Now that you know how much you need to borrow and deposit to get your new home or property, the next step involves comparing the different mortgages available. This is a vital step and includes more than just looking at the mortgage rates but also ensuring you have picked the right product. You can achieve this in the following ways.
Fixed interest rate vs. variable interest rate
When presented with various mortgages, it is essential to compare fixed interest rate and variable interest rate. A fixed interest rate will require you to pay a specific constant amount in a given period. However, your decision to go for either of the rates heavily depends on the changes in the interest rates.
When you go for a variable interest rate, any significant change in the interest rate by the Reserve Bank of Australia will affect your repayment and this will not always be in your favor. Nevertheless, variable interest rate provides one with the best repayment flexibility as makes it possible for one to repay without incurring any penalties.
Under this mortgage plan, you only repay your interest. Consequently, it is not until you make extra repayments that the principal amount you borrowed will reduce. One major drawback with this kind of mortgage is that you will incur more cost repaying the loan in the long term while principle amount remains unchanged.
When you have a loan, making extra repayments can significantly reduce the repayment period and the overall cost. Nevertheless, most fixed rates loans come with a maximum amount of extra payment accepted in a given period. Some financial institutions may also fine you for paying out a fixed rate early.
Mortgage comparison calculator
Another easy way of comparing various offers in the market is through the use of mortgage comparison calculator. The calculator can let you compare two different mortgages and decide the one that fits your budget. You can compare the flexibility and payments of the various loans more easily using this calculator. Moreover, it gives you the positives and negatives of the various loans making it easy for you to choose the option that suits you.