Expert Advice: Know What Home Loan Option is Best for You
Understanding Your Options is Critical
When it comes to choosing the best way to finance your next property purchase, there are so many options out there that it can be overwhelming at times.
That's why we sat down with Jeff Chapman from LJ Hooker's Home Loans team to bring some clarity our customers.
If you've ever looked at taking out a home loan, you'll have noticed that there are a number of different types, ranging from fixed to variable to split. What do these all mean?
"The difference is in the title," said Jeff. "Variable gives you greater flexibility, with more repayments available and a redraw account which can come in handy if you experience a windfall."
"Variable home loans are taken up by about 80 per cent of the population in Australia who are looking at funding their property purchases."
So, variable is a popular option, and you can see why with the ability to make additional contributions when you can afford to, potentially taking months and months off the term of your loan repayment period.
"Fixed rates have a lot of positives though, for example with people on a tight budget who are buying their first home as it's great for budgeting and stops market fluctuations affecting payments," continued Jeff.
"A little bit of flexibility is lost with a fixed rate home loan, but more lenders are offering some degree of redraw with fixed rates. With our LJ Hooker option, we allow lendees to pay up to $20,000 per year into a redraw account."
Maybe a fixed rate home loan is the best option for you - especially for first home buyers or people who need to know exactly where their money is going month by month.
"A split rate, on the other hand, means that up to 50 percent of the loan can be fixed (with a .15 percent discount at LJ Hooker), while the rest can be on variable rate, giving our clients the best of both worlds."
How Important is Portability to a Home Loan?
Portability is the freedom to take your home loan with you across properties if you decide to move house. In today's fast-paced world, there's no telling where you might be in five years, and having to get out of an existing fixed rate home loan contract to start a new one can result in expensive break fees.
"If I move interstate and want to buy another property, can I bring my existing mortgage with me? Portability will allow this. Life moves pretty quickly these days, so it is important to take into account how yours could change."
It's also important to make sure you're comfortable with the mortgage broker you are using. You'll want to have a certain level of trust that this person is working with your lifestyle, so take some time to make this all-important decision.
"The main thing is to think about yourself first, don't just wait for someone to offer you the cheapest mortgage. You need to be comfortable with the person you're talking to - a simple mortgage broker is just comparing the products, but not adding value to your comparative research."
Has this cleared a few things up? Get in touch with the team at LJ Hooker today to talk more about what home loan options could suit you.