Often, prospective clients ask us, “What does a mortgage broker do?” At Smartline Rockingham, one of our most important jobs is matching up each client with the right home loan for their financial situation. We have been in Rockingham since 1999. That has allowed us to amass a wealth of knowledge about the local property market and about which lenders prefer which client profiles.
While finding the best rates and terms is part of our job, anyone can find the lowest rate. However, if the terms aren’t optimal and there is too little flexibility for the homebuyer’s needs, just finding the lowest rate isn’t really giving the client the service they deserve, nor is it giving them the home loan that is in their best interests.
Here are a few buyer profiles. These are general in nature and don’t constitute individual advice. We can only do that after a consultation in which we get to know your basic situation. However, they can give you an idea of some of the things we take into consideration when recommending or discussing a home loan with a client.
If you are a budgeter, you like to make sure that all of your boxes are checked. You want your financial life to be predictable. You don’t need a lot of risk in your life; you just want to make sure you achieve your goals. You want to know how much your repayments are going to be every month so you can plan ahead. For you, a fixed rate loan will probably be the right choice.
Your fixed loan may not offer you a chance to take advantage of interest rates if they go lower but they do allow you to plan ahead. You can always keep your payment within your budget. The only real downside, besides not being able to take advantage of lower rates from time to time, is that you may face penalties and fees if you try to pay any of the loan off early. The bright side is that you probably will be satisfied to stay within your budget.
Do you save a portion of your earnings every week? If so, you may prefer a variable rate loan. Variable rate loans fluctuate up and down according to the interest rate but they do allow you a lot more flexibility. Many variable rate loans allow you to pay them off early without penalty. They also allow for offset accounts.
When the interest rate rises, you may have to have some flexibility in your household budget but you will always have savings to fall back on in an emergency.
The Practical Optimist
If you are optimistic but like to temper your optimism with common sense, you may opt for a split loan. A split loan allows you to fix the rate for a portion of the loan while paying a variable rate on the remaining portion. The “best of both worlds” for a split loan is that it doesn’t rise as much with interest rates but does allow a bit of relief when rates go down. If you want to make extra payments without penalty, you may do so on the variable portion of the loan.
If you are an entrepreneur or “freelancer” who has a fluctuating income, you may explore a home equity line of credit. A home equity line of credit combines the best features of a credit card and a variable rate loan. You can deposit and withdraw funds as needed. Many who take out home equity lines of credit choose to deposit their entire pay into their line of credit. This allows them to pay less interest while providing immediate access to their income.
The Small Investor
If you have investment property, an interest-only loan for a period of 1-5 years can help you save money while building equity and taking advantage of tax breaks for investors.
Call Smartline Rockingham Today
To learn more or to get started on finding the right loan for your current situation, call us today: (08) 9527 1800.