Comparing mortgages is without a doubt one of the more challenging tasks that the average person will have to confront in their financial life. For any home buyer, be it a first home buyer or an established home owner looking to refinance their mortgage or upgrade to another home, or an investor buying an investment property, making home loan comparisons between different mortgage providers and between various home loan options can be a highly complex exercise.

There are benefits in doing some homework before going to a mortgage broker; it will allow you to familiarise yourself with some of the terminology and factors in mortgage lending. It is worth going through the basic exercise of comparing home loans both in terms of monthly repayments and also in terms of flexibility of the loan. One feature could be the capacity to make changes to repayments or to switch lenders is a potentially rewarding exercise.

Decisions on the home loan should not be based on simply going for the first loan someone tries to sell you – rather an organised approach using all the information you have gleaned from the basic exercise. Comparing mortgage providers, variable and fixed interest rates, lenders, and loan types is essential. The mortgage broker can be a useful ally.

Consider the basic variable mortgage – usually described by lenders as a ‘no-frills’ home loan with low fees and a low interest rate. In any home loan comparison this is usually the first feature mentioned but is only one of many. Other features would include the headline interest rate, and also another interest rate, referred to as the comparison rate. This is the rate that can be used to make a choice between home loans from different providers. It only takes into account certain fees and does not necessarily prevent you from being penalised if you have not selected the best mortgage for your purposes.

In the home loan comparison exercise, any two loans need to be compared over the life of the loan. This takes into considerations upfront fees and eliminates any early exit fees.

The role of the mortgage broker is to offer the customer an appropriate home loan for their particular needs. This will require an extensive ‘Q&A’ exercise looking at the borrower’s capacity to service a loan and all the documentation needed to support an application, including the obtaining of a credit report.

The borrower will work through a short list of mortgage provider products and go through the list of features noted earlier. Other features that would normally go into a thorough comparison exercise would be whether the mortgage provider’s range of products allows the option of additional repayments; whether an offset account is available; whether interest-only repayments are available; whether the bank or credit union offers a redraw facility on their product.

The comparison exercise would list whether an application fee is to be charged and whether an administration fee applies, either on a once off or monthly basis. The home loan comparison exercise should also reveal any costs associated with early termination of the mortgage from the particular mortgage provider.

Mortgage brokers will also assist consumers seeking mortgage refinancing, for example in the case of a borrower wanting to switch out of their existing loan or to assist in the raising of loan funds from home equity.

Contact us to speak to a Mortgage Broker today for advice on your next home loan at http://www.moneynet.com.au through our online form http://www.moneynet.com.au

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