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today we're talking about how to choose the right mortgage for you we're looking at everything from home loan features to the products you can select from so starting from the top Jaden loan term and there's so many different loan terms you can choose from 10 20 and even in some cases 35. so Jayden how is long-term a factor when choosing the right mortgage in Australia generally the default loan term is 30 years so some banks can actually even go beyond this there's a couple banks that will do 35 years long term but the downside to that is the longer you have the loan the more interest you pay for example if you had a 500 000 loan paying five and a half percent interest you'd pay 520 000 if you had a 30-year loan term compared to six hundred and twenty thousand dollars if you had a 35-year loan term so it does make sense trying to pay off your loan quicker and having a shorter loan term the downside is however the shorter your loan term the higher payments are because you need to fit the same amount of payments into less time increase your monthly repayment so one of the things you can do is if you are having difficulties with borrowing capacity you may elect to go for a 35-year loan term but as Jaden said being mindful that you will pay more interest over the loan term however if you pay your payment on say a 30 year or even a 25-year term your opinions will be be higher but you'll still have the 35-year loan term so if you do it correctly you can have all the benefits with none of the downsides the next thing to consider when choosing the right mortgage for you is whether or not you want an offset or a redraft facility Jayden an offset and a redraw facility essentially does the same thing but why would you choose one over the other so let's talk about what they are an offset account is just a normal day-to-day transaction account that's invisibly linked to your home loan so put another way if you have an offset account you could have say a hundred dollars in that offset account and that hundred dollars will reduce your loan balance and save you interest one of the cool things with an offset account is you can have multiple accounts so if you choose a right lender the right lender will allow you to have all your savings account your offset accounts link to your home loan so if you have a bucket for your spendings and a bucket for your holiday that all goes into your mortgage and saves you interest redraw on the other hand is a feature for the loan redraw is the ability to make extra payments to your loan and transfer it back out so you can have that hundred dollars in your day-to-day everyday offset account you have to actually physically transfer that into your home loan account it sets there as an available 100 it can pull back out in the future but the downside to this is you need to be manually moving money around every day to take advantage and all in all choosing between an offset account and redraw facility in most cases the offset will cost you money from a 10 account keeping fee to an annual package fee of up to 395 dollars another thing to consider when choosing between the two facilities now it gets a bit technical here but in general most people that will be turning their property into an investment in the future will opt for an offset account it's going to help you maximize the tax deductions down the line when it does become an investment but have a chat to your accountant or your mortgage broker can give you a bit more advice on this and take you through the pros and cons of both so the next thing when looking to choose the right mortgage for you is whether or not you're looking to build both now or in the future because not all banks are allow for construction Home Loans construction Home Loans can be tricky and difficult and as you've seen in the news lately lots of Builders going broke so there is a lot more risk involved with that not all banks are geared up for this extra admin because they need to get the invoice from you you sign it off they authorize the payment there's a lot of steps involved there so there are some banks that just straight out say no construction loans no major Renovations or only just do a normal home loan we won't do progress payments so have a chat to your broker on that and try and think out what your next couple of years plans are because you could end up getting stuck with the bank that won't be able to help with the build in the future the next thing to consider when choosing the right mortgage for you is whether or not you want an interest only or a principal and interest repayment facility on a principal and interest loan you are paying down the principles the original loan that you took you borrowed and the interest so typically on a principal interest loan you are progressively paying down this loan balance from 300 000 to zero dollars over a 30-year period Now with an interest-only loan you aren't paying any of that principle down so your monthly repayments are much less but the downside is you pay much more interest over the life the loan the banks also see it this way and their preference by and large is looking at principal and interest repayments they'll give you actually lower interest rates compared to interest only but in the case of investors where cash flow is more important and the interest costs don't matter as much because you're getting tax benefits they look at interest only repayment each has its own merits now let's go through all the products on offer and how this will help when choosing the right mortgage for you so the basic home loan this is a basic variable home loan with no fees and is a really good option for first home buyers Jayden what are some of the benefits of a basic home loan so the biggest benefit for basic hormone is there's no annual fees generally and The Upfront fees are usually pretty low the downside with the basic is you have less features so typically you'll only have redraw so you can put that extra cash into the loan you can manually transfer it back out some banks have fees for that redraw so be careful with that because you can make extra payments they might charge an amount to draw it back out and typically if it's a variable basic home loan there's unlimited extra payments there's no penalties for paying off quicker and the next one is the package home loan and this is a home loan with all the bells and whistles and one in which that offers offset redraw split facilities but does come with a fee and this fee does vary from lender to lender but by and large is about 395 dollars so Jaden a package home loan what are the benefits and detriments of a package home loan yeah so one of the biggest benefits are banks that support multiple offset accounts your package can cover that so you might have your mojo your Splurge all your different accounts linked to your home loan and the is across all those accounts are waived the other advantage of the package is you get other perks and benefits under it so if you want to you know travel credit card with travel insurance rewards points Etc the banks typically will waive the fee on this so you can attach that under your package and it's all included they also have different discounts if you're looking at insurance for homes personal loans different things or weight application fees and in some cases under a package home loan you get a bigger discount for the life of the loan one of the biggest differences between a basic home loan and a package home loan is a lot of times you can't have a separate split say as an example a variable portion and a fixed portion in most cases you'll need to choose a package home loan to enable you to do this so be cautious when choosing the right loan product for you the next one is the introductory or honeymoon rate and these are really great because you get a high discount for the first couple years and then the discount disappears reverting to a higher variable rate subsequently Jaden what are some of the benefits of a introductory or honeymoon interest rate yeah so typically with an introductory or honeymoon interest rate you'll get a cheap interest rate so you might get a two percent discount for the first two years and then it drops back to a one percent discount so you get a much cheaper rate for the first two years then not so much after that period so I think the biggest Allure is the first two years you think all the repayments are really cheap I can get ahead of my home loan and start paying off the downside is that after year three you could be stuck paying a much higher interest rate for the next 27 years of your home loan if you can't refinance so if you're looking at these introductory rates you really want to have a lot of equity in your home ideally don't want to be buying a place with a minimum deposit because the risk is in two or three years when the rate goes back up you're not going to be able to refinance Banks you might have to pay lenders mortgage insurance again your job situation might have changed you might have kids you might not be earning as much and you can be stuck paying much more for this loan so for that reason we don't see a lot of people people taking up these at the moment because there's a bit of risk there that you could get stuck paying a higher interest rate over the life of your loan and finally a fixed rate home loan product and these are great for people that are looking for stability wanting to have a budget and really wanting to know their repayments for the next one two five years Jayden what are some of the benefits and detriments of a fixed rate home loan fixed rates are fantastic for that ability to budget the downside to fixed rates is are you are limited in most cases and making up to ten thousand dollars a year in extra payments so keep that in mind if you've got any big bonuses inheritances any big chunks of cash coming in the next few years if you fix your whole loan you can get stuck and you could get caught with fees paying that out the other downside the fixed rate is you aren't able to pay it off early so again if you fix for five years for example after two years if you want to sell your property the bank will charge you an exit fee for the remaining three years that you had to pay off that loan a mortgage broker can help you with navigating this process and knowing what other hidden features is a fees there might be in that bank compared to others so if you do need help with a mortgage broker and you're trying to navigate the market to work out what's going to work for you then hit us up we're mortgage brokers we're based in resume we help clients across Australia if you're looking for a home loan an investment loan or just a second opinion hit us up at huntergallow.com Josh and I would love to help you out