How to build a home loan wishlist

While many Australians know what they want when they’re buying a home, far fewer have a wishlist in mind when it comes to comparing home loans. The search for a home loan can be just as challenging as the search for the right property, so it’s important to know what you want when comparing home loans.

What home buyers want

According to the St.George Spring-time Housing Survey, one in five (21%) of Aussie first home buyers are looking to buy their first home this spring. Almost three-quarters (72%) said they were confident about purchasing in the current low interest rate environment.

Some of the top features on property wishlists were found to include:

• backyards (63%)
• quiet roads (55%)
• easy neighbours (53%)
• height of the showerhead (48%)
• wardrobe space (46%)

When it comes to locations, first home owners were also found to be looking at:

• family-friendly neighbourhoods (64%)
• access to views (61%)
• distance from sporting facilities (52%)
• distance from cafés or bars (46%)
• close to food delivery options (42%)

However, according to the report, more borrowers said they would feel more confident researching their dream home (37%) than going through the process of applying for a home loan (15%). 

First home buyers said they would feel more comfortable applying for a home loan:

• if an expert could help them (56%)
• if they knew their financial situation better (55%)
• if there was less paperwork needed (44%)
• if it were online (35%)

A quick guide to home loan features

Whether you’re a first home buyer, an investor or a refinancer, there are a few key features to consider when comparing home loans:

• Advertised interest rate – How much extra you’ll pay to the lender with each repayment. This rate can be fixed for several years so you’ll always pay the same, while a variable rate may rise or fall.
• Comparison rate – Combines the cost of interest and standard fees and charges. Can be handy for seeing at a glance which of two or more loans may cost you more in total.
• Deposit/Loan-to-Value Ratio (LVR) – How much of a deposit you’ll need to provide to secure a home loan. While some lenders will let you borrow up to 95% of the property value, you’ll need to pay Lenders Mortgage Insurance (LMI) if you have a deposit smaller than 20%.
• Extra repayments/redraw facility – Paying extra money onto your home loan can help clear your debt faster. This can shrink your interest charges and bring you closer to exiting your loan early. You may also be able to redraw any extra money you pay onto your home loan, such as when you need money back in the bank in a hurry.
• Offset account – A separate savings or transaction account that’s linked to your home loan. Money in an offset account is included when calculating your home loan interest charges, which can help you pay less in interest.

Remember, every home loan is different, and there’s no one-size-fits-all mortgage that’s the best choice for every borrower. Also, keep in mind that the more features a home loan has, the more likely it is to charge higher interest rates and/or fees.

When you compare home loans, it’s important to do your research, work out what home loan features you want, check the fine print, and consider contacting a mortgage broker or financial counsellor for more advice before you apply.   

Compare home loans in Australia