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How to choose the best possible mortgage for your needs

How to choose the best possible mortgage for your needs

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The Big 4 banks in Australia are huge, well known, trusted financial institutions. When you’re looking at buying a house in Australia, whether for investment purposes or your own enjoyment, it’s understandable that you may turn to one of these ‘big brand’ banks with the view that you’ll be able to negotiate the best home loan.

In truth, however, it’s the smaller lenders in the marketplace that could give you access to a better value mortgage.

In fact, nearly 9 in 10 (88 per cent) of the best value home loans in the market right now are from small and non-bank lenders, according to financial comparison site Mozo.com.au.

Mozo analysed 392 home loans from 86 lenders* and found that the big banks were rarely listed amongst the best value fixed, variable and full feature home loans in Australia.

The cheap home loans and the mortgages with the best home loan rates were almost exclusively to be found with smaller lenders, credit unions and building societies.

“It’s a common misconception that low rate loans from smaller lenders don’t come with the same bells and whistles of a more expensive loan from a big bank,” says Kirsty Lamont, director, Mozo.

“Our research shows this is absolutely not the case with many of the best value loans from smaller lenders offering features like offset accounts, free redraw and split loan functionality.

“Smaller lenders are now competing with the big banks on more than just rates and it’s hurting the Big 4’s share of the home loan market, which has shrunk by 1.6 per cent in two years. This equates to a hefty $32 million in loans lost to smaller lenders each day.”

According to Mozo’s calculations, the average borrower could save as much as $2,250 in repayments every single year by switching from the average Big 4 variable rate to the best variable rate from a smaller lender, such as Newcastle Permanent.

To search a range of investment home loans and mortgages suitable for owner-occupiers, you can compare almost 500 home loans using Mozo’s home loan comparison tool.

The key to success when choosing the right loan for your needs includes:

  • Looking beyond the interest rate. Low rate doesn’t always mean the best value loan, as monthly fees and annual charges could offset your interest savings.
  • Knowing the features you will need. Will the use of features such as offset or a free credit card account, be the ideal fit for your situation?
  • Looking at the bigger picture. Don’t just consider your needs with this loan; think about your overall finance strategy now and for years to come.

Full a full list of winners Mozo Experts Choice Home Loan Awards click here.