A home loan is not just an interest rate

In the rush and blur of modern life, we have a tendency to reduce things to abbreviations and simplify their meanings – the better that we may save time.

We are all in a hurry after all!

Thus, language becomes txt speak, poll numbers come to mean more than policy in elections, and the grand spectacle of the five day cricket test match is reduced by more overs with each new version of the game.

But we digress. First home buyers may be tempted to follow suit and classify home loan products simply by the interest rate they come with.

This is where a glitch should appear in the system. Home loans are in fact quite complex things and simply paying attention to one aspect of them can mean that potential borrowers could be missing the forest for the trees, so to speak.

There can be no denying the importance of your interest rate – the decision to opt for a variable or fixed rate and the amount of interest charged over the term of your loan is of central importance in home finance considerations.

That is the case for a first home loan as much as it is for an investment home loan.

Yet that is not the whole story. It is just as important to think about how much your monthly repayments will be and the term of your loan, for instance.

Also it can pay to consider whether a home loan will be flexible enough to be adjusted to changes in your own personal circumstances in the future.

If you get a raise on your salary a few years down the track, you may wish to up your repayments so that you can pay off your loan sooner.

Yet this may not be possible with some loan products, so it is critical to plan for such future needs by finding a flexible mortgage solution.