Sep 07

Home loan finance – a mortgage broker is still your best option

Published in mortgage brokerhome loan financehome financecheap home loan by Vicky Edema
Home loan finance – a mortgage broker is still your best option If you are looking to purchase a new home and are unsure just what is involved in obtaining home loan finance then your best option is a good mortgage broker. A mortgage broker will have access to a wide range of home loan finance and will be able to quickly establish the most appropriate home loan for you. While you may think that the best course is a direct approach to your bank, in reality bank home loans invariably only offer a basic home loan product at a market rate. By using the services of a mortgage broker when looking for home loan finance you can improve your position significantly.

Why is this?

Firstly, by using a mortgage broker he or she will be familiar with all the home loan finance products available and will be able to easily compare interest rates and features for you. Does the basic home loan finance you are considering through your bank provide you with sufficient flexibility?

Your mortgage broker will know whether you are able to salary credit into a particular loan facility for example. By being able to salary credit into your home loan you can save yourself a considerable amount of interest over the life of the home loan. Because interest is calculated on a daily basis any additional repayment of principal immediately impacts on the amount of interest that you are charged for that day. If by salary crediting on the 15th of the month when your interest payment may not fall due until the 10th of the following month you in effect could have say an additional $2000 per month in your account for say 25 days. A mortgage broker will be able to show you how this will make a difference to the total interest repayments you will make on your home loan finance.

A mortgage broker will also help you obtain a cheap home loan if interest rates are all you are concerned about. Unfortunately in the current economic climate interest rates are a factor but with the Reserve Bank recently dropping rates for the first time in many years, borrowers would be wise to look at features that can deliver good interest savings as opposed to a basic cheap home loan rate. A recent added feature that a mortgage broker will be able to explain to you is the “offset account”. Various lenders offer offset accounts – these are savings accounts that attach to your home loan finance. Under a 100% offset structure, the interest you earn on your offset account is identical to the interest you pay on your home loan finance. In other words, and a mortgage broker can explain this in detail to you, the balance in your offset account is deducted from your outstanding home loan finance balance and you only pay interest on the difference.

A mortgage broker today should recommend a 100% offset account as opposed to a facility where the offset account earns a lower rate of interest than the interest you are paying on your home loan finance. So, if you have $20,000 to deposit into a savings offset account and an outstanding loan balance of $150,000 your monthyl interest is only calculated on $130,000. This is an annual saving of $1850 (@ 9.25%). The 100% offset, if you have savings can effectively give you a lower overall rate than some other cheap home loan which has limited flexibility and features.

So don’t have the attitude that “my bank will look after me” because all banks in Australia are driven by profit and will not always be working in your best interests.
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