Shopping for a home loan can be extremely challenging. Besides going through the process of looking for the best house, you should also shop around for the best home loan. After all, you cannot go with the first option you find. A home loan is a serious commitment, and it’s essential to make sure that you’re able to borrow as much as you need, but also that you will get good rates.
Sure, it’s a demanding and time-consuming task, but it’s worth it if you want to buy your dream Australian house and have no difficulties when paying off your debt. To help you, we’ve created a list of a few things you should pay attention to when looking for a home loan in Australia in 2022:
- Make Sure You Have the Right Credit Score
Before granting you any funds, a lender will most likely check your credit score. Therefore, you must be prepared with a good rating – otherwise, your chances of obtaining that loan are scarce.
You must have responsible financial behaviour before applying. You must also be careful while you’re applying for different home loans left and right. Ideally, you shouldn’t send too many applications to various lenders.
When lenders check your credit report, they will perform a “hard inquiry”. This could decrease your score little by little as banks think your loan applications are not approved. In the end, your rating will have to suffer, and you will be less likely to be approved for a loan.
Look for a few good lenders and stick to them instead of desperately submitting applications.
- Be Aware of What You Want
Many borrowers tend to look at how much they can borrow, what the repayment term is, and what their interest rate will be. However, loans have more features depending on which lender you pick.
For instance, some loans might have a split rate option, redraw facility, offset account, repayment holiday, home loan top-up, as well as the ability to make additional repayments.
It’s best to think about the features you want for your loan. This way, you won’t pay for features you don’t need.
If you can, try to sign up for the shortest term.
Generally, it’s easier to pay off a loan when you have a longer repayment term. Still, you will deal with your debt for much longer, and you might pay more in interest.
So, if you can afford it, it’s much better to go for a shorter term.
Don’t forget about the comparison rate. This is a rate that lenders show when they are advertising their offers, and it mixes the advertised rate with any of the loan’s extra charges. In the end, this is very useful, as you can know how much you’ll end up paying.
Understanding the comparison rate is beneficial because it allows you to eliminate some alternatives from your list. Some funding options might look more convenient as the rate is lower, yet they have a lot of fees, bringing the overall cost up.
- Pay Attention to the Interest Rates
Knowing the interest rates in advance allows you to estimate how much you will be paying every month.
It’s recommended to know where interest rates are heading, as it’ll aid you in opting for the best loan options.
For instance, you might be looking towards a loan with a fixed rate, which seems like the greatest pick as long as there is an upwards trending for the rates. But when lenders set fixed rates, they visualize the future interest rate environment. This means that they might not remain as convenient as they are now.
Lenders tend to change their mortgage rates according to the cash rate modifications made by the Reserve Bank of Australia. Keep this in mind when choosing a home loan.
You should not rely on a single lender while rejecting the others. It is much better to shop around for several lenders and compare their rates. Each of them lets you borrow a particular amount and will charge different interest, but they also have different loan terms among other features.