There are four crucial factors that homebuyers need to take a closer look at when considering borrowing in the current interest rate environment.
Lenders raised interest rates on at least 303 loan products in October alone, according to Finder.com.au, and more are expected to follow.
With interest rates likely to rise at some point in the near future, here are four things that borrowers should consider.
IF YOU MAKE YOUR HOME LOAN, YOU HAVE TO PAY A LOCK FEE
Fixing a loan is one thing, but unless you pay an interest rate lockout fee, a lender can increase the fixed interest rate you pay between the time you are approved and once your property purchase is settled, Rate City Research Director Sally Tindall said.
“Right now, our data team is being flooded with rate changes, and prices only need to rise a little bit to offset the cost of locking them in,” she said.
‘But the fees change from bank to bank. The CBA charges $ 375 as a standard fee, but other banks can charge a percentage of the total loan, which can be much more expensive. “
DO NOT WAIT FOR WEEKS FOR PRE-APPROVAL OF FINANCE
With record levels of refinancing, lenders are facing an increased volume of loan applications and this can cause delays. Mortgage Choice broker James Algar said prices and features do not count much if the bank does not approve your application in time.
“Many loans end up with lenders with the best turnaround time,” Mr Algar said.
“You may not be able to sit and wait weeks for pre-approval, or you may miss the property.”
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ASK FOR A BETTER OFFER OR CHANGE YOUR DIVIDEND FOR MORTGAGE
Loyalty only goes one way with lenders, and while it may be beneficial to switch, it may also pay to ask your current lender for a better deal.
“Banks are going to make money and they are making a lot of their money on people who walk through the door and do not ask for a better deal,” Mr Algar said.
“If you have to change, but the new bank is going to take seven weeks, it may not be worth it. But if you go back to your existing lender, they will often match the rate. “
PAY MORE OF YOUR MORTGAGE NOW
Algar says borrowers should prepare for future interest rate hikes by paying an extra percentage now.
“That way you’re used to it if the prices go up and if they don’t go up that much, you’re paying extra down anyway,” Mr Algar said.
“If you can afford to pay more, there’s no better time to do it than when prices are at an all-time low.”
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