Most of us purchase our first home on mortgage. Getting a home loan however is a tedious and long drawn process. The first setback comes in understanding the type of home loans available and choosing the right plan. Only then can we think of battling the paper work involved.
Fixed or Variable Interest Rates
Loans can be taken at fixed or variable interest rates. If you opt for fixed interest rates, you may find that you are paying a slightly higher rate than is currently prevalent. However a fixed interest means a fixed home loan instalment.
Opting for variable rates means that your loan installment will vary with the rate of interest and you may find yourself having to pay a higher instalment when everything else is becoming costlier due to the increased rate of interest.
Some lenders will offer the option of converting your fixed interest home loans to variable interest or vice versa after a fixed period of time. However this option may come at a cost, the cost being higher rate of interest and increased instalments. See
You can create an offset account which will adjust any interest earned on deposits against your loan. That way you can gradually reduce the loan amount and also bring down the amount of your loan instalment. An offset account has the advantage of keeping your principal amount intact while using any interest earned for repayment of loan. See Adelaide home loan.
You can choose to repay a part of the Home Loans if you have a sudden wind fall like a bonus or inheritance. This will help reduce your future instalments.
See Also: Home Loan Calculator