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The importance of finding the right home loan

Home loans are not ‘one size fits all’. We are all unique in our situation, needs and wants — so our home loans should also be unique. Whether you are applying for your first home loan, refinancing your existing one or seeking out a loan for a new investment property, it’s important to choose carefully.

In this article, we’ll go through what you should look for in a loan, how to choose the right one and how a good home loan can make all the difference.

What should I look for in a home loan?

Everyone has different wants and needs, as well as personal circumstances that influence the kind of home loan that is best for them.

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Some people value stability and consistency in a loan. In this case, a home loan with a fixed interest rate might be a great choice. With a fixed rate loan, you pay the same repayment amount every month. You don’t have to worry about fluctuating interest rates and may find it easier to manage your finances.

Conversely, some borrowers look for the flexibility that can be found in a variable rate home loan. Variable rate home loans typically have a lower interest rate but are susceptible to market fluctuations. Unlike most fixed rate options, borrowers can make unlimited extra repayments on variable rate home loans. This means that if you get a bonus, tax refund or an unexpected sum of money, you can put it towards your loan balance so you can fully own your home sooner.

You may even be able to split your loan to make the most of both fixed and variable interest rates. Read more about split loans here.

Some borrowers might be interested in interest-only loans. For a brief, initial period of up to 5 years, borrowers with this loan type only cover the interest accumulated in their repayments. Remember that once the interest-only period is over, you will be required to repay both the principal (loan amount) and interest. Make sure that you can afford the increased repayment amount.

Loan features and lenders

Prospective homeowners and those refinancing should also consider adding home loan features. An offset account or redraw facility can help reduce the interest payable on your loan, while still granting you access to those extra funds.

Don’t forget to think about the lender you’ll be borrowing from. Many emerging lenders operate exclusively online and don’t have physical branches that you can visit. Most traditional banks have branches that you can visit, if that’s what you’d prefer.

How to choose the right home loan

Considering the above points, aim to create a list of things that you want in your home loan. For example:

  • A variable interest rate below 3%
  • No annual fees
  • An offset account
  • A lender with an app to easily make repayments and check the loan balance
  • 25 year loan term

Your lender and broker, if you choose to use one, will help you come up with a loan term that is realistic to your circumstances. It’s important that you can comfortably afford to pay your minimum monthly repayment amount. In saying this, try to choose the shortest loan term that you can afford because the shorter the loan term, the less interest you will have to pay.

Make sure that you research and are familiar with the home loan process. If you have any questions, don’t hesitate to get in touch with an expert. A mortgage broker can help you with any loan queries you may have.

Use our borrowing power calculator to see how much you might be able to borrow based on your finances.

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Why a low interest rate can make all the difference

A home loan is a long term commitment. Most borrowers will have their home loan for 20 to 30 years — think about how much interest can accumulate in this time! This is why getting a low interest rate is so important. If you don’t think your interest rate is competitive, refinancing is always an option. Even a 0.5% or 1% interest rate reduction can add up over time.

Let’s look at how much you can save with a lower interest rate:

Loan amountInterest rateLoan termMonthly loan repayment
$500,0003%30 years$2,108
$500,0003%30 years$1,976
$500,0003%30 years$1,848

Think about how those savings will add up over the years!

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When to refinance

It’s normal for borrowers to ‘outgrow’ their original home loan. Your needs can change, as well as your income. When this happens, it’s smart to consider refinancing. Refinancing can be a very simple process, especially if you choose to stay with your current lender.

Whether your refinancing goals are simple or complex, Lendi is here to help. Our team of experts can answer any questions you have and help you find a loan that suits your needs. Get in touch today to begin your refinancing journey.

Using an online home loan platform

Online home loan platforms like Lendi offer a comprehensive service that allows you to search and compare home loans, apply and be approved all online. If you’re looking for convenience, speed and support while looking for home loans, consider looking into Lendi’s services.

We work with over 35 banks and lenders to offer a broad range of home loan options to suit every borrower. Lendi negotiates with these lenders on your behalf to secure great interest rates and loan packages. We do all the hard work for you, so all you need to do is upload your documentation to our straightforward platform. If you have any questions along the way, our team is here to help.

Get in touch with a Home Loan Specialist today.

Got a home loan question? Just ask!

We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: refinance, interest rate, home loan, debt consolidation, loan term

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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