Comparing Interest Rates: A must for all potential home owners

A lot needs to be considered in the due process of selecting between mortgage products. Comparing interest rates offered by the various providers my quite possibly be the most important of these tasks. This because it will determine the actual costs of obtaining the finances you require to be on your way to that dream house of yours.

But Why the Variation?

This is due to economic forces they ensure interest rates are never constant in the long run. As such, mortgage providers will charge a different rate at different times over the course of time. An option for home seekers exists. At the time of taking up the home loan, you can decide to either go for a fixed or variable rate. So, depending on what your outlook for the economy in future is, and your risk appetite as well, you can decide on either. The current rates are within 4% in the Australian home market for most mortgage providers. Slight variations in tenths existing among the providers.

Benefits of Fixed Interest Mortgages.

Firstly, fixed interest rates are offered for a 1-5 year period. After this the loan automatically reverts to the lender’s variable interest if the borrower decides not to fix it again. Most homeowners and Mortgage holders prefer this due to a number of reasons including:

* The certainty it brings. This is by making known the total repayments required known over a long time frame. This in turn enables one budget.

* There is protection against interest rate fluctuations.

The cons as well are also worth a note and include:

* Less flexibility. This is in the form of some home loans restricting the ability to make extra repayments, or charging an extra fee to do so.

* Also, by virtue of being revised after every 1-5 years they are not entirely fixed. As a result, mortgage holders cannot take full advantage of this situation.

And there’s the Comparison Rate as well.

This is also worthy of a note. It is different from the normal interest rate referred to as the Advertised Rate. It is a combination of both the interest rate and the fees and extra costs associated with the loans. This is combined and presented as a percentage. Essentially, the comparison rate helps in determining the true/overall cost of the loan. Lenders are required by law to include their comparison rate when advertising their mortgage products in the market. Surprisingly, most people do not notice it when going over these adverts. Yet they the reason lenders were compelled to do so was to make them more honest about the actual cost of the loan.

To first-time home owners as well.

Fear not, though the processes involved in obtaining financing your home acquisition seem long and tedious. And to some extent truly is, there exists many platforms to help in the process of getting yourself a house. There are online materials that simplify the essential features of a mortgage, and even help you calculate the costs taking into account a variety of factors including the interest and comparison rates. As well you can walk into any of the offices of a house lender and ask them the question “Why should I pick you over the next competitor?”