Ugh! Housing costs are so expensive! Whether you are a first-time home buyer, looking to downsize, upgrade, or for a retirement home, lowering your mortgage would be a great way to save.
- The first tip is to shop around for the best deal. Sometimes your local bank or even a nationwide bank will not save you the most money. Some of the best lenders are the ones that you don’t hear about very often. They don’t need to be a “little guy”. They may simply be a company that many don’t realize you can actually get a home loan through. So shopping around is very important. Research and comparisons should become your friends.
- Then comes the question of whether to go with a fixed or variable interest rate. Both ways have a risk. If you go with fixed, yes you will know your payment for sure for “x” number of years, but you will miss out if the rate goes down. If you go with variable, you may end up with a higher interest rate for a time, but those increases don’t usually last and they might not increase at all. They might continue to drop.
- Okay, so if you choose fixed, do you go with short term or long term? A shorter amount of fixed time, will allow for lower monthly repayments. Keep in mind though that if you decide to refinance later, the amount of fixed time you choose will impact your fees.
- Mortgage brokers are not a terrible idea either. They can do the shopping around for you and may have connections that are not available to borrowers directly. Even before shopping around they might know who someone in your particular situation would work best with. So if you don’t have time or don’t want to do the leg work yourself, they might be a viable option.
- Lastly, one thing that is always positive in any large purchase, is saving for a bigger deposit. The main factor in deciding your loan’s interest rate is the loan-to-value ratio. So, if you require a loan that will pay 90% of the home’s value, your interest rate will be higher that if you were to borrow 60%. Taking the time to save for a bigger deposit is not a bad idea. It will allow for a lower interest rate and in turn, smaller repayments.
There is so much to consider when looking at buying a home. Education is key. The more you know about the process and how it works, the less painful it will be and the more joy the life change will bring.