Friday, July 13, 2012

Cheap Home Loans

Simply put, the "cheapest" home loan or mortgage is the one that costs you the least over the term of the loan taking into account interest rates, fees and penalties. If you are looking for a cheap loan deal, here are some tips that could save you time and money:

Don't assume that your trusty bank of 20 years is going to give you the best deal today because they offered you a great deal the last time you needed a loan. Today, there are a lot more home loan options than there used to be.

There are hundreds of home loans products available and shopping around could save you tens of thousands of dollars. The Internet has made comparing house loans fast and easy. With today's online mortgage comparison tools, it is possible to identify a list of potentially suitable home loans in a few minutes. Comparing loans with the aid of these advanced tools is the smart and convenient way to find you ideal home loan.

Nowadays, prospective borrowers are bombarded with marketing claims of "discounted" or "low" rates. Often these so called "discount rates" may only be introductory offers or come with other fees and conditions in the fine print. It is important to look beyond the headline rates and see what you are actually getting. A good comparison tool could help you see beyond the hype and hidden costs.

Consider your particular circumstances carefully. One home loan product may be ideal for one borrower but may not be the best option for another. The terms and features specific to each loan product could make a huge difference to their cost over the term of the loan.

One way to reduce accrued interest is to make biweekly repayments rather than monthly repayments. An even better way to reduce interest is to take advantage of the offset feature offered by many lenders. Offset facilities allow you to deposit your spending money into a linked account, whereby the balance is subtracted (offset) from the home loans principal. This is especially beneficial if you have significant amounts of money coming into your accounts on a regular basis.

Redraw facilities, if used effectively, could also save you a great deal of money over the term of your mortgage. Every time you receive a lump sum of money or have any money left over, you could deposit it into your mortgage account, reducing the principal and therefore the interest. Then, when you need money for an emergency or unexpected expense, many good home loan products will let you take it out again without fees. Parking additional money in your loan is better than putting it into high interest accounts, which usually pay a lower rate of interest than the interest charged on home loans.

Conversely, even small penalties and fees can compound and be extremely costly over the term of the loan. Beware of fees and penalties such as monthly recurring fees, late payment penalties and redraw fees.

On a final note, beware of costly "exit fees" that may apply for several years after you take out a mortgage. Special introductory rates often come with severe penalties in the event that you pay off of the mortgage within a few years, and this could be a considerable burden if you are forced to sell your home.

4 comments:

  1. Buying a home is a milestone goal in most people's lives and the earlier they achieve this goal, the more peaceful they feel. In current conditions building or buying a home without a loan is a difficult task especially if you are in your mid-twenties and early thirties. But I am glad there are many companies and agencies which are ready to help us by proving loans.
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  2. A loan modification is an alteration of the original mortgage agreement between a lender and a homeowner that makes a homeowner's mortgage payments more affordable.

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  3. There is also one of the reasons for refinancing that may possibly qualify you for the lowest interest rate. For instance, if your income has increased recently and you don't owe to any debts, it indicates that your debt-to-income ratio is relatively lower than the previous loan borrowed by you. This lower "debt-to-income ratio" carries good impression enabling a bank to consider you for a fresh loan at a lower interest rate.

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  4. Buying your first home is both an exciting and a daunting experience. Middle-people requires home loans for building their home. You have posted almost all of its types. Thanks!
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