With the Reserve Bank of Australia’s recent cash rate rises, many homeowners are learning to live with the highest variable interest rates in years.
If you’re struggling to manage rising interest rates, you may be considering refinancing for a better rate. Or, if you’re in the market to buy your first home or plan to attend a property auction, you might be wondering how to find the lowest rate possible.
Well, you’ve come to the right place!
Here are five quick tips for getting the best home loan rate in 2022.
- Shop around for different lenders
The first step involved in finding a better home loan rate is to compare lenders. Thankfully, online comparison services make this easier, allowing you to search for different lenders and view their offered interest rates, comparison rates, monthly repayments, and customer ratings.
Rates can vary significantly depending on the lender, the type of loan, and your circumstances, including:
- Loan-to-value ratio
- Mortgage size
- Credit score
- Type of loan, i.e., construction loan, investment loan, low-doc loans for self-employed individuals
- Loan term
- Deposit amount
- Additional features included in the loan, i.e., offset or redraw accounts
If you’re unsure how these factors could influence your home loan rate, we recommend using an online calculator or consulting a broker for home loan advice. You can also speak directly to different lenders to find out which rates to expect based on your circumstances.
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- Take note of the comparison rate
A comparison rate accounts for charges related to a loan on top of the stated interest rate. This rate provides transparency on the actual cost of the loan and helps you more accurately compare services different mortgage providers and financial institutions offer.
The National Credit Code regulates how lenders must display comparison rates. Generally, the rate must include all charges, excluding government fees and charges only made in particular circumstances, like if you pay off your loan early.
Make sure to check the comparison rate when comparing lenders so you’re fully aware of the real costs involved.
- Identify your wants and needs
Now you’re aware of how different factors can influence the cost of the loan, it’s time to weigh up your needs and desires.
For example, you may want an offset account to pay off your home loan sooner. Some lenders may require annual fee payments or higher variable rates to offer this service—so it’s worth weighing up whether the extra costs will benefit you.
Pinpoint your ‘must-haves’ and keep a few ‘nice-to-haves’ in mind. If you’re after the lowest rate possible, you may need to compromise on a few of these ‘nice-to-haves’!
Some final thoughts
Finally, consider future interest rate changes. Some experts have anticipated variable rates will continue to rise in late 2022 and early 2023—but there’s no way to know for sure.
You might consider a fixed or partially fixed interest rate to keep your repayments consistent, but keep in mind that fixed rates are often higher than their variable counterparts.
And if you’re still unsure, speaking to a broker or another financial expert is always a smart bet!
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