Hi Guys,
I am in the market for the first home. Looking for an apartment and feel comfortable that we have about 20% deposit. (we are buying in Western Sydney)
I have been following ozbargain and know Ubank, ING, RAMS, Macquarie, BOQ, loans.com.au are generally good options. The reason for asking this questions that I have heard that brokers can only provide limited options.
Now should I go to mortgage broker or just go one of the above directly and ask for pre-approval?
Is pre-approval needed if we already have 20% deposit?
Also, what should I consider in addition? - any advice will be helpful. Thanks.
Edit: Any recommendations re broker? Western Sydney area.
Edit 2: This looks good - https://www.loans.com.au/home-loans/offset-var-80
"go with a broker and stuck with limited options or search online and get best rate with required feature and apply there directly."
Understand that Independent brokers are almost always aligned with an Aggregator or Mortgage Manager. These Aggregators offer the brokers access to a panel of lenders for which they have already collectively negotiated with, smaller Aggregators or Mortgage Managers can have a panel of something like 15 lenders, right up to larger aggregators who have panels in excess of 40 lenders. But in general the broker's credit guide would show you which 5 lenders they place most of their loans with.
When you search online, you will find that different comparison sites will show different lenders, this is because the comparison sites also vary in lenders on their panel. Basic comparison sites wont go into detail with the fine prints of each loan, they will pass you onto a broker, this 'broker' is either inhouse as they are Authorised Representatives of the lender panel or the comparison site works as a referrer to the lenders/brokers. Most people are driven by the advertised rates even if the cost of credit ends up higher in the long run. So if you are researching your own loan, unless you dig into the actual loan product, take into consideration all its fees and charges, what your intentions for credit is, etc, I would recommend for you seek a trustworthy broker (one that comes recommended).
”Comparison Rates - Outdated?“
Comparison rates ensure that all lenders disclose to borrowers a near true rate by using a standard $150K over 25yrs, and adding in all costs upfront and ongoing so consumers have some idea of the actual cost of credit is. It isnt meant to say people lend at an average of $150k over 25yrs… Think of it as supermarkets price labels as having to show the cost of an item in 100grams, so immediately the buyer can see the actual savings in buying a 400g can compared to a 50g can. The same way, if all loan products used one standard forumla, it just makes it easier for the consumer to compare. Of course other things need to be taken into consideration, but if you see an advertised rate of 3.75% then a comparison rate of 4.19, you know fees and charges are high on this product, and you will end up paying more to the lender in fees than towards reducing your loan.
Variable & Fixed Rate
Whilst above members addressed the difference between the two, I thought I'd add that there are early exit costs involved in discharging a Fixed Rate loan as they are are meant to ensure stability in the lenders return on investment. (Traditionally fixed loan rates are loans from overseas funds like USA Superanuation equavalent, or managed funds etc, when the GFC hit and interest rates shot above 8% and people couldnt refinance due to break costs. The Australian government stepped in to abolish early exit fees on variable loans, but can not abolish it on fixed loans, since the contract spanned into overseas credit for which our Australian government have no jurisdiction.)
“Fixed for two years then refinance”
The worst type of advice is one that doesnt look at your situation for the long term. Refinance benefits the lender/broker, as they get to earn another upfront commission, while you end up with the discharge and setup fees all over again. Find a good rate you are comfortable with paying, and depending on your circumstance, either aim to pay off the loan, or structure it for tax incentives etc. The only time you should consider refinancing is if there is a considerably better loan (after taking into account all costs of discharge and establishment) or if you were looking at restructuring, purchasing new property etc。 I never advocate honeymoon rates where the rates are discounted for 1-2 yrs which guarantees you MUST refinance out of the product or end up paying considerably more .. borrowers are too fixated on the interest rate 'figure' alone never considering the elephant in the room is 'the cost of credit'. Being able to pay off your loan sooner supersedes any short term incentives.