Module 4 – Lesson 2 – How to Get the Best Home Loan Deal (7 Min)
How can you negotiate the best home loan deal? Are there any tips and tricks you recommend to get the best home loan deal on the market? We cover all things about obtaining the best home loan deal in the market in this lesson.
Did you know?
The longest place name in the world is 85 letters long.
Unfortunately, this is one of the facts you probably can’t repeat to your friends—and that’s because it’s nearly impossible to pronounce. Taumatawhakatangihangakoauauotamateaturipukakapikimaungahoronukupokaiwhenuakitanatahu is in New Zealand and is 85 letters long.
And when it comes to other super long place names, it’s followed by Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch in Wales, Chargoggagoggmanchauggagoggchaubunagungamaugg in the U.S.,
Tweebuffelsmeteenskootmorsdoodgeskietfontein in South Africa,
and Azpilicuetagaraycosaroyarenberecolarre in Spain.
Prefer reading? Here is a transcript of the video:
Hello and Welcome. Again, this is Paul Pappas from Mortgage Choice. So, you’ve bought your first property, you’re about to buy your property, and you’re looking now looking at your home loan deal. So how do you go out there and get you’re the best home loan deal that most suits you? What’s out there? What factors should you consider? Well, this is how we can help you. So, what points should you consider?
Well, firstly, you’re looking at a fixed-rate loan or a variable rate loan. What types of features are important to you? You’re looking for a redraw facility or like the flexibility of an offset facility and the ability to make extra repayments. Interest rates are clearly important. Obviously, we want to pay the lowest, but at the same time, we want to make sure that we get the features that we’re looking for.
As far as the repayment cycle is concerned, you can always get weekly, fortnightly, and monthly and we always advise to tie it in with your pay cycle principal and interest loans is generally. What is recommended for first home buyers as opposed to interest-only loans.
So, what types of loans are available out there for you? Well, to start off with variable rate loans, a basic variable loan can fluctuate in terms of interest rate movements and so forth, and this is the old-style mum and dad type loan that you know a lot of your parents’ grandparents. And so forth had over in the years gone by it is a loan that allows you to make extra loan repayments.
It provides you with a redraw facility that allows you to take those monies back if and when required at a later date. If you’re looking for the extra flexibility of not only having a redraw facility and making extra payments but also having a 100% offset facility attached to your loan. Now 100% offset facility, it’s a separate bank account that sits side by side against your loan whereby the balance of that offset account facility is 100% offset against the balance of your loan. For interest calculation purposes, the reason it provides more flexibility is that access is more easily and freely available by the offset facility.
Now there’s not a lot of difference between the two in terms of offset and redraw, but a lot of our clients do prefer the flexibility of an offset account facility. If you’re preferring certainty and knowing what your budget’s going to be, then you should look at a fixed-rate loan whereby the interest rate is set, and the repayment is set for two, three, four, or five years. So, therefore, giving you certainty and giving you protection against potential interest rate rises, and you know what your budget’s going to be. You could certainly do a combination of the two. In other words, part fix, part variable, and in fact, a lot of our first home buyer clients are taking out a combination of the two first fixed-rate products. So, they’ve got a lot of certainty and good for their budgeting but also mixing it with a or blending it with a variable rate loan.
So, you’ve got the ability to make those extra repayments that are very important to you as well. So, who gets the best home loan deals out there today? Well, obviously, simple applications get the better deal. And what we mean by that is this, and that is obviously. If you’re borrowing 95%, which is a higher risk to the bank, then they tend to charge a higher interest rate accordingly. Whereas if you’re probably not a first-time buyer with a 50% deposit and only borrowing 50%. But if you’re a borrower that only has a large amount of equity and, therefore, your loan ratio is low. You can certainly negotiate a better rate from your bank because there’s obviously less risk to the bank dollar size is important.
And obviously, the more you borrow, the more the lender is prepared to negotiate and offer you a lower rate. So, the general rule of thumb anything over a $1,000,000 will get a better rate. Owner-occupiers definitely get better rates than investors have been the case for some years, because of the regulations that are around, and certainly, principal and interest owner-occupied borrowers get the best rates going around. I’ve already talked about principal and interest loans being better at that than interest-only tips and general advice.
Looks don’t focus purely on the interest rate. Interest rate is important, and obviously, the lowest rate is important to you as well, but you’ve got to look at some of the features and benefits that we talked about earlier in terms of the flexibility that you require. And what’s the lender’s service level? Like you know, in terms of feature, in terms of satisfying your requirements, what we quite often find is this, and then that is that lenders who offer the best rates in town generally don’t meet the requirements of all borrowers. So, is the lender’s product suitable for you? We find with a lot of online or non-bank-styled lenders go to the market offering you butte rates that simply don’t appeal to a lot of clients because of a whole heap of factors. Know the total cost of the loan so you know we’ve got to look at not only the interest rate, the features and benefits that it provides you the ongoing fees whether there’s an LMI premium involved.
There’s a whole heap of factors involved here, so the interest rate is important, yes, but you need to know what the whole deal is all about. Know your needs like we talked about before in terms of understanding whether you do need an offset account to make those extra repayments and how you are going to handle those and what access to those extra repayments that’s if you can make extra repayments. If it’s your first property and you’re on a tight budget, well, some of these interests, these features might not come into play, and you might just want some fixed rate certainty.
So certainly, we’re here to talk to you about that as well. Look, we’ve got an extensive range of loan products available off our lender panel so we can talk to you about your specific needs, but more importantly, talk to you about what’s out there from the various lenders and negotiate for you with our lender panel to try and get the best product that most suits you/ and in terms of your features required and obviously the interest rate and other considerations that are very important to you. So, we do that shopping around for you as always. Please do reach out to us and talk to you about your specific loan requirements. Part of our obligation to all our clients is to ensure that your obligations are being best satisfied. Thank you for attending.
Best wishes!
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