How To Choose The Best Home Loan For You
When looking for the best home loan of course interest rates are important, but I would suggest that this is just one of the things that you need to consider.
Interest rates are also one thing where banks differ very little, especially after a bit of negotiating.
A lot of the more important differences are not obvious until after you have taken the loan and this is when things can get interesting and can start to cost you more in terms of both your time as well as the fees.
The following are some key areas in which banks often treat things differently;
- Fees that banks charge
- Customer service, and sometimes the lack of it
- Internet banking
- Ability to hold the home loan interest rates
- Other bank offers
Of course when you are looking for the best home loan you might want the help of a mortgage adviser.
Mortgage advisers are looking at all of the options each and every day (almost every day!) and because of this they know which banks offer what interest rates and loan options. In addition, in most cases the banks will cover the cost of using a mortgage adviser so they are free for you to use for advice and to source the best home loan too.
The Fees Banks Charge On Home Loans
Some banks will offer a free everyday transactional account, while others try to charge a flat monthly fee.
If you decide to take advantage of the flexibility on a redraw facility there can be a fixed cost also. A lot of people use a revolving credit style account as their everyday account to lower the overall interest cost so these are a very popular type of loan. Banks can charge up to $12.50 per month for this type of account, but this does include all the transactions.
A low equity fee (or lenders mortgage fee) only applies with a deposit less than twenty percent. Traditionally this was a one-off fee added to your loan amount when you first took out the loan, but many banks are instead now adding a margin to the interest rate paid which is a better option in markets where house prices are increasing. You need to understand which way your bank is going to charge as the difference between the banks on this fee alone can save you a lot of money, so it pays to check with a good mortgage broker before deciding on the bank or non-bank lender.
While sometimes you think fees are small, they do add up over time and can be quite significant as the size of the loans reduce.
The Banks Customer Service
Banks have big marketing budgets and can say all the right things to entice new customers; however the real proof of good customer service comes when you need help and unfortunately that is where we hear a lot of stories of poor service.
Of course having good customer service can mean different things to different people. Some people need to have a local branch where they can pop in to sort out things regarding their banking, but more people these days prefer to work through a mortgage adviser and deal online or over the phone.
The real advantage of dealing with a bank or non-bank lender that supports mortgage advisers is that they can deal with most of your questions and requests from arrange to refix your loans, to arranging a structure to pay off the home loan faster and top ups or mortgage refinances if needed.
The other thing is a mortgage adviser is typically going to be there for many years to help you.
Most of us now do our banking using internet banking or a phone APP.
Some banks have very smart online banking tools while others are not as good.
The Ability To Hold Interest Rates
Banks vary quite a bit with this and specialist advice from your adviser in this area can be very useful.
Some banks now let you lock in an interest rate for sixty days when getting or refixing a home loan. while other banks might charge a fee (refundable on draw-down) to hold the home loan interest rates for you.
It might not sound like a big thing; however when interest rates are increasing it is good to be able to fix the rates as early as you can.
Increasing Your Repayments
Most of us would like to pay our home loan off faster, but banks make more money from us having larger debt and therefore do not always make it easy to pay extra.
It is important to have the flexibility in a home loan so you can increase your repayments when you can, but not be forced into higher repayments during times when cash is tight. The best home loan will be one that enables you to have the structures in place to both offer competitive home loan interest rates and the flexibility too.
What About Other Bank Offers
These days banks offer more than just home loans, but it’s important to understand that while a bank may have the best home loan it may not be very good with insurances or KiwiSaver.
What about insurance?
It’s important that you’re covered to keep your lenders happy as well as making sure your assets are protected if things go wrong. We can help you get a better deal on home insurance and contents insurance as well as step you through the other insurances like income protection insurance, mortgage protection insurance and life insurance.
Ask For Expert Advice
As mortgage advisers we are dealing with various people, their unique situations and of course multiple banks all offering home loan options.
Every bank has what they believe will be a home loan that suits their customers, but of course makes money for the bank too. The real challenge is to find a home loan that suits you and this may mean considering a number of banks rather than sticking with the bank that you are with today.
Having a choice of banks and non-bank lenders means as mortgage advisers we can help select the best home loan to suit a persons situation.
Source: North West Mortgages