Most of us would have bought a car by now and what did you look for when buying a car? You might have gone through the process below:
- Decide what you are going to use the car for? family car? sports car? car for daily commute to and from work etc.?
- Determine your budget
- What are the desirable features you want from the car?
- What about the ownership cost? servicing cost? resale value?
- Is it reliable?
The list goes on and on. Then what do you do? You shortlist the cars based on your requirements and perhaps take them for a test drive. Once you are happy with the car, you then sit down with the sales or private owner to talk about the price.
Would you start the process by only focusing on the price? I mean, even without knowing what cars you want? I guess the answer is ‘No’.
If we would not just talk about the price when buying a car, why would some of us do so when it comes to choosing home loan, which is a way more important product than a car.
I have met a lot of people whose first question is always “What’s the cheapest rate?” without even considering what they need from a home loan.
Don’t get me wrong, I am not saying rates and fees are not important, however it’s not the be all and end all when choosing your home loan.
So what to look for? It depends on your intention.
For those who just want to buy a home and that’s all they want to do, then fees and rates are very important. But for most of my clients who typically are about creating wealth long term via property, rate is a part of the conversation but it’s not the conversation.
Building a portfolio of property, it’s a game of finance more than it is a game of bricks and mortar. The discussion should start at the top, which is the structure.
- Why do I want to invest in property?
- If it’s for financial freedom? How much do I need?
- What’s my current financial situation?
- How am I going to get from where I am to where I want to be?
- What’s the type of loan structure I need?
- What do I need to do so that I can keep buying properties to build the portfolio?
- What will be my loan level? 80%, 90% or even 95%? etc.
From there we filter down into the question of who’s the lender that’s going to give us the preferred structure to complete the portfolio and then what falls in behind is that – How much is it going to cost me? What’s the rate?
Let’s say you have some equity in your home and you want to use that as deposit to buy investment properties. You want to have that clear separation between owner occupied and investment loans. To achieve that, you will probably be looking for lenders offer features such as offset account, free multiple splits for additional flexibility and clear distinction between the personal and investment debt.
Once you have narrowed down the lenders who meet your requirements, only then we will start comparing the rates.
We are always going to have the option of shopping around for rates and fees. That’s our right, and no one can take it away from us.
What we have to remember though is that we might be wasting time if we are just chasing the ‘cheapest rate’. We need to be shopping around for structure/quality/benefits. Those are the deciding factors. Shopping for quality will find you the best possible options, and you’ll walk away knowing that you made the decision and the purchase that was right for your investment?
Look for the best fit, not the best rate