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.