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Why a Good Loan is About More Than Just it’s Interest Rate

Buying a new home is an exciting time. But it’s also a big financial decision you want to get right. Which is why it’s so important to choose a good loan.

Many people assume the best home loan will be the one with the lowest interest rate. But that’s not always the case.

That doesn’t mean rates aren’t important – they definitely are. But you should also consider five other things when comparing home loans:

  • Features
  • Fees
  • Comparison rate
  • Lending criteria (which impact your chances of approval)
  • Customer service

Why a loan’s features are important

Home loans come in all shapes and sizes, from basic, no-frills loans to mortgages packed to the brim with features such as:

  • The ability to make extra repayments – which can help you pay less interest and become mortgage-free faster
  • Offset accounts – a transaction account linked to your loan, which can save you money by reducing the interest you pay
  • Redraw facilities – which allows you to claim back any extra payments you make on your home loan

Depending on your situation, these features can give you more flexibility in how you manage and repay your loan. However, if you’re not careful, you might end up paying extra for bells and whistles you never or rarely use.

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Why a loan’s fees are important

When you take out a home loan, the interest rate won’t be your only cost of borrowing. Lenders commonly charge a variety of upfront fees such as:

  • Application fees
  • Property valuation fees
  • Legal fees
  • Lender’s mortgage insurance

On top of these one-off fees, some lenders also charge ongoing monthly or annual fees.

What this means is that a loan with an eye-catching interest rate might not be the great deal it appears to be. That’s because, in some circumstances, a lower-rate loan with higher fees may cost you more over the life of the loan than a higher-rate loan with lower fees.

Why the comparison rate is important

So while the interest rate is important, you also need to look at the fees to understand how much a loan will cost you over the entire term.

That’s where a loan’s comparison rate comes in.

The comparison rate, which is sometimes known as the ‘real’ interest rate, is designed to give you a better picture of a loan’s true cost. It does that by taking into account the interest rate as well as the main fees and charges.

Lenders are legally required to show you a comparison rate alongside a product’s advertised rate.

Why lending criteria is important

Lenders have different appetites for risk. So some make it harder to qualify for their loans, by using stricter lending criteria.

Apply to the wrong lender and you’ll likely get rejected. This isn’t just upsetting. It can also damage your credit score, making it harder for you to be approved in the future.

Why customer service is important

Of course, once you take out a loan, you want the lender to provide good customer service if you ever have a query or experience problems.

However, customer service is also important during the application process. Some lenders are responsive, flexible and process applications quickly, while others do the opposite.

So when you apply for a loan, you want to make sure the lender’s customer service standards match your expectations.

What’s the right home loan for you?

Everyone is different. So there’s no one-size-fits-all home loan.

As a result, the right home loan for a friend of yours might not be the right home loan for you. And the right home loan for you today might not be the right home loan for you in five years’ time.

That’s why you need to compare a range of lenders and loan products to find a mortgage that’s a good fit for your situation.

This can be a complicated, time-consuming process … unless you get expert help.

At Shore Financial, our expert mortgage brokers will take the time to understand your unique circumstances. They’ll then scour the market to find you a great loan that suits your needs.

Looking for a good home loan? Shore Financial can help. Contact us by calling 1300 416 700, emailing info@shorefinancial.come.au or filling in this online form.






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