You might think that finalising your home designs, hiring the architect or managing the stress of the actual construction of your house is the most demanding part of building a house, then you are wrong. Unless you are one of the lucky people who never have to worry about money, there is one strenuous hurdle that you have to cross to even start building or thinking about hiring new home builders Brisbane has.
The part of securing a home loan, that ticks off all your checkboxes of affordability itself is a mountainous task. As simple as it might sound, it is daunting to even think about the steps involved in it. This is probably the most stressful part of building or buying a property, where you have to make sure that you are getting a good deal and one that does not come with any hidden agendas.
We understand that the mere thought of approaching a bank might seem intimidating for many. To prepare yourself, here are a few things you can note down.
Bank or a Broker?
Majority of buyers tend to get their mortgage directly from the bank or the lender. It is convenient to approach a bank where you already have an account to proceed with the mortgage. But that isn’t your only option. Not only that, by doing this you might be missing out on better deals too.
Looking around for mortgage loans from more than one bank could give you a better idea of what you can get. If you do not have time to do this personally, it is best to hire the professional, the mortgage broker. Many people avoid hiring a broker thinking about their fees. What most of you do not know is that many brokers get paid by the lender and not by the buyer. So you are neglecting services that you might be getting free of cost. Even with a fee, you might be better off with a broker by your side especially if it is your first time dealing with mortgages.
Brokers are experienced to work directly with the lenders to negotiate deals that could work out the best for you. They will study your file, your credit score, income, savings, financial standing and helo you find an offer that is specifically tailored to your needs.
Type of Payments
There are two main types of loans, fixed-rate and adjustable-rate mortgages called ARMs. Majority of people are aware of only these two options, Fixed-rate mortgages, as it sounds, offers the buyers a fixed interest rate over the entire duration of the mortgage. Adjustable-rate, on the other hand, has a fixed rate for an initial period and then adjusts at regular intervals to reflect the current market rates. This means that the payment could be high or low, as it will fluctuate.
If you are staying in your Brisbane building for more than a decade and prefer predictable payments, then it is best to go for a fixed-rate mortgage. Your interest rate will remain stable irrespective of the market conditions.
When it comes to ARMS, the initial interest rate set itself is at least 1% less than that of fixed-rate, which might make a significant difference in the long run. Even with the wavering in the market rates, depending on your intervals, the change might affect you only after 5 or 10 years; by then you will be able to save substantially. If you are hoping to move or sell the property within the first decade this seems to be the better choice.
Mortgage lenders have different loan periods. Often it is mostly either 15 or 30 years. A 15-year loan might have a lower interest rate but will have higher monthly payments. For a 30-year loan, with lower monthly instalments, you will have to pay more interest as it is for double the duration. Deciding which is the right one for you will depend entirely on your affordability and financial circumstances. Discuss the scope with your financial broker to know how to proceed.
Will Your Financial Situation Change?
You cannot always predict how your life might change, but if you are expecting some significant changes in your financial situation you need to consider that also before determining which loan to take. If you are expecting an increase in income, then you can opt for an ARM, adjusting the payment periods accordingly to pay more later, if you are expecting a lump sum amount also, you can pay off the principal amount later. If you are worried that your income will decrease then it is best to have a fixed-rate loan.
Lock in Your Rate or Not?
A lock-in allows you to secure a specific interest rate for a specific time before finalising your loan. This protects you from having to pay a high interest rate if the market fluctuates. Another feature to know about is a float-down, that offers you the flexibility to go for a lower rate according to the market even with a lock set on the interest.
Both of these features require the buyer to pay a fee, but if you expect the market to be wavering and how particular you are about the interest, it might be worth to pay the extra fees.
Is it possible to Negotiate?
Negotiation might not always be possible with all lenders. The chances are less concerning the interest rates and terms of the loan unless you are approaching through a mortgage broker. But there are other areas such as an itemized list of expenses, including hidden fees like mail fee when you are opting for electronic communication and such, These are small fees that you might miss in the contract but might add up to a considerable sum during the full course of the loan. Through negotiation, you might also be able to get the lender waive the application fees or closing costs.
This is one of the areas where a mortgage broker can be of the most help. Their relationships with the lenders could get you better offers than you approaching them individually.