It’s just a matter of selecting the lowest interest rate, right? Wrong!
When you buy consumer goods, typically you look for the features or functions that you need and once you have determined the desired make and model, then you look for the best price. It is no different when seeking a new finance product. You need to determine the features or benefits you require, then look at the interest rate. For example, do you need an offset account, or an ability to redraw on the loan sometime in the future? Do ongoing fees cause you concern? Getting the lowest interest rate product and finding it doesn’t offer what you require can actually slow down your ability to pay off that loan.
The finance market has changed a great deal in the last 12 months. The regulator, Australian Prudential Regulation Authority or APRA, is taking a keen interest in borrowing habits and at the same time encouraging funders to make changes to lending policies.
Property market headlines, particularly in Sydney and Melbourne have set the scene. Many lenders are placing a loading of between approximately 0.3% – 0.7% on interest rates for investment properties. So purpose becomes a pivotal question.
Another area coming in for close attention is interest only versus principal and interest rates. The broker is required to have a detailed conversation with the consumer and ensure they are very clear on not only the difference, but the long term consequences. Lenders are increasingly concerned about interest only loans on owner occupied properties. The expectation is that you should be trying to reduce your home mortgage.
This changing landscape of rules and regulatory requirements makes an even stronger case to engage a finance consultant. Call AUS Finance Group on 1800 287 346 to speak with one of our lending specialists.
Disclaimer: This article has been prepared without taking into account your objectives, financial situation or needs and should be regarded as general advice only. Before acting on this advice you should consider whether it is appropriate for your needs and has regard for your own objectives and financial situation. We encourage you to consult a finance professional before acting on any advice provided in this article or found on this website.