No fees! Low interest rates! Fully-featured! If you pay attention to the marketing, it seems that every lender is willing to offer you the best mortgage product in history - but how can you make sure you actually land a hot mortgage deal?
When you’re shopping for a home loan, it can be difficult to separate promotional “fact” from “fiction”, according to consumer advocate Michael Lee from www.keyfacts.com.au
“When it comes to lenders’ latest, greatest deals, there is almost always a catch,” he explains.
“A favourite tool in the mortgage magician’s kit is ‘spin’, which is the art of turning or spinning a negative around so that it appears positive.”
Case in point: Lee once saw a mortgage product advertised that claimed to boast the lowest fully featured variable rate home loan in Australia.
In the fine print, however, he uncovered the fees: a whopping $1,000 plus 0.66% of the loan amount to set up the mortgage account, plus an “early exit” fee equivalent to 2% of the original loan amount if you terminate the loan early.
On a $350,000 loan, this equates to establishment fees of $3,310 and exit fees of $7,000!
When you take these fees into account, “you start to see why they focus their advertising – and borrowers’ attention – on their low rates and product features,” Lee says.
That doesn’t mean your search for the hottest mortgage deal is hopeless. It’s all about doing your research, according to Tim Buckett, executive general manager of customer development at Suncorp. He offers these top tips to help you find the best deal:
- Do your research and shop around. If you’re unsure of which loan is right for you or you’re not even sure where to start, then compare products at www.yourmortgage.com.au, or seek professional advice from your lender or a qualified mortgage broker.
- Don’t just look at the interest rate. The rate is just one part of the loan, so make sure you also compare the home loan features – such as offset facilities and free linked savings accounts – and consider ongoing fees and charges.
- Do the sums. Look at your financial situation and determine how much you can afford to spend on mortgage repayments, while still maintaining a comfortable lifestyle. Visit the government website MoneySmart.gov.au for an excellent free resource to help you plan map out your finances.
- Ask about professional packages or loan discounts. You may be able to secure a rate discount of up to 0.9%, simply by asking the question!
- Consider the market. Are interest rates likely to rise or fall? This may have an impact on whether you decide to look at fixed or variable rates.
- Make sure the interest on your loan is calculated daily. This ensures that any principal repayments you make have an immediate effect on reducing your next interest payment.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan