SYDNEY, July 6, 2018 (Newswire.com) - Zaki Ameer, founder of Dream Design Property says, "There's more to a home loan than just comparing interest rates." Different products are designed to suit different types of people and a wide range of circumstances. While it's tempting to get the home loan 'out of the way' and move onto more exciting things, the financial vehicle chosen will determine — at least to a certain extent — the effectiveness of the investment.
Here are a few things to look out for when choosing a home loan:
1. The Rate Advertised vs. the Actual Rate
When comparing loans, remember that the advertised interest rate doesn't take into account all the costs associated with the product. When speaking to financial advisers or banks, ask them about insurances, administration fees and any other costs that will be incurred (either in the form of cash or added to the mortgage) as part of the loan agreement. Often these costs are laid out in the long and complicated documentation, rather than being communicated as part of the initial comparison. While responsible lenders will disclose additional costs, they may only break down the specifics later in the process, when it's too late for the loan product to be changed. Ensure that reviews and complaints online are checked to ensure they have all of their ducks in working order.
2. Options Matter
It's not just costs that are important when selecting a home loan. Consider overall portfolio strategy and plans in the event of a market downturn or family emergency. Will the property need to be sold? Are there plans to subdivide the block in the future? What is the likelihood of the loan being refinanced at some stage?
Inform lenders that a flexible loan is a requirement and ask if there are any additional fees and costs associated with refinancing and making extra payments. Ask if there is an allowance for a "mortgage holiday," where mortgage payments are temporarily stopped for a period of time in the event of financial hardship. These types of options will assist in providing assurance in regards to the flexibility of the loan product, and while they may seem inconsequential now, have the potential to be vital in the future.
3. A Well-Structured Loan
A well-structured loan is one that is understood and is representative of the overall strategy. For example, one may elect to reduce monthly mortgage payments by having an "interest only" loan. As the name implies, this product allows payments on the interest component only, without reducing the amount borrowed. In any particular scenario, this could make the property cash flow positive, freeing up additional capital for improvements. These renovations could provide the opportunity to expand the portfolio further.
No loan is designed with every investor in mind. Financial institutions can't communicate all the benefits and shortfalls of every financial product they offer, so it's recommended to invest time in researching which loan product is most appropriate. Create a list of criteria, based on plans for the property and talk to financial advisers about how to best structure the loan. Taking time at the start to get it right, will mean less stress later on, and may end up saving thousands.
DDP Property is a full suite, buyers agent service that includes a finance arm, to support buyers in obtaining the right home loan for their respective needs. Get in touch today to see how we might help.
Zaki Ameer
Founder
DDP Property
www.ddpproperty.com.au
Source: DDP Property Dream Design Property
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