Not all home loans are created equally, and some mortgages are more beneficial than others. When purchasing or refinancing a house, consider these tips on selecting the home loan that works best for you.
1. Find a reputable lending company. Ask friends, family, neighbours and co-workers for recommendations, and select a lender with an active customer service department.
2. Determine what you can afford. Never attempt to get a loan without understanding how much you can actually pay. Don’t agree to any loans that will force you to restructure an already tight budget.
3. Consider all the interest rate options. Fixed-rate mortgages are ideal for long-term ownership, but introductory rates are best if you intend to sell the home within the period of the loan.
4. Choose the loan term. Most people opt for a 30-year mortgage, but shorter terms are often more financially sound. When choosing this option, be wary of the higher monthly payments these loans often include.
5. Ask about associated fees. Home loans come with additional costs, and each lender decides whether these fees get paid upfront or are rolled into the loan. Discuss all relevant charges so that you can choose an affordable loan.
6. Inquire about exit fees and tie-ins. Exiting a loan early can result in penalties. Verify how long you’ll be tied to any loan, and select the most appealing option.
7. Watch out for higher lending charges. When borrowing a high percentage of the home’s value, you may get hit with extremely high fees. Look for a company that doesn’t practice this.
8. Choose flexibility over irrelevant features. Rather than picking a mortgage that offers features you don’t need, opt for a flexible loan that allows you to underpay, overpay or take payment breaks.
9. Factor in the deposit you can afford. You may get stuck with an inflated loan if you don’t provide an adequate deposit upfront. A deposit also prevents the need for private mortgage insurance.
10. Look for incentives. Many lenders offer incentives such as rebates or free homeowner’s insurance for a specific time period. Take advantage of these incentives whenever you can, but weigh any affects it may have on your loan.
There is an assortment of home loans available and home loan calculators to help you plan, so take time to research the different options. If you pay attention to the total structure of the loan, you can make a decision that meets your financial needs.