Choosing A Home Loan
Principal and interest will pay off the loan
Principal and interest loans
Most people get this type of home loan. You make regular repayments on the amount borrowed (the principal), plus you pay interest on that amount. You pay off the loan over an agreed period of time (loan term), for example, 25 or 30 years.
Interest-only loans
For an initial period (for example, five years), your repayments only cover interest on the amount borrowed. You aren’t paying off the principal you borrowed, so your debt isn’t reduced. Repayments may be lower during the interest-only period, but they will go up after that. Make sure you can afford them. See interest-only home loans.
When looking for a good deal on a home loan (mortgage), the interest rate matters. A home loan is a long-term debt, so even a small difference in interest adds up over time.
Get the shortest loan term you can afford
Your loan term is how long you have to pay off the loan. It impacts the size of your mortgage repayments and how much interest you’ll pay.
- A shorter loan term (for example, 20 years) means higher repayments, but you’ll pay less in interest.
- A longer loan term (for example, 30 years) means lower repayments, but you’ll pay more in interest.
Aim for the lowest interest rate
An interest rate even 0.5% lower could save you thousands of dollars over time.
For the Full Article please refer to the link below.
Source: https://moneysmart.gov.au/home-loans/choosing-a-home-loan
