How do I choose the best home loan
Choosing the best home loan product depends on what your financial situation is. What is best for Mr Black is not necessarily the best home loan product for Mr White.
Mr Black is a 59 yo male about to retire from his job during the next 12 months. He has an opportunity to purchase an investment property and plans to repay his loan as soon as he retires and receives his lump sum superannuation entitlement.
Mr White is a 23 yo Motor Mechanic who is looking at purchasing his first home and he will be seeking a home loan for a period of between 25 and 30 years.
These two home buyers have different needs when wanting to take out a home loan.
While everybody wants the cheapest home loan, not all cheap home loans turn out to be cheap.
Home loans have exit fees. If you repay a fixed interest home loan ahead of schedule you will find that you will probably be penalized because the bank hasn't been able to make x amount of profit on your loan as to your agreed contract which you are breaking by repaying your home loan early, which would be the case for Mr Black.
Mr White wouldn't have any such worries. With home loan interest rates expected to rise then Mr White would in all probability be seeking a fixed term home loan.
He may wish to take out a business loan and set up his own auto repair shop, interest rates may fall to record lows and all of a sudden he can find himself in a position that requires him to make a financial decision regarding his existing home loan which has a fixed rate.
If he was to transfer his home loan to another bank that is willing to give him his business loan he too will then be paying exit fees.
Your financial situation will decide which home loan products to seek. Discussing your situation with a mortgage broker can help give you an insight into what you should look for when selecting a home loan product.
Exit fees are just one penalty that you may encounter. Deferred establishment fees is another.
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