Best way to shop for a home loan in 2024

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When searching for a home loan, numerous questions must be considered. Which lender is the right fit for you? Are you leaning towards a fixed or variable interest rate? What features are indispensable for your needs?

Discovering a loan that satisfies all your criteria can be challenging, but there are steps you can take to simplify the process. Below, we outline several factors to keep in mind when navigating the landscape of home loans in 2023.

Explore various lenders While many Australians traditionally secure a home loan from the bank they’ve been with for years, often one of the big four banks, this might not always be the optimal choice. Instead of automatically turning to your primary savings bank, take the time to explore offerings from other lenders. Online lenders, in particular, may offer more competitive rates due to lower overhead costs.

Different lenders may also allow you to borrow varying amounts, as they employ different methods for assessing serviceability. Some may use lower assessment rates when evaluating customers’ ability to repay a loan.

Grasp the comparison rate Lenders are obligated to disclose a comparison rate when advertising their home loans. This rate combines the advertised interest rate with any additional charges associated with the loan, providing a more accurate representation of the overall cost.

For borrowers, the comparison rate serves as a valuable tool for comparing different options. A loan with a low interest rate but substantial fees may have a higher comparison rate than one with a moderate rate and no fees.

Consider interest rate trends Understanding the direction of interest rates can guide your choice of loan type. If rates are declining, opting for a variable rate enables you to take advantage of potential decreases over time. Conversely, during upward trends, a fixed rate may seem appealing, but it’s essential to note that fixed rates are anticipatory, reflecting lenders’ predictions of future interest rate environments.

Identify desired features Beyond the interest rate, home loan features should also be considered. Features such as offset accounts, redraw facilities, the ability to make extra repayments, split rate options, home loan top-ups, and repayment holidays are common considerations. Narrow down these features to essential ones to avoid unnecessary expenses.

Fixed-rate loans often come with fewer features than variable-rate loans. For instance, not all fixed-rate loans permit extra repayments, and those that do may impose restrictions on the annual amount.

Monitor your credit score When seeking pre-approval, limit the number of loan applications to avoid multiple “hard inquiries” on your credit report. Numerous hard inquiries in a short period may create the impression of rejected applications, potentially affecting your approval chances. Instead of applying with multiple lenders, conduct thorough research beforehand and focus on one or two lenders that align with your needs.

Opt for the shortest term feasible While extending the term of your home loan may make repayments more manageable, it results in higher overall interest payments. Strive to select the shortest term that fits your budget, striking a balance between manageability and cost-effectiveness.

Ready to embark on your search? Please call or email our brokers for no BS opinion on what is available in the market right now so you can refine your search based on interest rates and loan types.

Our mortgage company is committed to providing expert guidance and tailored solutions, helping you navigate the path to homeownership with ease and confidence.

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