Having your own home is a pride and joy. Very few can afford to build a home without taking out a loan. These days, many people are still unaware of the many options available on the market in terms of these solutions. Primarily, there are two principles to factor into any loan: (main loan amount) and the interest (amount paid on the outstanding principal).
It’s critically that you understand the fine print involved with loans that you’re interested in taking out. With enough information, you will understand each type, how much you’re likely to pay, and what you can actually afford—without the mortgage being too much of a burden on you and your lifestyle.
Loan structures and features
In Australia, the most popular home loan type is the one with a variable rate. Here, your interest payment will vary based on the current interest rates in the market. This means that the repayments could go up or down throughout the loan period.
For easier budgeting, you might want to take a look at fixed loans. In this type of loan, the interest rate and the repayments are fixed for the entire loan period. It makes it easier for you to budget your repayment and you are protected from interest rate increases. However, when interest rates are down, your rate will not be affected, so you will end up paying more.
There are lenders who are willing to allow you to have a split loan, which means that one part will be fixed while the remaining part will be variable. In some cases, this could be a very good option because you will partly be protected from rising interest rates and at the same time avail of the benefits when interest rates go down.
Comparing home loans
Do not just sign up with the first lender you talk with. It is best to shop around first and ask questions. Request a key facts sheet from lenders, which will let you compare fees and features. A key facts sheet shows clearly the information you need, such as the total amount you have to pay back during the loan period, the amount of repayment as well as the additional charges and fee.
Double check everything when you come across loan companies that claim to help you pay your mortgage payments faster. It can only happen if you can secure a loan that has low fees and interest rate, otherwise, you can only repay your mortgage faster by increasing either the frequency or the amount of your repayment.