When buying a home, the lower the interest rate on your home loan the better – right?
Not entirely. While low interest rates could save you a lot of money over the long-term, chasing the lowest rate to the detriment of all else could actually cost you money in the short-term. Here’s why:
If you select a home loan purely on the lowest interest rate and you have less than a 20% deposit, you’ll usually have to pay Lenders’ Mortgage Insurance (LMI) – a type of insurance that protects the bank, not you!
That means the upfront costs of the home loan could be many thousands more. And even with a lower interest rate, it’s going to take years to make up the extra dollars you’ve outlaid in LMI.
But there is a way to have your cake and eat it too. One in eight South Australian first-time home buyers know the secret to saving thousands and here’s how you can too.