While prospective homebuyers spend years and months trying to find the perfect floor plans and home designs for their dream house, many of them fail to spend enough time to shop for a mortgage. It might not seem like a worthy matter to spend many days on, but it is, in fact, one of the key elements that could determine your financial future.
Even a small mistake while shopping for home loans could cost you thousands of dollars. One common mistake among home buyers is that they apply for home loans only from a single lender. This limits your options of finding out whether better deals are out there. Interest rates and fees could vary drastically from one lender to another. A minute difference could make for a substantial difference when you take into account the entire course of the loan.
Just like you look around for the right designers and new home builders Brisbane has, you also need to consider more than one option for mortgages too. You are betting your entire investment on the house by taking out a mortgage. So whether you are depending entirely on the mortgage broker, or choosing to secure a loan yourself, familiarise yourself with the key factors listed below.
1. Your Credit Score
The first thing that lenders analyse while considering you as a prospective client is your credit score. Your credit score is what that determines the loan amount, the interest rate and whether you can borrow any money at all. Those with higher credit scores have better chances for a lower interest rate. Even a small percentage in the interest rate could make a lot of difference while you sum up the whole amount.
There are many websites online that one can use to find out the credit score. Try to find out your credit score before you start applying for loans. If you have a low rate, knowing it beforehand will help you address the issues that might be pulling your score down.
2. The Mortgage Terms
Shopping for mortgage loans seems complex mostly because there are several types of mortgage plans. To start with there are fixed-rate, adjustable-rate and hybrid plans for loans. Choosing the right mortgage plan for you will depend on how long you are likely to own the property and how much you can afford to pay as monthly instalments.
The most common loan durations available are for 30 years and 15 year periods. In this itself, adjustable rate loans tend to have lesser interest rates compared to fixed and hybrid plans. Adjustable-rate allows for lower interest rates for a certain period, but after the first interval is over depending on the market fluctuations. Thus this seems to be suitable for those looking to own the property for a shorter time.
If you are likely to own for a longer duration, you can go for fixed rates for either 30 years or 15-year loan duration. The longer the duration, the lesser the interest rate would be. Though the interest rate is higher for the 30 years, since the 15-year option requires you to pay off the amount quicker, even with the low interest rates, you will end up paying more monthly.
3. Watch Out For Point Systems
Many lenders present the option of points while closing a loan. Points are fees that you pau upfront that is calculated as the percentage of your capital loan amount. If you are willing to pay higher fees, then there might be a small concession in calculating your interest rate. If you are taking the loan for a longer duration, then lowering the interest rate this way might be feasible.
However, not every lender offer this. So if you are comparing deals from different lenders, opt for a no-point system to get a fair understanding or ask for a rate with the same points.
4. Beware of Fees
Another aspect that might make the biggest difference between the mortgage deals are the fees that the lenders charge. This might vary tremendously from one lender to another. All lenders are required to provide an estimate of their final fees and other charges when you start with the loan process. These fees and other charges alone could add up to thousands of dollars. When you compare the estimates, make it a point to compare the fees also. You can also negotiate this part of the loan with the lenders. Do a thorough study of the fees and charges before you sign the agreement.
5. When You Shop
Shopping for a loan might sound like a very complicated process. There are two ways to approach this, one is by doing it yourself by reaching out to the lenders or by hiring a mortgage broker to do all the legwork for you.
If you are doing it by yourself, then there are several websites that you can use to compare the rates. It is also necessary that you follow the different market rates and keep track of them.
If you opt to work with a broker, they will be doing most of the tiresome work. Not only will they approach the lenders for you, but they can also take care of the necessary documents, The most attractive aspect of having a broker is that they can negotiate deals with the lender for you. Even with a bad credit score, brokers could get you a deal that might work well with your interests.
Remember to talk with more than one lender when you shop for home loans. It is similar to comparing the different home builders Brisbane prices and quotes before you choose one. While deciding for a mortgage also, you have all rights to keep your options open when you are investing in a Brisbane building.
If you are planning to build a new home you should make sure to hire the best home builders Brisbane has. The most reliable platform to find out all the trustworthy people in the construction industry in Brisbane is TrustCo. Contact us to know more about realising your dream house.