Category: House & Home
Chapter Select
Sub category: Buy
4 June 2015

5 things to consider when choosing a home loan

Finding the right property can be an exciting time, but it’s just one step on the path to property home ownership. For most buyers, finding a home loan to finance the purchase is also an integral part of the process.

Here are a few things to consider when deciding which home loan is right for you:

1. Suitability

There is no one size fits all approach to choosing a home loan, so take some time to do your research and find one which meets your particular needs. Comparison sites such as Mozo or Finder can be a good place to start, allowing you to compare home loans across a range of providers. For tailored advice, consider speaking to an independent broker.

2. Affordability

A low interest rate environment may sound like an ideal scenario for home buyers, but remember that you may have this loan for anywhere up to 30 years and your interest rate in that time will change.  You could end up having to make higher repayments than you had initially budgeted for.

Online tools such as a borrowing calculator or repayment calculator may help you determine how much you can afford.  To see if you can cope if interest rates rise, consider doing the same calculations with interest rates a couple of percentage points higher than they currently are.

3. Fixed or variable rate?

Choosing whether to fix the interest rate on your loan should be more about your personal circumstances, than it is about trying to get the best rate.  Factors to consider include whether you intend to make significant additional repayments into your loan, whether you intend to sell your property or discharge your loan for any reason in the short term, and whether you are comfortable with your loan repayments potentially increasing without significant warning.  When weighing up which type of home loan is right for you, consider the following tips on choosing a fixed or variable rate home loan.

4. ‘Interest Only’ or ‘Principal and Interest’?

Both investors and owner occupiers can consider two home loan repayment structures – interest only or principal and interest.

Many owner occupiers choose to repay the principal as well as the interest, meaning at the end of the home loan term they will own their property outright. Property investors often opt for interest only loans, relying instead on capital growth to deliver a long term return on their investment.

Although interest only loans may appear more affordable in the short term, remember you will still need to repay the principal in full once you have paid off the interest.

5. Value for money

When choosing a home loan, the interest rate offered by the lender is often a key decision making factor. However, if you’re seeking long term value for money, consider adopting a more holistic approach and take into account value for money across all home loan features including fees as well as interest rates. Some lenders may offer additional features such as mortgage rewards or incentives.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Home and Contents Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

Related articles

House & Home
Loading...
Share
Loading...
XS
SM
MD
LG