Choosing a home loan
Choosing the right home loan depends on the purpose for the loan and your short and long term strategy.
Then there is a layer of complexity to add, by way of who is borrowing, their character, capacity and collateral.
And the final layer is the lender - their risk appetite for the type of loan, the interest rates, features and terms they are willing to offer.
Essentially, there are hundreds of different elements in a home loan, so working out which of those elements are important, is best done using a home loan broker who can help ensure you are fully informed to select the right one.
Let’s start with the why
- Are you going to live in the property?
- Is the property going to be an investment?
- If the property is land, are you holding it for increasing value or building on it later?
Just asking these questions can help a home loan broker provide you with options that will suit your immediate, short and long term needs.
Choosing the right home loan lender
A home loan broker like Mint Equity has access to over 40 lenders and 100’s of products, so choosing a home loan is something that takes knowledge, experience and an understanding of what can happen if the wrong home loan is selected.
Your strategy can and will change
Of course, your strategy can and will change, but half the battle is knowing how your home loan will be affected if you do change direction. Life can get in the way of strategic decisions and with property market changes, you may need to sell before you originally intended to. Depending on how you structure your home loan, there may be costs if you end the term earlier than expected. You home loan broker will be able to guide you through the changes.
Home loan features to suit you now and in the future
Your home loan broker will be able to provide an insight on repercussions of your selected home loan. If you choose to fix your interest rate, there may be financial costs with breaking the loan. However, knowing that early in your strategy will help you to prepare for the potential costs.
Types of home loans
There are many types of home loans and combinations of home loans. Depending on the purpose, some options and features may not be available. For example, recently the major banks are restricting the number of interest only home loans for owner occupied properties. Repayments are lower on interest-only, but home owners are not repaying any of the principal of the home loan.
The most common components of home loans are;
- Principal and interest
- Interest only
- Variable interest rate
- Fixed interest rate
- Split (a combination of fixed and variable)
Features of home loans
In addition to the core components, depending on the type of loan, borrowers may select features such as;
- Line of credit
- Extra repayments
WHAT TO DO BEFORE BUYING A PROPERTY
SAVING FOR A DEPOSIT
Before you buy a property, you’ll need a deposit of between 5% and 10% of the property price. For example, if you want to buy a house that costs $500,000 you’ll need a minimum of $25,000 of your own cash to use as a deposit. There are ways to avoid saving for a deposit and if you’ve got family or a really great friend who own their own property and have equity (amount owed to the bank is lower than the property value), they could cover/guarantee your deposit with their equity.
There are also government incentives that may help contribute to your deposit.
COSTS ASSOCIATED WITH PROPERTY PURCHASES
In addition to the deposit, you’ll need cash to cover associated purchase costs like stamp duty, conveyancing/legal fees, mortgage insurance. These costs vary from state to state, so a good guide is to put aside a minimum of 5% of the purchase price.
SECURE YOUR HOME LOAN
Before going property shopping, you need to know how much you can spend. Mint Equity is able to assess your financial situation and advise you of how much you can borrow on your home loan before you go shopping. Banks and lenders credit criteria vary, but essentially the more deposit, higher income and lower expenses you have, the more you can borrow.
GET PRE-APPROVED HOME LOAN FINANCE
One of the steps to buying your dream home is to secure pre-approved finance. Not only will you feel more comfortable knowing that the bank or lender have approved your home loan, it will enable you to make quick decisions and beat buyer competition.
Pre-approval finance is essential for auction conditions because once you buy at auction, the property is yours and if you don’t complete the purchase, you lose your deposit.
The team at Mint Equity assist clients with residential, commercial, business, and SMSF lending. We work with the big four banks and multiple second tier home loan lenders to provide a vast portfolio of products for our clients.
We simplify the process for our clients, taking care of all the necessary administration tasks, which includes the paperwork, application process, and the final settlement.
Our services are free of charge, as we are remunerated by the lender you choose once the loan reaches settlement.
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Frequently Asked Questions
Does Mint Equity charge a fee?
No, we don’t charge our clients fees for our services as we are remunerated by the lender you choose once the loan reaches settlement.
What areas the key elements to consider when choosing a home loan?
The key elements to consider in a home loan include;
- Lender – customer service standards, branches, online services and products
- Interest rate – rate, fixed or variable and discounts
- Loan structure – Principal and Interest or Interest Only
- Fees and charges
- Home loan product features – offset, low-doc, extra repayments etc
How do I make an appointment?
We can arrange appointments 7 days a week at a time that suits you and at your preferred location. Our head office is based at Somersby on the Central Coast, or we’re able to meet you at your home, work or even at a café. You can call us on 02 4340 4847 to have a chat or book an appointment.
I’ve seen online lenders, why should I use a mortgage broker?
There are many online lenders advertising on TV lately and all tell you how ‘easy’ it is to get a mortgage. The reality is that it isn’t easy at all and it’s getting harder and harder. Digital disruption is great in certain industries, but borrowers want to be able to speak to a knowledgeable and experienced person who knows credit policy and lender appetites. Unfortunately, most online options are operated by call centres and lack local industry knowledge. There is no difference in cost between an online home loan comparison site or a local mortgage broker, just the level of experience and knowledge.
How many lenders does Mint Equity have access to?
We have access to over 40 lenders including the major banks and second-tier lenders which provides us with 100’s of products to suit the needs of our clients.
How quickly can I get a pre-approval?
Most of the time spent on a mortgage application is collecting all the information. If you are able to provide all the information and supporting quickly, in some cases we can get pre-approval within 24 hours. Mint Equity has priority status with many lenders which enables us to turn around home loan pre-approvals very quickly. However, we would always recommend allowing up to 5 business days to ensure you have enough time to provide all the documentation we’ll need to submit your loan.
What if I’ve already had an offer accepted on a property and don’t have finance approved?
Whilst it’s not ideal to make offers or exchange contracts before getting finance approved, we know some properties are hard to resist. In those cases we will prioritise and escalate your application through the lender. We have great relationships with our lender panel and can assist us to get urgent approval.