How To Decide If You Should Fix Or Float Your Mortgage

Applying for a mortgage can be challenging, especially if you have never done it before. The best thing to do is to talk to someone who knows all the ins and outs of the process, such as a mortgage broker. Not only can they help explain the process, but they will also work towards getting the best deal available for you.

Here are 9 points to follow when you apply for a mortgage.

  1. Shop Around
    When applying for a mortgage, your best bet is to shop around for the best deal for you. It is possible to negotiate the rates and other terms of your mortgage, especially if you do a lot of business with a particular bank or lending agency.
  2. Fixed or Floating
    You need to understand how fixed and floating mortgages work and the pros and cons of both of them. Ask for clarification from the lender and find out how they work before picking which one, or a combination of both, to go with.
  3. Break Fees
    If you are thinking about a fixed mortgage, find out about break fees as you could end up paying a lot if you alter it or cancel it during its term.
  4. Kiwi Saver
    You can use Kiwi Saver to help pay all or part of your deposit. Talk to your Kiwi Saver manager to find out if you are eligible to withdraw your savings to purchase a property.
  5. Loan to Value Ratios
    The new LTV ratios mean that most new home buyers need a minimum of 20% deposit before they can be granted a mortgage. There are exceptions however, so contact your lender to see if you are eligible for a lower deposit rate.
  6. Mortgage Broker
    An Auckland mortgage broker really knows everything about applying for a mortgage. If you are finding the process tricky and want some extra help, get in touch with one. They can apply to a wide range of lenders on your behalf for your mortgage and will work towards getting you the best rate possible, saving you money in repayments.
  7. Repayments
    Make sure that you can afford to pay the repayments on your mortgage, even if you run into some financial difficulty down the track. It would be useful to work out a budget and ensure that you will be able to pay for all your expenses, not just your mortgage.
  8. Insurance
    You will need to have home insurance when you take out a mortgage, so factor home and contents insurance payments into your budget. It may also be worth looking at life insurance and income protection insurance policies too.
  9. Loan Term
    The longer you make your loan term, the less you have to pay for each repayment. However this means you will pay a higher amount in the long term as you will have built up more interest to be repaid. You could also set it at a longer term, but pay more than the minimum repayments. This can help reduce the amount of interest you will be charged. Be aware of any penalties when doing this, so make sure you find out from your lender how much extra you can repay without being charged.
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