Finding the right home loan isn’t as easy as it sounds. With so many mortgages on offer – each with its own conditions, terms, features and rates – it can start to feel like you’re navigating a mine field. To help you avoid a potentially costly mistake, here are some of the mortgage traps you need to look out for when choosing the right home loan.
Deciding whether to fix your interest rate or to go for a variable rate will largely depend on your personal circumstances. While it may be tempting to lock in a really attractive fixed rate now while rates are at an all-time low, keep in mind that if you do decide to revert to a variable rate at a later stage there may be break costs. It’s worthwhile getting independent advice from your mortgage broker before you make a decision.
Flexibility vs. Limitations
Along with interest rates, home loan features are often a big deciding factor when comparing home loans. Find out how much flexibility you have with the home loan you’re considering. Can you make extra payments, and if so, is there a charge? Some loans will allow you to make extra payments but have limits on how much you can redraw.
When it comes to honeymoon loans, it’s best to proceed with caution. Whilst a honeymoon loan option may sound enticing at first glance – a highly competitive rate for the first six to 12 months – you could end up with a nasty surprise when interest rates revert to a much higher rate, leaving you paying thousands of dollars more for the duration of your loan term.
Trying to decipher legal jargon in a home loan contract can leave you confused, but one area of the contract you need to pay careful attention to is the schedule of fees and charges. Mortgage fees can very quickly add up, so find out what upfront fees, ongoing charges, and any other costs you’ll incur for the life of your loan. When comparing home loans consider set up fees, mortgage insurance, redraw fees and any fees charged for repayment defaults.
Just as you would when buying a car or an expensive holiday, when it comes to home loans you need to research your options and shop around for the best deal. Different lenders offer different rates, features and terms, and many are negotiable depending on your circumstances. Your mortgage broker has access to a range of mortgage solutions and can talk you through your options to help you make an informed decision.
Signed and sealed
Finding the right mortgage may take some time, but it’s worth it. You’ll save money and avoid unnecessary stress with the right home loan. Before you sign your contract, make sure you understand exactly what it is you’re committing to. If you have any concerns, get independent legal or financial advice. And if you’d like help tackling the mortgage maze, talk to one of our brokers.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Credit Ombudsman Services Ltd (COSL) | Member of Choice Aggregation Services.