HOME LOAN FEATURES EXPLAINED
These days when it comes to home loan options it can feel like you’re drowning in choices with different lenders, products and features. Choice Home Loans broker Scott Erickson shares his tips.
Define your goals
Understanding your financial goals is key to finding the most suitable mortgage product for you. For example, do you want to pay the loan off quickly while paying the least amount of interest? Would you prefer your repayments to be a predictable cost? Do you need the flexibility of a redraw facility (borrowing money you’ve paid into your loan)? It’s also important to look at the fees and charges: there may be an establishment fee and account service charges that could offset any savings in interest.
Decide between a fixed or variable rate
A fixed rate loan may look attractive. The rate is set for a certain period (usually two to five years), which makes repayments predictable. But the conditions may limit extra repayments. So if you pay a quarter or half per cent more interest for a variable rate loan, you may be able to pay more off the loan faster, reducing the interest you pay over time by making more frequent payments, or paying lump sums into the loan.
Consider offset plus credit card packages
Most lenders now offer packages consisting of a loan account, offset account and credit card with interest-free days. You use the credit card for your expenses, and at the end of the month pay the full credit card balance from the funds in the offset account. This means you make use of the interest-free days on your credit card account without paying interest.