With a lower interest rate for your home loan rates you can save more money in your pocket every month. But how does this actually work?
Obtaining the most suitable rate for your mortgage can greatly impact your monthly budget. This can mean potential thousands saved in interest over the life of your loan. One way to do it is through comparing the mortgage types available from a range of lenders and comparison-shop.
When you’re armed with the right knowledge it can become easier to find the right rates for you. In this blog we’ll talk about how you can compare home loans while saving big!
Understanding Home Loan Interest and Rates
Home loan rates, also known as mortgage rates are defined as the interest rate and the cost of borrowing money from a lender so you can purchase a property. When you take out a home loan, the lender will give you your principal amount while the interest rate is the annual cost for using and borrowing the money.
How to Compare Home Loan Rates and Save Big
Before house-hunting, clarify your home loan needs and assess your financial situation. Consider your credit score, affordable monthly repayments, risk tolerance for variable vs. fixed rates and life priorities (e.g., family planning, career moves, etc.). This helps determine whether a fixed or variable rate mortgage suits you.
Once you have realistic expectations, shop around and get different rates from different lenders and financial institutions. Mortgage terms can vary widely with many factors like lender, term, loan type. HOT TIP: A professional mortgage broker can do the shopping around for you so you can be stress-free and focus on finding the right property.
Don’t hesitate to verify deals and feedback about the financial institutions and lenders. Check out reviews via sites like Canstar and other testimonials so you can filter out those who have attractive rates and provide quality customer experiences.
With the amount you can afford to borrow, compare loans from at least two different lenders. Check the loan interest rates, fees and features to get the right loan for you.
When comparing lenders, pay attention to the APR (annual percentage rate), not just the interest rate. The APR reflects the total cost of the loan, including the lending rate and other fees.
By comparing fees and deals you can save money and avoid paying an application fee to some lenders.
Other things you may need to factor in are the types of interest rates:
- Fixed-rate mortgages: This means that for a certain amount of time (usually 2-5 years) your repayments have a fixed interest rate and allows you a degree of predictability, making it easier to calculate your payments. However they tend to be a higher interest rate compared to variable rates.
- Variable-rate mortgages: This means your interest rate fluctuates based on market conditions. Your repayments can go up or down over time, making budgeting a little less predictable. While they might start with a lower interest rate compared to fixed-rate loans, they carry the risk of increased repayments if interest rates rise. It’s a good option to consider if you’re comfortable with some level of uncertainty and set a reminder for a yearly home loan health check to ensure you have the most competitive interest rate available.
- Split loans: Loans with a part of the mortgage amount set at a fixed rate period and the remaining mortgage amount set to a variable rate.
- Interest-only mortgages: In this type of mortgage payments are limited to interest only for a limited time. However they can result in higher long-term debt levels.
In addition the factors that affect mortgage rates are:
- Credit Score: The higher your credit score the better rates you may get. This is because you will be deemed less of a risk to lend to.
- Loan amount and term: Loans with shorter terms often have lower rates. On the other hand, loans with longer terms come with higher rates.
- Deposit: A bigger deposit helps lower the interest rate as it reduces the lender’s risk.
- Loan-to-value ratio (LVR): This measures your loan amount relative to your home’s worth and determines the percentage of your home’s value that is mortgaged. The lower your LVR is, the lower your lending rate will be because a low LVR marks you as someone safe to lend to.
- Debt-to-income ratio (DTI): This compares an individual’s total monthly debt payment to their monthly gross income. If this value is too high then you may not get a good interest rate.
- Market conditions: The current state of the economy and inflation drive the interest rates.
Get Good Deals With Us
To ensure you are getting the right deal and value you need points of reference by shopping around.
Professional Lending Solutions is a trusted mortgage broker on the Gold Coast that offers a range of mortgage solutions. Our goal is to provide you with the most up-to-date lending solutions in the market. Get in touch with us today!
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.