If you are a potential home owner in Sydney, it’s vital to fully understand how to properly choose a mortgage that suits your needs. Through understanding of the market and some research, you out yourself in the best position to find the right home loan for you.
This is a question that almost every Sydney-sider will ask themselves at some point in their lives. Buying a property is most likely the largest purchase you will have to make in your life, so we recommend putting as much thought as possible into your decision as possible. To help you do that, we’ve put together a comprehensive guide to choosing the right mortgage for you in Sydney.
Fixed Or Adjustable Rates? Which Is Right For You?
Fixed rates are common with home owners who are concerned about market fluccuations and the rise of their rates while they are paying off their mortgage. Fixed rates give you peace of mind by staying the same throughout your repayment period. These are ideal if you believe that you will stay in your home for a long period of time and are great if you are lucky enough to start your mortgage when the interest rates are low, eliminating the need to worry of a rise of rates.
There are some concerns with fixed rates, where if the rate does drop, it won’t benefit you which can be frustrating. Fixed rates are also less agile that adjustable rates as extra fees may be included if you choose to sell your home before the agreed upon rate period is finished. The same goes for when you want to increase your payment amount. The provider can sometimes disallow this or pile on extra fees.
Adjustable or “variable” rates are ideal if you believe that there will be lower rates in the future that you can take advantage of and are especially beneficial if you are looking to move or sell in a short period of time as they are far less restrictive than fixed rate loans. Once the rates drop, you are free to adjust your mortgage and benefit from the changes.
Problems that some people face with adjustable rates are that each month they face the task of creating a new budget to comply with the change of rates on their loan. As well, the rates could rise to a level where they become too much to afford given the unpredictable nature of the market.
Competition Opens Up Your Mortgage Options
Lucky for you as a home buyer, the market for home loans is incredibly competitive which opens up your options, in particularly to a fixed and variable rate mortgage. This means that you can fix the first part of your home loan and then allocate a time period where your home loan is susceptible to rate changes. The time period is up to you, whether you want 5 years fixed or 30 years fixed, you are able to make a decision that best suits your financial needs.
Personal Requirements For Your Home Loan
More and more people find themselves on the move, with the desire to live in several locations throughout their lifetime, whether it be to experience different cultures or for family or work commitments, people are moving more than ever. If you as well believe that flexibility is important, it’s important to be realistic and honest with yourself when you take out a home loan, so you aren’t stuck with extra fees if you choose to sell early.
If you believe you can afford it, be sure to choose a home loan that allows you to make extra contributions which have the potential of saving you thousands in the long run and allow you to pay off your new home in a shorter period of time.
As mentioned, the market for home loans is extremely competitive and they are all after your business, so don’t agree to anything unless you are completely satisfied with what they are offering and it matches up to your requirements after considering the above information.
Things To Especially Look Out For When Deciding On a Home Loan
While it’s important to keep a clear focus on whether you are more suited to a fixed or variable home loan, you should as well keep the following factors in mind to avoid common mistakes that home buyers make which cost them thousands.
By changing your payment schedule from monthly to fortnightly or even weekly, you are able to make more repayments and pay off your mortgage sooner. An example of this is if you have a $300k mortgage over 30 years and decided to pay fortnightly rather than monthly, you would be able to pay it 4 ½ years earlier than if you paid monthly, saving you over $20k in interest fees.
Paying A Higher Interest Rate Than Necessary
According to popular mortgage comparison site, Canstar, there is a 2.26% gap between the lowest and the highest standard variable rate for home mortgage loans. Take this into consideration when searching through different loans and aim to find a rate that is lower than the market average.
Not Reviewing Your Home Loan Terms
As well as properly reviewing your home loan before you initially agree upon the terms, it’s vital that you stay on top of your home loan by making yearly critical reviews to evaluate whether or not there is room for saving and if the loan is competitive compared to the market.
There are a number of contributing factors that go into choosing a home loan that suits your financial and personal needs. Interest rates are lower than they have been in the in the last 50 years, which has led to an extremely competitive market who are all after your business when you choose to purchase a property. For this reason ChapterTwo help home buyers find and reach out to mortgage brokers who understand the individual needs of their clients.
For more information on how ChapterTwo can help you find a home loan that is tailored for you and your family’s needs, you can talk to us now on 1300 344 433