Buying your first home is the most eventful chapter of your life. You have reached a few career milestones, made good choices and finally reached the point where you can purchase a house. The intention of buying a house can be living in your property or investing in real estate. Either way, you need to figure out the most significant matter of all, which home loan to choose?
There are many options of home loans to choose from, variable-rate home loans, home loans fixed-rate, interest-only home loans, and refinancing home loans. Choosing either is like buying a pair of boots; you buy the one that fits.
Additionally, you have to consider how much down payment you can give, the location of your desired home, the size and the theme of your home, and most importantly, if your chosen house will go out of your budget and if it will, then by how much? Are there ways to get a loan that can get you the home of your dreams and still be within your budget? As you can see, the most crucial problem that you must figure out is not which house to buy. But it should be, which loan to consider? A good loan will make the difference between having the choicest home and choosing a property half-heartedly.
Let’s find out the different types of home loans so you can decide which is most suitable for your personal needs.
1. Variable rate home loans
Variable-rate home loans are a type of home loan where the interest rate on the principal amount varies based on certain factors. These factors are subject to market conditions, interest rates changed by the Reserve Bank of Australia, etc.
Usually, when people expect the interest rate to go down with time, they choose this home-loan option. Also another benefit of selecting this loan type is that the interest rate initially remains less than fixed-rate home loans. In this way, you can save money by paying lesser interest. Usually, people looking to pay off the loan in five years or less choose this type of home loan.
2. Fixed-rate home loans
As the name suggests, this is a home loan where the interest rate is fixed. The rate of interest in this type of loan is usually higher than in fixed-rate home loans. Now you may wonder why anyone would prefer this option. The answer lies in the fact that the interest rate of this loan is independent of market conditions. External factors have little to no impact on the interest rate, making this a stable choice—people who do not want to take risks concerning the interest rate choose this loan.
3. Interest-only home loans
These are home loans where you are explicitly paying the interest first and then the principal. These home loans are opted to gain tax deduction benefits. Many opt for these home loans to invest in salary hikes without increasing their monthly expenditures.
If you opt for this loan, you can invest in other aspects of your home, such as maintenance, renovations etc. Although the interest rate in this type is slightly higher than the other options above, this provides investment opportunities and flexibility in repaying your debt.
4. Refinancing Home loans
When buying their first home, most people get a little help from their parents, close relatives and friends. As purchasing your house is too big of an undertaking, many people help but with their convenience. Sometimes, you want to factor in the event wherein someone gives you a hefty inheritance, for instance, in your home loan plan. This is where refinancing home loans are best suited for you. In the event that you receive a large amount from relatives or receive a hefty investment equity, you can pay off your loan without paying any fees to the bank. This is an appropriate choice when you are aware of such a possibility in future.
When it comes to financing your home loan, APW Finance is well-experienced and equipped to guide you through the process and aid you in making the right decision for you. When deciding on buying your first home, help from professionals can help take the stress off. APW can help you with the right home loan for your individual needs and requirements.
Feel free to contact us to get guidance for getting the best home loan in Sydney for your house.