Whats the best type of mortgage?

[colin_hanley]

Hi, I've started the process of buying a property and put down a booking deposit on a place. I just need to get started on the legal and financial stuff . I got pre-approval for a standard variable mortgage but was hoping in reality to have something which would work better for me financially.

I heard it is best to go half fixed, half variable. Is this generally the case ? I have 10% of the sale price to put down, but is it better to put down 5% and put the other 5% in an offset account or redraw facility/
Thanks,
Colin

 

[Peter_Tersteeg]

Hi Colin,

Does the 10% you're able to put down include the purchasing costs (stamp duties, conveyancing, etc)? If so, then you do have flexibility in how much you can put down.

Given you will need at least a 90% LVR you can expect to pay mortgage insurance. At 90% LVR this will be around 1.3% of the loan amount (on loans over $300k). If you borrowed 95% LVR, this would be around 2.1% of the loan amount. In dollar figures, this is at least $2,400 difference in fees for an extra 5%.

If a bank has offered you a 'standard variable' home loan, you can definitely do better. Standard variable loans are currently at rates of 8.37% plus application and ongoing fees.

If you qualify for a standard variable loan, you will also qualify for a basic loan which would currently have rates of 7.65% (or better) and significantly lower application and no ongoing fees.

Fixed rates are also useful tools, but I'd want to know more about your situation before giving specific suggestions.

IMHO banks are not the most ethical organisations. They will take advantage of your lack of knowledge to give you a more expensive loan if they can. Contact one of the brokers from this forum for help.

 

[colin_hanley]

Thanks Peter, the 10% doesn't included conveyancing, strata checks etc. as I have a seperate budget for that. It does included mortgage insurance but I qualify for the first time buyers grant which should cover that and stamp duty. I'll get in touch with one of the brokers and see what the best deal I can get in.
Thanks for the tip,
Colin