Choosing a mortgage is the biggest financial decision for most people

It’s the one thing in life you can’t ever afford to get wrong because you don’t know what you don’t know.

Buying your own home will probably be one of the biggest financial decisions you'll ever make. Buying an investment property is probably the next biggest financial decision. As life and relationships continue to change most of us will find ourselves taking out a sizeable home loan (mortgage) and making repayments for a major part of our working life.

As lifestyles, business and family pressures increase many people also find themselves unexpectedly having to start again after a relationship breakdown. As a result, mortgages are now becoming a part of our longer term reality.

Over 30% of Baby Boomers expect to retire with a mortgage.

So it's worth taking the time to get proper financial advice from an independent source and consider your lender options too. (That's probably not from a Bank or a bank aligned mortgage broker.) Get some qualified advice about how these types of loans work, their effect on every other financial decision you'll probably make and how you get them to work for you, not against you.

So where do you start?

With the market flooded with multiple mortgage products, special promotions and introductory offers it's not wonder that most people feel overwhelmed with too much information. Where do you start to compare the different offers to see what's right for you? One of the best ways to be able to compare apples with apples so to speak is by understanding what's known as the comparison interest rate.Understanding this can be a real a game changer.

Comparison Interest Rates - make them work for you

A comparison interest rate is a comparison tool to help consumers see the true cost of a loan so it can be easily compared with a competitor's true costs as well. It's an interest rate that includes both the interest rate and the bank fees and charges relating to a loan, rounded up to a single percentage figure.

• For example, a Bank's advertised interest rate may be 5.49% and its comparison interest rate is 6.75% See the difference? This is a great way to compare the raw cost of different loans and cut through the advertising fog.

What is my actual interest rate then?

Your repayments are charged at the advertised rate. The comparison interest rate is included for comparison purposes only and shows the effective rate over the full term of the loan when all the fees and charges are considered.

Most people understand that an advertised honeymoon rate starts out low and then, after the honeymoon is over, so to speak, the real cost of the commitment becomes apparent. In a similar way, the comparison rate is closer to the real cost of the loan (the total interest you pay) over time.

• For example, some banks might advertise a professional package interest rate (and charge you an annual fee for having it. These types of fees can add 0.2% to the overall cost of the loan. Lower rate+Annual fee=Much the same).

Getting the right Loan Structure makes the difference

Every person, their circumstances, their family and business is different. Our expertise is in looking at the bigger picture and showing you how it will affect you now, tomorrow and in your future. Rushed decisions made before you understand all your options, usually cost you significantly more money, effort and lost opportunity later. So get the mortgage structure right from the start and sleep better.

Features to look for in a Mortgage Loan

The loans features are often more important than interest rate alone - but if you can combine both - you have a powerful advantage. When choosing a mortgage that is right for you there are many things to consider, so speaking with us is the best place to start.

What you want may turn out to be different to what you need and knowing the reasons why can save you a small fortune and a big headache

Here are some basic questions to ask to get you started thinking about (and discussing) your bigger financial picture.

• What is the 'comparison rate' on the loan I'm considering?
• What features do I get for the cost and how many features are fee free?
• Is the home loan flexible and does it allow me to make additional repayments?
• Is the loan portable and can I take it with me to my next home without needing to refinance every time?
• Is the home loan easily managed online and allow redraws of extra repayments?
• Can I make additional repayments into the fixed portion of a loan?
• Is there a 100% offset account and am I paying for one I don't use?
• Is there a credit card linked to the loan?
• Is the credit card at the same interest rate as the home loan?
• Are there fees for fixing my loan, topping up my loan or splitting my loan?
• How much can I really afford and what amount do I want to borrow (remember this may be less than what the funder is prepared to offer you)?
• How much will different funders lend me (this will always vary between funders)?
• Will I be paying lenders mortgage insurance

The regulator ASIC has produced a useful Home Loan Fact Sheet to download and provides some good insights into The Different Types of Interest Rates to read here.

A note about Non-Bank Lenders

When considering a mortgage option that works for you a Non-Bank Lender may often be a competitive option. These funders are often referred to as wholesale lenders and because they don't have the local brand infrastructure to fund, their rates can be more competitive than a traditional bank. As many mortgage brokers (now called Credit Representatives) are now required to work under a mortgage aggregator, you'd want to know if your mortgage broker is just a bank employee in disguise.

Sapience is not aligned with any bank or funder and is a Certified Non Bank-Aligned Advisor®