Most people will have a home loan at some time in their lives, but maybe not the best home loan – “they could have done better and saved a lot of money”
Most people that have a home loan dream of the day that they pay it off too!
What To Consider When Getting A Home Loan
There are a number of considerations when selecting the best home loan for any given situation, but unfortunately most people will select a home loan based on factors like;
- I spoke to my existing bank and they approved my home loan application
- This bank was the fastest at giving me a home loan approval
- The bank I went with had the lowest interest rate
Sure, it’s easier to go to your existing bank as they require less ‘stuff’ from you and getting a fast approval is nice and less stressful. Plus, yes of course a good interest rate is important too.
But while you may think that getting the home loan approved is the hard part, the hardest part is paying the home loan off. In most cases the banks will set you up with a 30-year loan and will never really explain how to structure the loans (yes – loans not loan) and it’s not in the banks interest to show you how to pay the loan off faster.
Looking For The Best Home Loan…
Some points to remember when looking for the best home loan;
It doesn’t matter which bank you go to – the money is all the same. You could get your home loan from ANZ or Westpac and while one is known as the blue bank and the other is the red bank the colour of their money is the same.
Who will offer the right loan structure? The main consideration when selecting a home loan should be ensuring that you can get the best loan structures which enables you to pay the loans off faster.
Plus you want a good interest rate. It is important to remember that the bank that offers you the lowest home loan interest rates today might not be offering the lowest rate next year or the year after. You want competitive interest rates all of the time, but also remember that you will save far more by paying the loan off faster than you ever will getting a slightly better interest rates for a given period.
You don’t need Fries with that! These days the bank staff will try to “sell” you everything else too. They will try and suggest they arrange house insurance, mortgage protection insurance and even get you to transfer your KiwiSaver. You can get better insurance policies with specialist companies and the same can be said about KiwiSaver providers – banks are not very good at insurance and investments.
Let’s look at what most people think are the important factors when selecting the best home loan.
- Should You Talk To Your Existing Bank?
As mortgage brokers we will most likely talk with a person’s main bank if that bank offers what the people need, including the loan structure options and competitive interest rates.
The important thing is to ensure that the bank provides the flexibility needed to allow you to pay the mortgage off faster, and they generally don’t as it’s a bit more work for them and there is no incentive for them to have you reducing what you owe the bank.
- Getting Fast Loan Approvals
The speed of getting approvals is always an issue.
You have been searching for the perfect house and once you do you just need the finance approved but there is a date that the finance needs to be approved by.
It can be a stressful few days!
You want an answer quickly and the banks seem slow … but why?
Often the banks offering the best options end up getting busy and therefore the processing times get slower. On the other hand, the banks that are not offering the best options are not busy so can process things more quickly.
The same can be said of mortgage brokers – some of the better brokers are busy while some of the others (and many of the new mortgage brokers) are just sitting around waiting for the phones to ring. You want an experienced broker that is busy rather than someone that is not busy.
Probably everyone wants or should want the best interest rate.
The fact is the banks are changing what they can offer almost daily so chasing the best interest rates is always going to be difficult, especially if you structure your lending across more than one loan and fixed term which is recommended.
You might look at the 2-year rate offered by TSB Bank and say that is the best 2-year rate, but they might not have a very good 1-year fixed rate so with split loans the average rate may not be the best. And what about next year when you go to refix the 1-year rate again – what if they don’t have the best rate then?
The best that you can do is insist on competitive interest rates every time, and this is where mortgage brokers can add a lot of value.
A good mortgage broker is dealing with a range of banks every day and will know what is a good deal at any particular time, and can then negotiate with your bank on your behalf to ensure that you get a competitive home loan interest rate. You should contact a mortgage broker every time you have a loan coming off a fixed rate and they can quickly check what you have been offered by the bank and see if they can do better.
It’s a free service offered by some mortgage brokers and it can save you both time and money.
Where Mortgage Brokers Can Really Help
A good home loan is where you have competitive interest rates and a loan structure that allows you to pay your home loan off faster.
As mortgage brokers we encourage everyone to put aside an hour or so each year to review their home loan.
Of course a mortgage broker can offer some free advice on getting the best home loan and even just a few tweaks to your existing loans might save you a bundle.