Choosing the right mortgage is a very important decision as it could make the difference of thousands of dollars in the long term.
There are so many products from so many financial institutions all with differing interests rates , features and fees. So where do you start?
Here are some ways to help you to take up the right mortgage:
Purpose and requirements of the loan
Think of the purpose of the loan first. Is it to finance a property intended for your residence or for investment/leasing? Next, find out what type of loan will best suit your needs. For example, do you want the flexibility to pay off more than your scheduled payments or offset your mortgage against your regular transaction account thereby saving on interest expense? Would you prefer a fixed or variable rate? (This is again depends on the purpose of purchasing that properth. If you and your spouse intend to start a family in the future will you need a period of time where you will be able to reduce your repayments? Over what term (how long) do you intend to repay the loan?
Talk to not one but a few bankers and know the features of several loan products. Keep in mind too that many banks will also allow you to split your loan amount over more than one type of loan to meet your needs – this can be useful if part of your loan is for investment and you need to claim your interest payments as a tax deduction. The following lists of features are typical of those offered by many loan products (most of which incur one-off or ongoing fees).
Additional repayments: Allows you to make earlier partial redemption of your loan so that you can save thousands and cut years off your loan.
Portability: If you move house, this feature will allow you to keep the same loan. This may incur a fee but will still be less than establishing a new loan.
Redraw: Allows you to have access to any additional payments you have made above the normal scheduled repayments.
Credit facility: Rather than take out a separate loan for personal finances such as renovations a credit facility on your loan increases the credit limit on your existing loan. This is subject to approval and other lending criteria.
Repayment holiday: If you make extra repayments in a month or months then you will be permitted to skip certain number of repayments as long as the repayments that you have made are enough to cover the skipped ones.
Parental Leave: Depending on certain terms and conditions, you will be permitted to decrease the monthly payment by half.
Mortgage offset: Links your mortgage with your transaction account so that every dollar in your transaction account offsets the interest calculated on your mortgage.
Income to loan account: By depositing all your income into your loan account you can save in interest calculated on your mortgage and still access cash or pay bills by setting up automatic transfers into other transaction accounts (held with the same bank).
Consolidation of accounts: You can save interest on mortgage and still access your money by consolidating your accounts in to one for savings, credits and transactions.
Refix: Here you can change the fixed rate of loan when the period of your fixed rate is completed.