Differentiating Home LoansBy Dave Fleming : 17 December, 2018
How do you differentiate between
the various home
loans on offer?
The essential information
Although, there are a vast variety of home loans available in the market, but for the sake of this piece not turning into a War and Piece saga, we are going to discuss only three prime home loan options.
Purchase home loans: These loans are available to individuals for purchasing a new property either to live in or for investment purposes.
Refinance home loans: For the sake of getting a better deal and if you already own a house, then a home loan refinance can be the best option for saving money.
A home equity line of credit loans: are loans secured by your home equity so that you can have flexible credit and use it for just about anything you want.
So what should we look for when applying for any home loan? Well, it usually includes the amount you need to borrow, your credit history, whether or not you want an interest – only loan and various other questions akin that.
Mentioned below is the list of home loans available out there. However, it is always advisable to have an expert opinion on each kind before reaching for a decision.
• variable rate mortgages
• Fixed rate mortgages
• Split mortgages, part variable and part fixed
• Basic mortgage
• Professional package mortgage, includes offset account
• Line of credit
• Bridging loans
• Construction loans
• Intro mortgage
• Low Doc mortgage
• Self managed superannuation fund mortgage
When was the last time you checked your credit report?
One of the most significant features in getting a loan approval is the credit history. Lenders through your credit history can gauge your repayment behavior and on that basis decide the rate of interest and other terms and conditions of the loan offered. The better the credit history you bear, the better the chances of getting the best deal.
During the credit application process you firstly have to understand that the credit risk level and your prior credit history is going to set the credit risk level as assessed by the lender. If your previous credit record depicts a slow payment behavior, missed payments or over the limit purchases on a credit card, then you are going to be put in the high credit risk category by lenders.
Revolving Line of Credit Credit: Depending on the type of Line of Credit will determine if they think you are a risk. Generally though you usually only have to make interest only repayments until you reach the approved limit of the facility. Nonetheless in today’s credit market it pays to make some principal balance payments on a regular basis to prove that you’re not using the facility to prop yourself up financially.
Installment credit: Any payments more than 30 days past due will hurt your credit score
Housing debt: no payments are allowed to be past due. To prove your payment history, you can present the checks to the lenders.
However, what if you have bad credit?
Well, in that case, you will have to apply for a bad credit home loan. Before trying to get a bad credit loan, you should acquire a copy of your credit report so you know what your credit score is. You can get one from any trusted credit reporting agency. At present In Australia, there are three renowned credit rating agencies which are engaged in mortgage credit risk reporting. The credit score from these companies will be used by the lenders to evaluate your creditworthiness. After the evaluation assessment of your creditworthiness, the lending company decides which kind of bad credit loan product they will be prepared to offer you.
Be ready for a higher than usual interest rate quote though.
The popularity of mortgage brokers grows
Mortgage brokers now account for over 53% of all home loans in Australia. This is not by accident, as professional brokers in today’s market have to maintain high level educational and compliance standards.
Unless you have a very good reason for doing so, going directly to a lender is probably going to cost you more money in the long run than necessary. The lender is not going to tell you what their competitors are doing and in the main will try to sell you a product best suited to their bottom line.
Getting the best service
Whereas, brokers are in it for the long run and will nurture their relationship with you by finding out your real needs and wants, not only for the immediate, but also for your long term needs. From there they will drill down and look for the very best deal available to you.
Brokers know that this loan won’t necessarily be the last loan you will be looking for. As you go through life you will have other loan requirements.
When did your bank last call you?
By the way, when was the last time your bank called you and offered you a lower interest rate? In fact the opposite happens; many bank customers experience interest rate creep by stealth.
Call you broker next time you need a loan or call them now if you need a mortgage health check, you will never know how much money you could save if you don’t pick up the phone