Acquiring a loan for your home, whether it be your first or another investment property, is a big step financially. In this article, well talk about a couple of things you need to put into consideration before taking out a home loan.
Mortgages arent simply commodities. Most people think that its only about the rate, well it isnt. Its about looking out for and finding a trusted partner that can help you navigate a complex transaction by giving responsive support and honest advice about the entire process.
Avoid interest-only loans. Unless youre looking to move in a short period of time, or the loan is simply a short-term bridge avoid going for the interest-only loan. If youre paying interest, you wont build up any equity or ownership in the home.
The two types of lenders. Basically, there are two types of mortgage lenders who advertise on the web and those who use newspaper rate table. These are perhaps ones youve heard for and ones you havent already. So why do major, well-known lender advertises higher fees? It might be because they have higher cost structures, or perhaps they are more reputable and can provide a lot more service.
What aright home loan feels like. You should know that mortgage brokers arent banks and dont necessarily play by the same rules. As such, countless stories about bait and switch happen with people being promised by an agent/broker one thing but end up with another during closing. You shouldnt accept any last-minute changes. Just walk away while inconvenient. Way away from the loan if:
- The agent/broker wants you to borrow more than necessary.
- The agent/broker encourages you to overstate your income or understate your outstanding expenses or loans.
- If the agent/broker prods you to agree to payments you know you cant afford.
Try avoiding mortgage insurance altogether. Many home loans require mortgage insurance. Some will waive the insurance if you have a low enough debt-to-income equity ratio when taking out your loan. Many mortgage insurances protect the lender and the buyer. Thats the harsh reality of life.
Avoid adjustable rate loans as much as possible. Adjustable rate loans are attractive to people since they used lower advertisement rate. They usually allow you four payment options:
- Do not pay minimum since it wont even cover the interest on your loan and can easily lead to a situation where the home has lesser worth than your loan.
- As stated above, interest-only payments are not recommended since no money is going to pay down the loan or make home equity.
- A fully amortized 15-30-year loan.
With that said, the ideal choice is fixed rate home loans offered by a trusted home mortgage provider by Newcastle Permanent. Fixed rate home loan is more advantageous since you get locked in interest rate and fixed repayments from 1 to 10 years. In short, it gives you the certainty of knowing what your repayments will be like for the remainder of the mortgage.
Thats it. Be sure to continue researching about things you need to know about buying a home and the home loan provider before you fully commit. Best of luck on your home hunting!