Everyone is of course looking for the “best interest rate home loan” but to establish an optimal home loan product in each case there are many questions that need to be answered first. Some of the more important questions that need to be answered are;
- What is the loan size
- What is the property value
- How many securities are involved
- What type of home loan is preferred? Eg fixed, variable, pro pack or splits...
- What is the loan to value ratio
- What type of property
- Where is the property located
- What is the source of income to be used to repay the loan
- What is the estimated or intended life of this loan before it is to be repaid in full or refinanced
- What additional banking features are required
- What additional banking features could be utilised, saving you cost elsewhere
There are often other variables but the above shortlist should provide a general idea. Once we establish the above parameters we can then begin to look at actual loan products and the differences. Additional costs which may be incurred can dramatically affect the interest rate and may render a “low interest home loan” more expensive that a higher interest home loan. Costs which may be incurred and end up costing more than an “advertised interest rate” could include any combination of the following;
Loan discharge fee
Deferred establishment fee
Early repayment fee
Lenders mortgage insurance
Monthly account keeping fee
Annual package fee
To establish the real interest rate, each home loan being considered needs to have these additional costs added to the “interest cost”, and then have the actual interest rate calculated once the additional costs are included to establish an actual interest cost.
Often a home loan that has a slightly higher interest rate and no, or minimal additional fees and charges, may end up costing less that a home loan with a lower interest rate and additional fees and charges.
Finance brokers can help customers make comparisons of home loans using home loan qualifier software databases.
Once all the details and required loan amounts are entered, the system usually calculates which home loan options are potentially available, and recalculates an averaged interest percentage rate based on known additional fees and charges that will be incurred over a given loan term.
This home loan qualifier system could help finance broker customers to build a shortlist of possible competitive home loan options, “what if” scenarios can be examined, and competitive home loan reports can be quickly and easily generated then compared detail for detail.
This is established by calculating all the costs that will be incurred, not by quoting a “cheaper interest rate”.
So if you are looking for a quoted best interest rate no one is going to be able to answer that because there are simply too many varables and ¨cheapest interest rate" is rarely the cheapest home loan!
You need to carefully assess your unique situation and requirements before beginning to develop a shortlist of options.
Unlike a bank or lender who may be offering around a dozen different home loan options brokers help customers choose from literally hundereds of different home loan options spread across 20 or 30 different lenders.
If you call a bank or lender they can easily quote you their lowest interest rates but it may end up being their best interest rate, not yours once other costs are included!
There is no need for you to ring or march around different banks and lenders trying to compare apples with watermelons, brokers home loan comparison software can often do it all for you from the comfort of your own home or office.