Thursday, February 03, 2005

Choosing a Home Loan

There are several factors to consider in choosing the right home loan. What is right for you will depend a lot on your particular situation, lifestyle, and goals.

If you are the type of person who would like to have the peace of mind and security of knowing what your payment will always be, then a fixed interest rate home loan is probably the best choice for you. This type of loan has a fixed interest rate for a specific term unlike a variable rate home loan where the rate varies according to the market. With a fixed rate loan when the loan reaches the end of his term you may be able to roll it over into new fixed term loan at the current interest rates or convert it to a variable rate loan. While you get security and stability with fixed interest rate loans you will often pay a higher interest rate than you would with a variable rate loan.

If you do not expect to stay in your home for an extended period of time or you simply want to have the lowest possible payments initially then a variable rate home loan might be the better choice for you. Variable interest rate loans offer flexibility, low fees and low interest rates. They also have other features which you would not find in the fixed rate loans. These features include a redraw facility, direct salary crediting, they are portable and in their often there is free payment options. The redraw facility is a feature which allows you to have access to extra funds which you may have paid if needed. The interest rate for variable rate home loans is usually the lowest interest-rate of all types of home loans.

There is also a type of home loan which is called a split rate home loan. This is basically a combination loan which consists of both a variable rate component and also a fixed rate component. This is essentially the best of both worlds. Part of the loan has a fixed rate for the term loan while the other part varies.

If you are thinking about taking out a new mortgage make sure to research all the types of loans available to you and then discuss your options with a mortgage professional. You will want to try and find loans with low monthly account fees.