In the New Zealand housing market slowdown, choosing a home loan raises lots of questions.
What are interest rates going to do? What kind of mortgage should I get? Do I fix or float? It's an important decision that can be hard to make.
"The whole process scares me witless," said Lucy Taylor, a Northlander who’s currently house hunting.
"I can’t decide on what areas to narrow my search to, never mind choosing a mortgage," she told Newshub.
So how do you choose the best type of home loan for you? We asked ANZ about some of the different types available.
A fixed rate home loan
This type of loan is good if you need certainty about your repayments and budget. You can lock in an interest rate anywhere from six months to five years.
ANZ Christchurch based Mobile Mortgage Manager Rachel Goad says the benefit of this kind of mortgage is that you know exactly how much your repayments are going to be and for how long.
But while a fixed rate protects you when interest rates rise, you may miss out if rates fall.
"With a fixed rate you can choose to repay an extra amount or increase your repayments, although you will incur an admin fee and may need to pay an early repayment cost if you do."
Would-be homeowners should consider how their finances could change over the next few years before committing to a fixed rate – particularly for families with young children and individuals climbing the career ladder.
"Do you foresee that you might be getting pay rises in the future?" asks Ms Goad. "Is one of you going back to work? You're paying childcare now, but in 18 months will they get their 20 hours free or start school?
'If you're locking it all on a five-year rate, it may not be the best thing if you're planning a family or expecting career changes. It's about having those conversations"
A floating rate home loan
If you are anticipating lots of changes such as getting a bonus you might want to consider a floating rate home loan.
This allows you the flexibility to make extra repayments or lump sum payments at any time without incurring a fee.
But you need to be comfortable with the fact that the interest rate fluctuates with the market and could go up or down.
A flexible home loan
This type of home loan is a flexible credit facility and acts like an overdraft. You can access funds up to your agreed limit if you need it.
It can work well in terms of saving you money in interest costs while allowing you access to money when you need it to fix the car or carry out renovations.
Aucklander Michael Brenndorfer and his partner opted for a loan like this. They could comfortably pay their home loan, but they found they didn’t manage to chip away as much as they’d planned.
"Once we were in our own place we really relaxed into it - the pressure to save a deposit had gone, so it was a bit harder to keep the discipline up."
"That's something buyers need to keep in mind," says Ms Goad.
"If you're disciplined with money and have a strong focus on wanting to pay your debt back quickly, this is a good way to do it."
Whatever your situation may be, it’s important to take the time to consider which home loan suits you. Check out more information on the options here.
This article has been created by Newshub for ANZ.
ANZ DISCLAIMER: This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product.
