What Are Low Interest Home Loans?
Interest rates are in the news again, with big four banks hiking up their home loans rates. Even though many economists say this is a one-time hit to the economy, there are many people that could use some extra cash. If you’re looking to take advantage of the lowered interest rates and refinance your home, you may need to work with one of these big four banks. But how exactly do they get you approved? Do they use the same approval criteria as most loans? Are there any differences?
The standard home loans rate that all lenders use is the prime interest rate. This is the highest rate that a bank will consider when offering a mortgage to a customer, although it is still not as low as it was a few years ago. The first thing that you need to know is that even if the first, second or third company’s interest rates on the home loans that you choose are higher than the current prime rate, the customer probably will make the lower repayments over the term of the loan.
This is because of one of two things. Firstly, in the current economic climate, banks are feeling more anxious than ever to recoup as much of their capital as they can from the customer. Secondly, it just makes financial sense for them to offer competitive interest rates. The cost of lending money has been steadily rising, and they would be putting a lot of risk on their balance sheets if they increased their rates without providing any incentive to the customer. Most home loans will have a fixed interest rate and ongoing fees attached. This is something that you cannot change once you have signed for the loan.
It should be noted, however, that the bank does not always have the option of changing their variable home loan rates. Many people have made the mistake of assuming that variable home loan rates will change whenever the bank changes their big four home interest rates. The fact is that if the interest rate goes up, the amount that you pay out each month will also go up.
The best way to get low interest-only home loans is to deal with either a major lender, such as Chase, or a small community lender, such as BBVA. Both of these types of lenders will provide you with the best interest-only home loans possible. Small community lenders tend to be more flexible with their requirements for minimum deposits and monthly repayments. On the other hand, the credit union type banks do not generally give you very good interest rates. In fact, if you are willing to make a big deposit, some of these institutions may give you zero percent financing.
A major advantage of dealing with a bank or a community lender is that you can go through the entire application process at one location. It is much faster and easier to apply for a this type of loan when you have a number of lenders at your finger tips. Another thing you want to be aware of when shopping around for a this type of loan is the ongoing fees and costs. Most lenders do not include ongoing fees in the final loan amount, but there might be a couple that will, so it pays to read all the fine print before signing on the dotted line.
A great feature of interest-only home loans is that they allow you to repay your principal and interest. This way you can keep your house and pay down the principal faster. If you choose to use a fixed rate, this will help you in keeping your monthly repayments low and your principle relatively low. On the other hand, by choosing a variable rate of interest you can fluctuate your repayments up and down based upon the market value of the underlying property.
Before applying for a this type of home loan, you need to determine what your repayment options are going to be. Do you want to make lump sum payments that will be lower than your present income? Or do you want to make smaller monthly payments that will be higher than your current budget? Knowing what you want to do with your money is the first step in determining your interest rates and the amount you can borrow from a reserve bank cash rate.