When shopping for the best home loan, you’ll want to be careful and fairly selective before signing any paperwork. Additionally, if you are a first-time home buyer, you may not be offered the same rates as someone who has already gone down this route before. Being approved for a loan may also be difficult your first time around.
In order to avoid making some poor decisions with your purchase, these tips will help you find the best home loan:
- Be aware of interest only loans. Interest-only loans are exactly what the name suggests. These repayment plans contracts you to paying interest for a certain amount of time. Once the determined period ends, it moves to an interest-and-principal payment plan. This type of home loan may be beneficial if you’re refinancing your house or looking to buy to an investment property. Unless you have a specific need for interest-only loans and are able to make extra payments, avoid this type of home loan.
- Find a trusted partner. Finding the best home loan is more than about the rates; it’s about who is offering it to you as well. Having someone guide you throughout the process and providing honest advice will help alleviate that stress of finding the best option. Talk to several lenders to weigh out your options.
- Know what fees to ask about. Don’t be afraid to ask what to expect. Have the issuer be as detailed as possible and discuss each line item. The fees you should inquire about include but are not limited to:
- Title Search
- Application Fee
- Loan Processing
- Credit Evaluation/Insurance
- Appraisal Fee
- Current Mortgage Interest Rates
- Different interest rate options. What route you decide to take with your home loan’s interest rates depends on your budget and financial situation. Popular options include a fixed interest rate and a split loan.
- A home loan with a fixed interest rate is set for a certain amount of time usually between one and five years. The benefit of choosing a fixed interest rate is that you know what to expect in repayment. If the interest rate rises above your fixed rate, this won’t affect you. However, despite this option making budgeting easier, you are typically unable to make extra payments on your loan.
- A split loan is made up of fixed and variable rates. With variable rates, your rate can increase or decrease depending on the official cash rate. Doing this helps to manage some of the risks associated with both variable and fixed loans but makes total repayment amounts sometimes uncertain.
- Loan portability. If you think you may end up leaving an area before paying off the home loan in full, adding on this feature may be wise for you. Loan portability allows you to transfer your loan to another property. You’ll need to check on whether your loan allows this add-on, though, as well as what extra fees exist with this.
- Negotiate. Once you’ve done your research and you’ve talked to multiple lenders, don’t hesitate to negotiate. Some may offer the same terms but different rates, so always come prepared with the rates you’ve been given and researched.
Finding the best home loan for you means comparing rates, shopping around and talking to multiple people. Never settle for the first option given to you, and don’t be afraid to walk away if anything seems fishy at any time during the process.
What would you add to the list?
Let’s take a look at the interest first.