Before you even approach the Surfers Paradise property market, figuring out your financial situation and financing options is an important aspect of the buying process to work out. After all, without a home loan, most people won't be able to afford outright buying property – so getting in touch with a lender and discussing the best options for you could be a great idea.
However, having a basic idea about the options available to you and the differences between the various mortgage options could be beneficial to understand. There are two main home loan types that you need to concern yourself with – a fixed-rate home loan and a variable-rate home loan. Chances are, you'll be choosing from one of these two types, so understanding the differences could make all the difference to your overall property approach.
The basic differences between a fixed-rate home loan and a variable-rate home loan is how interest is calculated on the mortgage principal. When you take out a home loan, the general expectation is that you will begin making repayments on the amount borrowed until you have completely settled your account. You will also be charged interest on each payment, which makes up the profit being earned by the lender.
At a basic level, a fixed-rate home loan provides you with a steady interest rate for each payment that remains the same for a certain period of time – usually between three to five years. On the other hand, a variable-rate home loan doesn't necessarily have a steady interest rate, but is instead influence by the various financial factors occurring within the economy.
Between the two home loan options, they cover a wide variety of different approaches to purchasing property, which means there is a suitable mortgage option for every type of buyer. Whether you're an owner occupier looking to settle down, an investor interested in expanding your property portfolio, or someone hoping to begin a construction project – these finance options are broad enough to have you covered.
Seeking a fixed-rate home loan could be a great option for those looking for a steady, secure mortgage option that can be put on the back burner and relied upon to remain unchanged throughout the years of repayments. Because the interest rate on these repayments is fixed, this makes budgeting the repayments – including interest – into your expenses a much easier task to achieve.
This level of comfort could be great for owner occupiers or first time buyers simply looking to buy their own home and slowly chip away at the remaining mortgage balance, before coming out on top and owning the home 100 per cent.
Furthermore, there's no need to worry about rising rates either. You're safe and secure for the duration of the loan term, so regardless of market changes your repayment amounts will remain the same.
On the other hand, variable-rate home loans can be a great tool for those more experience in the financial markets. While the interest rates are open to change, those with their ear to the economic ground can often interpret when a great time to take out these loans will be – most notably, while interest rates are falling and the environment is hospitable to investment.
Therefore, these are often the choices of investors and others who have vested interest in potential lower repayments while foregoing the security that comes with a fixed-rate home loan.
Furthermore, variable-rate mortgages often have a number of facilities that can be added on that are primarily geared towards wealth generation. Things like offset accounts, redraw accounts and the ability to refinance can be draw cards for the more financially-minded buyers in the market.