Home ownership is highly aspired to in Australia and at as a result, the lending market is highly competitive. Home lending or the home mortgage market is one of the largest sectors in the financial lending industry and is closely watched. Australians have somewhat of a fascination for the property market and sourcing a home loan has become an important and essential part of many people’s lives.
Whether it’s buying your first home, an investment property, downsizing or upsizing, you need to understand how the home mortgage market works so you are well-informed to source a great home loan.
There are several key components of a mortgage:
- The Principal: this is the amount that is borrowed. Usually, purchase price of the house less any deposit paid.
- Interest Rate: this is the rate charged by the lender.
- Home mortgages may be at a fixed interest rate or a variable interest rate.
- Fees: loan establishment fees or application fees are usually applied to a home mortgage.
- Ongoing fees: a monthly administration fees is sometimes charged by lenders.
- Loan term: a mortgage is usually a sizeable amount and as such the term of a mortgage can be as long as 15, 20 or even more years.
Types of Home Mortgage Loans
Principal and Interest: this is most commonly offered type of home mortgage structure. With this loan the monthly mortgage payment is structured to include both the interest charges and the principal.
Interest Only: these are loans where only the interest charges are repaid, usually over the initial years of a loan. Following this period, repayments are usually reset to include a repayment of both principal and interest.
Sourcing a Home Loan
The home lending market is highly competitive with many banks and lenders active in the space. It can become confusing to borrowers to assess what is the best home loan for them. That is where the service of a Mortgage Broker can be extremely useful.
Mortgage Brokers are licensed finance professionals with access to a loans from different sources. They assess your requirements and handle the negotiations with banks and lenders to come back to you with the best options and offers to meet your requirements.
When using the services of a Mortgage Broker, ensure they are fully independent and not simply a representative of a bank or financial institution and make sure you get a written quote.
If you’re interested in sourcing a home loan, we know people that operate in the home lending area and can share their details with you. Please contact us for details.