Home Loan Comparison |
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Home loan comparison is without a doubt one of the more challenging tasks that the average person will have to confront in their financial life. For any home buyer, be it a first home buyer or an established home owner looking to refinance their mortgage or upgrade to another home or an investor buying an investment property, making home loan comparisons between different mortgage companies and between various home loan options can be a highly complex exercise. The benefits in comparing loans both in terms of monthly repayments and in terms of flexibility of the loan – for example the capacity to make changes to repayments or to switch lenders – is a potentially rewarding exercise. Decisions on the home loan should not be based on simply going for the first loan someone tries to sell you – rather an organised approach using calculators and tables to compare lenders and loan types is essential When you are first confronted by the exercise of selecting the best mortgage for your needs, you will probably have used the mortgage calculator tool to determine monthly repayments. But there are many other variables that go into a home loan.. There is the question of type of mortgage - variable, fixed for example. Then come the features of each of the variable, fixed loans. Consider the basic variable mortgage – usually described by mortgage companies a 'no-frills' home loan with low fees and a low interest rate. In any home loan comparison this is usually the first feature mentioned but is only one of many. Other features would include the (‘headline’) interest rate, and also another interest rate, referred to as the ‘comparison’ rate information. This is the rate that can be used to make a home loan comparison. It only takes into account certain fees and does not necessarily prevent you from being penalised if you have not selected the best mortgage for your purposes. In the home loan comparison exercise, any two loans need to be compared the life of the loan. This takes into considerations upfront fees and eliminates any early exit fees. Other features that would normally go into a thorough home loan comparison exercise would be whether the mortgage company’s product allows the option of additional repayments; whether an offset account is available; whether interest-only repayments are available; whether the mortgage company offers a redraw facility on their product. The home loan comparison would list whether an application fee is to be charged and whether an administration fee applies, either on a once off or monthly basis. The home loan comparison exercise should also reveal any costs associated with early termination of the mortgage from the particular mortgage company. In the case of mortgage refinancing, a home loan comparison requires essentially the same steps with the additional proviso that the borrower needs to consider the costs of switching from one mortgage company to another mortgage company. In the case of a borrower seeking a fixed rate mortgage, then the home loan caparison exercise includes the same factors. |
