If you have never bought a house before it is a pretty confusing process and most confusing of all are the different types of home loans or mortgages that are available.
The first thing you need to look at comparing is the types of home loans that are available in New Zealand. Once you know the type of home loan you are looking for it will make the choice of comparing home loans far simpler. The type of home loan depends on your situation and your financial circumstances.
Is a home loan different to a mortgage?
In short… No. They are the same thing. Much like we say jandals, the Aussies say thongs and the Poms say flip flops… it’s the same thing with a different name. No difference at all. So you can substitute the word mortgage for home loan in all situations. There are three main different types of home loan;
Fixed Rate Home Loans
GOOD FOR YOU IF: You want know exactly how much your monthly, fortnightly or weekly mortgage payments will be.
NOT GOOD FOR YOU IF: You think home loan rates might drop or the official cash rate (OCR) will reduce. This may be annoying as you’ll end up paying over-the-odds on a fixed rate deal.
Variable Rate Home Loans
GOOD FOR YOU IF: You believe the OCR and home loan rates will go down in the foreseeable future.
NOT GOOD FOR YOU IF: You’re on a tight budget and live close to your means. If the rate goes up you may struggle to afford the payments, so a variable home loan is not good if you need to know exactly how much your mortgage repayments will cost you every month / fortnight or week.
Tracker Rate Home Loans
GOOD FOR YOU IF: As above – a tracker is pretty much the same as a Variable rate home loan and so these are good if you believe the OCR and home loan rates will go down in the foreseeable future.
NOT GOOD FOR YOU IF: You’re on a tight budget and need to know exactly how much your mortgage repayments will cost you every month.
Offset Home Loans
GOOD FOR YOU IF: You have a decent level of savings which you are happy to leave in your offset mortgage for a period of time. This effectively reduces the amount you are borrowing on your home loan. Borrow less and pay less interest.
NOT GOOD FOR YOU IF: You can’t guarantee that you’ll leave those savings alone. If you have to withdraw from your savings or want to earn savings interest then your home loan increases along with the interest and repayment amounts.
Not sure what type of home loan is right for you?
Get in touch with the team and arrange a free consultation (that’s just a fancy name for a chat) to see the type of mortgage (home loan) that best suits your needs.