Detail is Important When it Comes to Your Mortgage
It is natural that many of us focus on one thing when it comes to our Mortgage – the interest rate. However detail is important when it comes to your mortgage. Here are several other things that it pays to get right before you sign on the dotted line of any mortgage, investment or reinvestment loan.
Understand Your Contract Expiry Dates
Many borrowers don’t really understand their loan’s terms and conditions. While most of us are clear on how much we owe and the repayments we will have to make, many of us aren’t aware of details such as what the impact will be on our repayments when a loan feature like fixed term and interest only portions expire.
An example of why this detail is important is that many lenders are currently reluctant to let investors roll one interest-only loan term into another as a result of the implementation of recent government housing affordability measures. If you aren’t aware of this detail in your contract it may pay to contact your broker to check for you. Finding out that you need to soon start paying principal and interest repayments instead of interest only is not a surprise that many of us want.
A Fixed Interest Rate isn’t Always the Cheapest
It might sound like a good idea to have all or some of your loan fixed but it can end up costing you money if you decide to break the term early. In many cases, exit fees can actually cost you more than it would have cost to pay the variable rate instead. So if you are considering changing lenders or refinancing, knowing any possible costs you may incur from your current loan contract is important.
Reasons for breaking your term may be totally in your control, such as reacting to a lenders decision to change your interest rate. However it may be due to a decision out as a result of a lenders deciding to change their credit policies in a way that’s unfavourable to your goals and situation.
So, while in some cases it may be beneficial to fix rates, speaking with a professional can help you decide whether or not to fix because everyone’s situation is different.
A Cheap Rate Isn’t Always the Cheapest Loan
It is important to look at the costs involved in a loan as a whole, rather than just focusing on the cheapest rates. Firstly, the chosen lender may be the cheapest at the current time but over the life of a 30-year loan, it is unlikely your interest rate will continue to be the cheapest in one year’s time, let alone in 10, 20 or 30 years! Your lender may end up being a more expensive option over time.
The Total Loan Product is the Key
It’s common for borrowers to visit whatever bank they have a transaction account with in order to get a loan – it is often the easy option. Whatever you like about that bank may not mean that they are able to offer you the best loan products for your current circumstances however.
Other lenders may have loan products and credit policies that are better suited to your needs and financial goals. For this reason it is important to research what products are on offer in the market, or use a mortgage broker to do this for you, so you can compare a number of different policies and loan products to find the most appropriate one for you.
Contact Us if you would like to discuss recent rate movements or if you would like to make an appointment to review your finance options.