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Finding the perfect first home can be difficult and finding the right home loan can be even more challenging. At present, first home buyers can choose from a wide range of lenders and loan products. Before signing on the dotted line, it pays to do homework. Let your consultant determine the type of features you require and make an informed decision. Standard variable or fixed rate home loan If you don’t need the ‘bells and whistles’ that come with many loans (at a price), then a basic home loan could be the answer. Popular with first home buyers, basic home loans typically offer interest rates of half of one per cent below the standard variable rate. Many also have ongoing fees. In return for a lower interest rate, basic home loans have fewer features and can be less flexible. Some lenders may offer the option to pay for extra features when you need them. There may also be fees and charges if you decided to switch loans or lenders, or pay off the loan sooner. Split rate home loan If you are concerned about interest rates going up, you can choose a split rate home loan, whereby part of the loan is on a floating or variable interest rate and the rate other part is at a fixed rate. These loans generally offer all the features of a normal loan, however there could be penalties for early repayment of the fixed portion. Honeymoon home loan This type of loan could be beneficial for the first home buyers as the lower repayments coincide with the cost of purchasing and setting up a new home. Beware, however as these loans generally revert to a higher rate of interest after the honeymoon is over. Features you may wish to consider including in your loan:
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