We’ve compiled some expert tips to help you land a hot mortgage deal that delivers on price and on features.
Choosing a loan can be very time-consuming and confusing process, and if you make the wrong selection upfront, you can be stuck with an ill-fitting product that costs you more than it needs to. Thankfully with these trusty expert tips on hand, you’ll be in prime position to land a competitive deal.
Tip #1: Work with the professionals
Odette Shahnazari, personal mortgage adviser with Smartline (www.smartline.com.au/odettes) says those who are in the market for a home loan have two options: check every single lender's website to see the latest deals on offer and compare them all to find the best deal, or call a mortgage broker and let them do the research for you. “A professional mortgage broker will ask you about your goals and objectives and then based on your needs, they will recommend the most suitable product,” she says.
Tip #2: Package vs non-package loan?
A package loan product could save you hundreds of dollars in various fees every year, so work out how much you will save by being on a package and paying the annual package fee, versus going with a stand alone mortgage product. “In saying that for loan amounts under $200,000, you may be better off sticking to a non-packaged deal,” she warns. “Your broker should be able to the sums for you.”
Tip #3: Beware low interest rates
“Lower rates do not always mean a better deal,” Shahnazari says. “They may also mean no bells and whistles, so what you should take into account is the overall fees versus overall savings. Remember, in the current environment the lenders change their rates so frequently that there is no guarantee your rates would remain the lowest after your settlement.” All aspects should be taken into consideration when selecting the best lender and product to suit your needs.
Tip #4: Consider pros and cons of fixed rates
Fixed rate loans obviously provide consistency and stability in repayments, but they also come with restrictions. For example, you are normally limited in regards to how much you can make in extra payments each year. If this feature is important to you, check with the lender before you apply as significant financial penalties can apply. “Different lenders have different policies, so find out the full details,” Shahnazari says. “You need to know if the limit is based on ‘per calendar year’ or ‘per loan year’, too.”
Tip #5: Not all fee packages are the same
Outside of your deposit and stamp duty, the biggest chunk of cash you’ll have to hand over is your lenders mortgage insurance (LMI). This is an insurance premium that applies to almost all loans where a deposit of less than 20% is provided, and it protects the bank in case you default on your loan. In recent years – following the global financial meltdown – this fee has increased substantially. “If your loan is subject to mortgage insurance, ask your broker to provide you a comparison on the amount of LMI charged by various banks; you would be surprised with the difference in the rates they charge,” Shahnazari says. “Another question to ask is 'what is the refund policy?' If you have plans to sell the property within a couple of years you may be entitled to a refund. And if you are borrowing no higher than 85%, ask your broker if they can get a deal without mortgage insurance – this could mean savings of thousands of dollars.”