Saturday, November 2, 2013

Choosing the Right Home Finance

If you are ready to buy a home you are probably considering home finance. There are so many options it's often hard to work out which type of finance is best for you. It's a good idea to understand what's available:Type - Fixed rate, standard variable/ARM, basic variable, honeymoon, interest only, redraw/line of credit loans; each have advantages and disadvantages so you need to understand the differences.Fees - Set-up, closing, account keeping, late payment and early pay-out penalties; these fees are payable in addition to the regular loan repayments.Loan Amount - 70%, 100%, 110% of property value; loan amounts may be tied to loan type and the location where you want to purchase as well as the amount of your deposit and your ability to make the repayments.Repayment period - 25, 30, 40, 45 years; time may depend on a number of factors including loan type. A shorter loan reduces interest paid over the life of the loan but the repayments will be higher.If low interest rates are a high priority for you, then consider a Honeymoon rates loan, a discount mortgage, a basic loan, or fixed rate loan. Loans offering lower interest rates generally only offer the lower rate for a specific period of time, such as one year, before reverting to the standard variable or adjustable rate. These loans are often 'no-frills' loans and don't have many of the features found on other loans. You will need to consider how much difference one year of low interests rates will make to your own circumstances, taking into consideration the long-term view of having the mortgage for many years. This is just one of the factors that may be key to your requirements, so work through the process for anything else that is critical to your unique situation.Don't forget, when considering finance you are considering what kind of institution to borrow from and on what kind of terms. You'll need to consider the pros and cons of each different choice and remain flexible with your approach. For instance, the interest rate may be better at one type of institution but the repayment schedule suits you better with a different lender. You may still be unsure about whether to get a home finance with a variable or fixed interest rate, and if this is the case you need to take all other factors into account, such as application and account keeping fees, repayment schedule and the total cost over the life of the finance.Tip: If you visit a series of lenders and brokers only to find that there are yet more options to consider, always ask for time to think things through.For everything you need to know about choosing the right home finance go to Home Finance Selection Guide