Home loan update: What to look for when shopping for a home loan?

Published on December 1st, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Purchasing a home for anyone is one of the biggest investments you could make. Furthermore, you would like to make it worth your buck since you will be forking out a lot of money towards your mortgage. Before you even move into your house you will need a home loan. We have put together research that can help you in choosing the right home loan for you to suit your financial needs.

The average home loan size

Knowing the average home loan size can give you insight into how many homes loans get approved, the amount of these home loans, and whether any of these are set at fixed at variable rates. Australia currently sits on a total of 9 million homes with nearly 20,000 dwellings approved every month. Finder recently released statistics on Australian home loans statistics. In September 2017 a total value of home loans that were written in Australia was sitting at $20.5 billion with an average loan size of $371,700. For first time home buyers this drops even lower with a cost of an average loan size at $315,200.

This can aid you in determining the costs of how much you can borrow when taking out a home loan to ensure that you are financially prepared. You will need to be able to compare the lowest interest rate that will match your mortgage. However, don’t fall into the trap of being an interest only mortgage borrower.

The trap of being an interest only mortgage borrower

Being savvy about how you spend your money is essential. Watching the Australian property market, coupled with research t to make key decisions can also be helpful. However, an interest mortgage borrower who constantly reacts to every change in interest rates to make their decision can reflect poorly on them. Research done by Morgan Stanley’s AlphaWise show that interest-only mortgage borrowers are usually less competent money managers and are risks by financial institutions.

Firstly, interest-only mortgage borrower save less, but they are also most likely to sell their property if interest rates rise which could raise a red flag from financial institutions. They are also more likely to dig themselves into more debt as they take on more debt with 53% staying that they would use credit cards to manage their higher costs.

Best and the worst home loan rates and why you need to compare

With the reserve bank leaving the cash rate at 1.5% this has seen a variation in terms of the gap between the best home loans and the worst home loans. This is also the perfect time to go shopping around for the best deal in your home loan by comparing as home loan lenders are cutting rates to bring on new borrowers. However, this has also created a gap in terms of lenders who have not yet changed their rates. By comparing you will be able to save some money by finding the best deal on the market.

Locking the best deal for yourself

At the end of the day you want to secure a deal that will benefit you and your pockets in the long run. It’s advisable to speak to a reputable financial lender that can assist you in comparing loans, and rates that will best work for your needs. Beware of additional fees that might come with your loan, ask for a discount from your financial lender. To get a deal that is below 4%, you will need to be an owner occupier with a loan-to-value ratio below 80%.

Use your power as a consumer to leverage on the specials in home loans that are currently open on the market. If your current lender does not offer a competitive deal or a discount threaten to leave. They would rather fight to keep an existing client than to spend more on a new one. Try to be aware of your loan terms. The norm is usually a 30-year loan term, but there are also some lenders who offer up to 40-years. Just keep in mind that while you mortgage repayments will be lower due to it being spread over a long term, you will still be paying more in interest cost because of the longer loan duration.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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