It’s natural to feel overwhelmed when looking for a home loan. The average new home loan in Australia is $626,055, with an average interest rate of 6.27% p.a. That’s a commitment of repaying $3,863 a month over 30 years.
Given this situation, you would want to secure the best home loan when buying your dream house. That means selecting a home loan with repayment flexibility, the lowest possible interest rate, and adjustable tenure with minimal fees.
The good news is you have plenty of options, and with an expert home loan broker like My Money House on your side, you can find a loan that best fits your needs.
In this post, we’ll tell you how you can find the best home loan. But first, let’s go through the basics.
What Types of Home Loans Can You Get in Australia?
While a home loan is offered against the property you are buying, its terms and conditions can vary depending on:
- The lender
- Your credit score and income
- Property size and location
- Market conditions
Each lender will create its own products with specific terms and conditions. In Australia, you can typically come across the following types of home loans.
1. Fixed Home Loan Options
In a fixed loan, your interest rate remains unchanged for a set period. Most Australian banks offer fixed rates for 1-5 years, while ANZ bank and RAMS are the only major lenders offering 10-year fixed-rate mortgage products. The main benefit here is your initial payments are predictable, which helps you better manage your finances.
2. Variable-Rate Home Loans
In variable-rate home loans, your interest rate changes depending on the market conditions, and so will your payments. While you can benefit from the drop in the interest rate, your repayments would also increase if the rate goes up.
3. Split-Rate Home Loans
These home loans combine the benefits of fixed and variable-interest loans. You can nominate a portion of your loan to have a fixed interest rate, and the remainder will be charged a variable interest rate. You can split it 50/50 or 60/40 – the choice is yours. But be sure to consult your home mortgage broker or consultant before making this decision.
5 Things You Must Consider When Choosing a Home Loan
Choosing the best home loan is often easier said than done. With so many options available, you may feel overwhelmed and need more time to decide which mortgage fulfils your needs. But if you keep the following things in mind, you might come to a decision sooner than you think.
Here’s what you need to consider:
1. Interest Rates
It is the most critical component of your home loan. Usually, a higher interest rate means steeper monthly repayments, which may affect your bottom line. Australian lenders offer two types of interest rates – fixed and variable.
Fixed rates offer more stability with a set interest rate for typically 1-5 years, while variable rates can fluctuate with market conditions. You can also opt for a split-rate home loan, where one part of your mortgage attracts fixed interest while the remainder is charged a variable rate.
Whether a fixed, variable, or slipt-rate loan, compare the interest rates. You can use a loan comparison calculator or consult a home loan broker to decide which mortgage is more cost-effective in the long run.
2. Loan Term
The loan term is the length of time over which you agree to repay the loan. It typically ranges from 15 to 30 years in Australia. While a shorter term may seem attractive due to less interest paid over the life of the loan, it requires higher monthly repayments.
Conversely, a longer term will have lower monthly payments but more interest overall, making it expensive in the long run. You will need to understand your current financial obligations when deciding the term of your loan. If you can afford to pay more, go for a shorter term. But if you want to save more money right now, you can choose a longer home loan term.
3. Repayment Options
Lenders offer different repayment options, including principal and interest or interest-only repayments. Principal and interest repayments reduce your loan balance over time, while an interest-only mortgage lowers initial monthly payments but does not reduce your principal.
Use loan repayment and interest-only calculators to know which option best suits your requirements. You can also consult your home mortgage broker to understand your options. You shouldn’t have to make your ends meet while repaying the mortgage. It puts pressure on your financial and emotional well-being. Choose an option that aligns with your financial goals and current budget.
4. Fees & Charges
See if there are any extra charges or fees associated with the loan.
Most Australian banks charge different fees. If you are stuck with a lender who loves charging fees, they can quickly add up, making your home loan more expensive than you imagined.
Typically, you may have to pay:
- Application or settlement fees, often ranging from $150 to $600 or more.
- Around $100 to $300 in property valuation fees, depending on the type, location, and value of your property.
- Conveyance fees, which may be anywhere between $500 and $1,000.
- Ongoing maintenance fees ($5 to $15).
- Annual fees ($200 to $400) and redraw fees that can be up to $50 per redraw.
- Government charges and legal fees as applicable.
In addition to this, your lender may charge an early exit fee if you repay the loan within the specified period. Most lenders charge this fee if you repay your home loan within five years. It depends on your loan amount, term, and other loan conditions. Understand how these fees might affect your bottom line when deciding on your home loan.
5. Loan Features
Most mortgages in Australia come with features that offer flexibility and convenience. These may include offset accounts, redraw facilities, and flexible repayment options, which can help you manage your loan more effectively. An offset account, for example, can reduce the interest you pay by offsetting your loan balance with the money in your account.
When shopping around for a home loan, ask if the lender will allow you to make additional payments or change your repayment schedule without attracting fees. This helps you repay your loan faster without stretching your finances too thin.
How Can My Money House Help Me
The My Money House team is the expert in getting their customers the best home loan that suits their needs. All My Money House Finance Specialists are fully qualified and licenced. The team have assisted our clients in providing in excess of $850 Million in home loan approvals.
My Money House can assist you to get the best home loan by:
- Understanding how much money you earn and how much money you can afford to borrow.
- Talking with you about what kind of loan would suit your needs. For example, variable rate loans, fixed-rate loans, extra repayment facilities, redraw facilities, offset accounts, interest-only loans, guarantor loans, low doc loans, line of credit loans and non-conforming loans. My Money House Finance Specialists can explain to you the different loans available and discuss which would best suit your needs.
- My Money House will take the hassle out of applying by completing the entire process for you, from application through to approval/settlement.
- My Money House can also get your home loan pre-approved so that you know how much you can spend.
Final Thoughts
Getting the best home loan is possible if you know what and where to look. Always compare interest rates, lean features, loan term, fees, and repayment options when shopping for a mortgage. Remember, you don’t have to go through this alone. My Money House team is with you every step of the way.
We can help you get the mortgage you deserve. Contact a My Money House Consultant today to get your loan approved.
