In a world where people tend to customise so many aspects of their lives, it’s amazing how many home owners make the mistake of assuming that they have to take the first home loan they are offered. If only they’d taken the time to ask a few simple questions, they could have started with a loan that not only saved them money in interest, but which could have also given them features that were of real benefit over time as well.
So here’s three simple questions that every borrower should ask about any home loan, whether they are borrowing for the first time, or thinking about refinancing.
1. Variable interest rate, fixed or a bit of both?
Many people put this decision down to whether they prefer the security of knowing what their repayments will be each month, (no matter what happens to interest rates), or they want to keep their flexibility in case rates fall further still in the future.
With official rates at record lows, some people feel that this is the ideal time to lock in a fixed rate loan. However, history shows that many people end up paying less interest by sticking with a variable rate loan, whilst others prefer to split their loans to have “a bet both ways”.
It does come down to personal preferences most of the time, although if you feel you will have the capacity to make extra payments over time, be sure that you pick a loan that won’t penalise you if you do.
2. Tell me about the fees?
Lots of home owners that we talk to make the mistake of assuming that bank fees are an unavoidable evil. However, there are literally dozens of mortgage loans in the market that don’t have ongoing fees. So don’t be shy about asking your Dreamstreet mortgage expert about this option.
It is also important to remember that while annual fees and fees associated with certain features of your loan, it can be the less obvious fees that really carry the sting. The best idea is to ask for a complete rundown of fees before you sign on the dotted line.
The other type of fee that still catches some people out are those charged for switching home loans. Back in 2012 the Federal government banned the charging of loan exit fees, meaning you could take your business to another lender without being charged to get out. However, some loans taken out before this time still have some exit fees attached, and you could still be charged with setup fees by your new lender when you move.
Once again, don’t be shy about asking you’re the Dreamstreet team members about negotiating the best possible deal on fees when you ask about refinancing your loan.
3. How about a redraw or offset facility?
Did you know that around 40% of new loans nowadays have an offset facility, whilst around two-thirds of loans have a redraw facility?
An offset account facility can help you save on the amount of interest you pay in total, as well as shortening your loan. For example, by keeping $10,000 in an offset account throughout a 30-year loan at 5%, you could save over $32,000 in interest as well as shaving around 1 year and 9 months off the term of your loan.
Once again, the important thing here is to weigh up all of your options with your Dreamstreet Consultant to work out which option will suit you and your circumstances best. So to get the ball rolling, why not give is a call today on 1300 230 240.
- 11 Mar, 2016