How to Select the Right Home Loan

home loanHere at ACTON we know that when it comes to home loans the choice can be a little overwhelming! With so many options out there to suit people across all phases of the property life cycle, how do you know which one is right for you?

“We are always educating our clients on the best financial options available them. It’s important for them to determine where they are at in their property phase. For example what loan is best for them? This is why we seek expert advice as they might want a variable loan with no exit fees because they plan to sell in 6-9 months as opposed to if they are not planning on selling for the 5 years they might be better to fix their rates.”
Travis Coleman CEO ACTON Real Estate

Variable Rate Loans

In a variable rate arrangement the interest rate charged on the outstanding balance of the loan varies in line with market interest rate fluctuations. Consequently, mortgage repayments vary.

For example, if you enter a property finance arrangement on a variable rate basis and the market interest rate decreases during the term of your loan, this decrease may be passed on to you in the form of a reduction in your interest repayments and, consequently, your total repayments. The downside of a variable rate loan can be the risk of interest rates increasing and consequently your monthly repayments increasing.

Fixed Rate Loans

A fixed rate loan is a direct alternative to a variable rate loan. The interest rate charged on the loan remains fixed for that entire term agreed, regardless of any change in market interest rates.

Whether a fixed rate loan is the preferred alternative for you will depend on a number of factors including, but not limited to, the duration of the loan and also the interest rate environment. If your loan is for an extensive period of time and the interest rate environment is volatile a fixed rate loan may be the choice for you. It is always important to seek professional advice on these types of decisions, as everyone’s situation is unique.

Introductory and Honeymoon Loans

These loans offer discounted rates during the introductory period of the mortgage. They are usually designed with first homeowners in mind, enabling them to get a head start in the property market by easing the initial financial burden that comes with making mortgage repayments for the first time.

Interest only loans

An interest only loan is one in which you pay the interest component on the principal balance of the loan only. Repayments will be smaller than under other loan options and therefore these arrangements allow those wishing to make smaller repayments now, in favour of perhaps larger repayments in the future, to enter the market at a particular price point. This option may also suit borrowers looking to enter the market for a short period of time on an investment loan basis.

Low doc and no doc loans

These loans allow borrowers to access property finance without having to provide extensive financial documentation. They therefore enable prospective borrowers who do not necessarily receive a stable income, such as the self-employed, to enter a loan arrangement.

In making any major decision it is always important to seek the advice of professionals. St James Finance provides expert advice for home loan finance in Perth and will assist you in finding the perfect loan for you. Contact the friendly team at St James Finance today to learn more or 9389 0000 or visit stjamesfinance.com.au.

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