Comparing home loans before taking up one is one of the smartest things to do. For most Australians, buying a home is one of the major investments they undertake in their lifetime and getting a good deal can help you save a good amount of money in the long term.

What are some of the things to keep in mind when shopping for a home loan?

1. The Type Of Home Loans Available In The Market

As a home buyer who is looking to purchase a home with the help of a home loan, one of the key thing to know is the types of home loans that are available and which one suits your current and future financial needs. Some of the most popular home loans in the market include:

Basic Home Loan – no frills loans usually with low interest rates and limited features. It may offer redraw facilities but limit you in case you want to make extra repayments and withdraw the money in the future.

Standard Home Loan – offers more flexibility than the basic loan but with higher interest rates.

2. Getting Different Home Loan Quotes from Lenders.

Comparing home loans from different lenders may feel like comparing oranges to apples. However, as you start off on a journey of owning your dream home, the first thing you need to do is get a good number of quotes from different lenders, both banks and non-bank lenders. This can be achieved through various means one of them being you talking to the lenders and getting direct quotes from them. If your time and schedule doesn’t allow it, you can opt to get the services of a mortgage broker. A mortgage broker usually has access to various lenders and can easily get you the information you need to help you compare the available home loan products. Another great way to spend less time and get all the details you need is to use a home loan calculator tool.

3. Take A Closer Look At The Fees And Loan Terms

Even though interest rates play a key role on how much you pay every month, there are other fees to watch out for before signing up with a specific lender for a home loan package. Some of the common fees include:

Lenders Mortgage Insurance (LMI) – This can apply in the event you are unable to raise the 20% deposit. Though its referred to as an insurance, it doesn’t ensure you as a borrower but rather protects the lender. Try your best to have a high deposit, for a small difference in the deposit can make a huge difference in your LMI.

Application Fees – Some lenders may charge an application fees, in such cases, try to negotiate for lower fees or if possible for the fees to be waived.

Break Costs – If you are opting for a fixed rate home loan, you may want to pay attention on how much it will cost you in the event of an exit.

A lot needs to be considered in the due process of selecting between mortgage products. Comparing interest rates offered by the various providers my quite possibly be the most important of these tasks. This because it will determine the actual costs of obtaining the finances you require to be on your way to that dream house of yours.

But Why the Variation?

This is due to economic forces they ensure interest rates are never constant in the long run. As such, mortgage providers will charge a different rate at different times over the course of time. An option for home seekers exists. At the time of taking up the home loan, you can decide to either go for a fixed or variable rate. So, depending on what your outlook for the economy in future is, and your risk appetite as well, you can decide on either. The current rates are within 4% in the Australian home market for most mortgage providers. Slight variations in tenths existing among the providers.

Benefits of Fixed Interest Mortgages.

Firstly, fixed interest rates are offered for a 1-5 year period. After this the loan automatically reverts to the lender’s variable interest if the borrower decides not to fix it again. Most homeowners and Mortgage holders prefer this due to a number of reasons including:

* The certainty it brings. This is by making known the total repayments required known over a long time frame. This in turn enables one budget.

* There is protection against interest rate fluctuations.

The cons as well are also worth a note and include:

* Less flexibility. This is in the form of some home loans restricting the ability to make extra repayments, or charging an extra fee to do so.

* Also, by virtue of being revised after every 1-5 years they are not entirely fixed. As a result, mortgage holders cannot take full advantage of this situation.

And there’s the Comparison Rate as well.

This is also worthy of a note. It is different from the normal interest rate referred to as the Advertised Rate. It is a combination of both the interest rate and the fees and extra costs associated with the loans. This is combined and presented as a percentage. Essentially, the comparison rate helps in determining the true/overall cost of the loan. Lenders are required by law to include their comparison rate when advertising their mortgage products in the market. Surprisingly, most people do not notice it when going over these adverts. Yet they the reason lenders were compelled to do so was to make them more honest about the actual cost of the loan.

To first-time home owners as well.

Fear not, though the processes involved in obtaining financing your home acquisition seem long and tedious. And to some extent truly is, there exists many platforms to help in the process of getting yourself a house. There are online materials that simplify the essential features of a mortgage, and even help you calculate the costs taking into account a variety of factors including the interest and comparison rates. As well you can walk into any of the offices of a house lender and ask them the question “Why should I pick you over the next competitor?”