer the standard 25-year term. However, with a shorter term, you can get lower interest rates.
Split, Variable, or Fixed Interest Rates
You should also consider whether the advertised interest rate is for a split, variable, or fixed interest rates. Your monthly repayments may vary depending on the type of home loan that you choose.
With a fixed interest rate home loan, the interest remains the same throughout the life of your loan. With a variable interest rate, the interest rates may increase or decrease based on the Federal interest rates. A split rate provides you with a fixed rate for a specific period before switching to a variable rate.
Early Payment Penalties and Additional Fees
The last factors for finding the best home loan are difficult to explore without looking at the details of the home loan. For example, some lenders may charge a penalty if you pay off the loan before the end of the loan term. These early payment penalties can be costly.
Along with an early payment penalty, there may be additional fees that apply to the advertised home loan. Before applying for a home loan, make sure that you learn more about these fees and penalties when comparing home loan options.
Use an Online Lending Services Platform
The final tip for comparing home loans is to use an online lending services platform, such as Lendi or Canstar. They work with some of the most trusted lenders in Australia. Based on your finance situation and the amount that you seek for a home loan, you may receive a wide variety of home loan products from significant lenders to consider. Remember the details discussed when comparing these home loans to find the option with the best rates.