What are the Best Steps to Narrow Down the Right Home Loan?
Finding the right home loan can seem overwhelming because there are so many lenders and loan options to choose from. Here are some of the best steps to follow when trying to narrow down the right home loan option for you.
Choose Between a Principal and Interest Loan or an Interest-Only Loan
Principal and interest loans are the most common type of home loan. These usually have 20, 25, or 30-year terms, and you can make regular repayments on the amount your borrowed and the interest. Conversely, interest-only loans allow you to pay just the interest on your loan for a set amount of time. This doesn’t reduce the amount you owe on your loan, but it does make your monthly repayments lower during the set term.
Apply for the Shortest Affordable Loan Term
The length of your loan not only affects the size of your monthly repayments but also how much interest you pay. Shorter loans have larger monthly repayments, but you end up paying less in interest. Longer loans have lower monthly repayments, but you end up paying more in interest. Therefore, shorter loan terms are ideal, as long as you can afford a higher monthly repayment.
Find the Lowest Interest Rate
Your interest rate affects how much you pay by the end of your loan term. Having an interest rate that is .5% lower can save you thousands of dollars over the life of your loan. Not only do you want to find a loan with a lower interest rate to save you money, you also have to choose between a fixed rate, a variable rate, or a partially-fixed rate.
At Mortgage House, we understand how overwhelming finding the right home loan can be. Our brokers make it easy by comparing lenders’ interest rates, assessing how large of a loan you can afford, and helping you choose the right type of loan for you.