Money is arguably the single most important deciding factor in the type of home you acquire. The good news is that with very few exceptions, you can get the home of your dreams regardless of your current financial situation. Most people only know about one or two possible home loan options which severely restrict their ability to buy their dream home. Rather than settle on what you can afford, below are a few home loans options that are worth considering.
Fixed Home Loan
As the name suggests, a fixed home loan means that the interest rate you get when you acquire the loan remains as it is for the duration of the repayment period. This means that whether interest rates increase or decrease, your scheduled monthly payments are exactly the same. This is a great option if you are budget conscious and like to know exactly how much expenses you are looking at in any given month. This is also a great way to protect you from inflation.
The downside is the lending market is unpredictable and interest rates can fall significantly a short time after getting the loan. You still have to pay the agreed upon amount meaning you wont enjoy any savings in such an event.
Interest Only Home Loan
An interest only loan means that you are only paying interest on your loan for a pre-determined period of time. This may be a good option if you are strapped for cash and want to take advantage of a slump in the housing market to acquire your dream loan. The monthly payments in this case are minimal at least for the initial agreed upon period.
The main disadvantage of this type of loan is you may end up paying significantly more over the long term. Remember that you are still not paying off the principle and once this takes effect, the monthly payments rise significantly. It may also take longer than usual to repay the entire loan.
Refinance Home Loans
Refinancing only applies to people with existing home loans. In this case, you negotiate your current arrangement with the existing lender either to incorporate newer and better features on your loan or to pay less interest. There is also the option of shifting the loan to a fresh lender. This is a good idea if you want to consolidate debt. This means stashing all your credit card debt and other personal loans into one comprehensive loan with lower interest.
A lending expert such as from DeYoung Mortgage can explain the merits of this type of move including in accessing extra funds for large purchases or equity.
No Deposit Home Loan
A no deposit loans rarely means that you don’t have to pay any deposit at all. These types of home loans usually offer very low deposit where homeowners can get up to 95 percent of the home’s asking price. There may be additional charges such as lenders mortgage insurance and stamp duty so it is prudent to do due diligence and find out exactly what you will be paying.
This is a good option for people who don’t have the money for large deposits or for first time home buyers.
Variable Home Loans
As the name suggests, variable home loans interest rates vary depending on the prevailing interest rate set by the reserve bank. These loans are typically stable with the advantage of paying less when interest rates are down. It is worth noting that the interest rates are also subject to the lender’s discretion so you need to find out how this clause may affect you. Unscrupulous lenders are notorious for raising interest rates arbitrarily so you need to ensure you have an honest lender who adheres to the industry’s best practices.
These are just a few of the home loans worth exploring if you are on the market for a home. Speak to a qualified financial advisor, preferably one who is in the mortgage and home loans industry for expert advice on the best course of action.