How to get the best home loan rate in town

If this relates to something that was inexpensive then it is not too annoying, but if it relates to a major expense – such as a home loan – then we would like to know that we have arranged a really good deal and have obtained the best interest rate possible.

The good news is that a home buyer can do certain things to ensure that the home loan interest rate that he is offered by a bank is the best rate available to him.

There are 5 main points to take into account so we can get the best rate in town!

1. Use the services of a good mortgage originator

A good mortgage originator will be able to present the application in the best possible light. The originator will ensure that there is no double counting of expenses, that the loan is viewed as being affordable by the bank and will also approach more than one bank so that you are able to select the best deal offered.

2. Check your credit record

Before applying to buy a property, you should check your credit rating. The credit bureau will give a person one free credit report a year. This report will highlight any possible negative matters that exist and you should make sure that any negative comments are removed from the credit report before applying for a home loan.

3. Improve your credit score

If you apply for a home loan while you have a poor credit rating and a low credit score, then if the loan is granted it will no doubt be at a high interest rate as the bank will view the loan as being of high risk. To improve your credit score you should have some retail accounts and these accounts should be paid as required each month before the due date. You should have a good payment profile in place and should not have any accounts that are paid after the due date.

If your credit score is not good, then it can take up to a year for this score to increase once the problem areas have been attended to.

4. Improve your behavioural score at your bank

Ideally you should have a cheque account at a bank and your monthly salary should be paid into this account each month. This account should be well conducted and there should be no debits that have been returned as unpaid through insufficient funds. If this is not the case then your internal bank score will be negatively affected and if the bank grants your home loan then it will either be for a lower amount or at a higher interest rate.

If your internal bank rating is not good, then it can take up to a year for this score to increase once the problem areas have been attended to. It is therefore important to get this score to be as high as possible before applying for a home loan.

5. Place a deposit

The banks do grant loans for the full purchase price (although these are agreed to in only 15% of cases), but such loans are seen as being of a higher risk to the banks and so those loans are granted at a higher interest rate.

The banks normally require a 10% deposit to be placed, but if you are able to place a 20% deposit and ask for an 80% loan, then the loan that is granted will be at a better interest rate.

Summary:

If you want to get the best interest rate in town, then it is important to plan before putting in an offer to buy a home.

• Make sure your bank account is well conducted and that your overdraft limit is not exceeded and that no debits are returned as unpaid.
• Also make sure that you have retail accounts in place and that these accounts are paid on time and that no arrears exist.
• Also check your credit report to make sure that there are no negative comments listed. Sometimes there are errors but these should be resolved before you put in an offer to buy a home.
• Save up for a deposit – a 20% deposit with an 80% loan will result in a good deal being offered by the bank, provided all the credit scores and affordability are in place.
• Ask a good Mortgage Originator to assist you.

If you attend to these 5 points then, at the next social function, you should be able to convince others that you obtained the best interest rate in town.