Not long ago all mortgages were almost identical. Therefore
all you had to do was find the lowest interest rate and you
would have found the best available loan. No longer!
Now even if the interest rate on two loans is identical, be
warned that each and every loan is different.
How do you work out which loan is right for you?
It is all in the features and benefits of a loan along with
the fees.
A feature of a loan is something that the loan allows you
to do.
A benefit is the positive outcome that you can get by using
that feature.
Some of the most commonly used features and
benefits are:
Feature. |
Benefit. |
| |
| Fix the interest rate.
|
Lock your
interest rate means your repayment is at set amount
for a set period of years. |
| |
| |
| Interest Only. |
Pay a lower
payment because you are paying only the interest on
your loan. This means of course that your balance does
not reduce. |
| |
| |
| Splitting your loan. |
Enables you
to literally break your loan into different parts with
different features on each part. For example half fixed
and half variable. Also handy for keeping investment
portion of a loan separate to personal. |
| |
| |
| Extra payments.
|
Allow you to pay more than
your contracted repayment either regularly or in lump
sums and then only charges you interest on your new lower
balance. |
| |
| |
| Redraw. |
Allow you to ‘take back’
those extra payments which you have made on top of your
required minimum repayments. |
| |
| |
| Portability. |
Your loan can be transferred
from its current security to another security at minimal
cost compared to starting your loan all over again. |
| |
|
