5 Things Everyone Should Know About Home Loans Before Applying
Applying for a home loan is a big step. Owning a home is a big investment, and one of the most expensive purchases you’ll ever make in your life. A little research into the home loan process upfront is essential in order to ensure you get the best deal. Here are five things everyone should know about home loans before applying.
1. Different Types of Home Loans
Not all home loans are created equal. It’s important to understand the different kinds of home loans so that you can compare and select the best option for you. Consider how long you’ll need the loan, what repayment options and loan features are available, and what fees and interest rates you’ll be charged.
2. Your Credit Score Matters
Your credit score is one of the most vital factors lenders consider when evaluating your home loan application. The higher your credit score, the better rates and terms you’re likely to get. Improving your credit score before you apply can put you in a stronger position to get a great deal on a home loan.
3. Compare Different Lenders
Different lenders offer a range of loan products, so compare home loan products from several different lenders so that you can pick the best one. Look for features such as redraw facility, offset accounts, and additional repayments if these are important to you. Check any early exit and termination fees, too. Make sure you factor in the costs of getting the loan – things like application and settlement fees.
4. Shop Around for a Better Rate
Once you have applied for a home loan, you aren’t necessarily stuck with the loan for the entire life of the loan. According to MoneySmart, “Refinancing is when you pay out an existing loan and replace it with a new loan, usually one with better features and/or a lower interest rate.” This is a great way to reduce your loan costs, so it’s worth seeing if you can get a better rate with another lender.
5. Estimate Your Mortgage Repayments
Knowing what your mortgage repayments will be can help you plan for the future. Estimate your mortgage repayments with the help of an online calculator. A good place to start is the Mortgage Repayments Calculator from Low. The calculator will give you an idea of how much you’ll be expected to pay in principal and interest when you take on a home loan.
Before you apply for a home loan, it’s important to understand the different types of loans available, the importance of a good credit score, and the importance of shopping around and comparing lenders. You should also make sure to estimate your mortgage repayments before making a commitment. With these tips in mind, you’ll be better equipped to make the right decision on your home loan.
