08/05/2016

What should you consider other than interest rates?

What should you consider other than interest rates?

Interest rates are an incredibly important part of your home loan. After all, they are the dictating force over what the final cost of your new property will actually be. However, while you should always consider this factor in your home loan comparison, it certainly isn’t the only deciding factor for your home loan.

Home loans aren’t just about getting the most competitive interest rate – let’s take a look at the other features you should be considering.

Pay off your loan faster

You might want to get a low interest rate because you are primarily concerned over how much you are going to be paying per month. That’s a good start to taking control over your budget, but people often forget that payments are affected at both ends – a higher interest rate might be offset if you can pay off your actual loan balance faster.

And with some home loans, you don’t have that ability, or incur a fee if you try to do so. Fixed loans, for example, are known for lacking this particular feature. Whilst you are protected from rising interest rates with a fixed loan, you also tend to be unable to pay more than the required amount per month. So, if you suddenly get a promotion or a windfall cash lump sum from somewhere, you can’t put it towards paying off your mortgage and removing your debt (and additional interest payments) sooner.

The extra features are useful but cost more

Home loans can be as simple or as complex as you like – additional features such as offset accounts, lines of credit or redraw facilities can give you the additional flexibility to manage your loan better. However, they will also tend to cost more, whether that’s through a higher interest rate or through an additional product fee.

They could be worth the extra cost if you would benefit from the additional facilities. Lines of credit are great for those with irregular incomes, redraw facilities give you the opportunity to withdraw from your mortgage in case of emergency, while offset accounts allow you to use your savings to reduce your interest repayments.

If you only look at the interest rate for a home loan, you might be missing out on an incredibly useful feature or the ability to pay off your loan faster. Remember, seek home loan advice from professionals like us to discover which loan type would be best for you.