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Tuesday, September 17, 2013

A Guide to Choosing the Right Home Loan


Why is it that we agonise over the decision of which house to buy for months and months, but when it comes to choosing a home loan we all too often jump at the first instant cash loans we come across? While it is tempting to go for the path of least resistance when it comes to the financing for our dream homes, the loan product you choose will affect you just as much (if not more) as the home you choose to live in, so doing your research and finding the right loan for your home is essential. It may not be as much fun as choosing the home itself, but clever choices now could save you big bucks in the future. Here is a guide to help you make those difficult decisions.

Interest Rates

Over 30 years, a loan on a $500,000 home with an interest rate of 7.5% will end up costing $1,250,768.81 in total. Compare that to if the interest rate had have been just.5% lower at 7%, and the overall cost would be $1,190,599.33. That is a $60,000 saving you could make simply through choosing an interest rate that was.5% lower than the other. $60,000 can pay for a pretty nice family holiday later down the track, and when you look at it in terms of overall expenditure, it is clear to see why choosing a good interest rate is so important.

Hidden Fees

Having said this, interest rates are certainly not the be-all and end-all when it comes to choosing a home loan. Fees, charges and other hidden expenses can be masked by a low interest rate, so it is important that you get all the facts before signing up. For example, many loan products have penalties for early repayment, which means that if you are planning to upgrade quickly after purchase you may be liable for some nasty costs.

Flexibility With Repayments

If you expect you income to increase over the coming years then you may want to consider a loan that allows you to make extra repayments or one that has the flexibility to allow to you change to fortnightly repayments instead of monthly. Did you know that by paying fortnightly instead of monthly (half the cost of monthly, so you really don't notice the difference) you can cut a whopping 6 years off the life of your loan? Consider long-term when shopping around, and you will not be disappointed that you did.

While fast loans may be appealing, when it comes to your home, smart loans are a far better idea.

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