HOME LOAN FEA­TURES EX­PLAINED

Highfields' Own - - Real Estate - BY CHOICE HOME LOANS

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.

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