by Lisa Montgomery, Head of Consumer Advocacy 26/06/2007

With more than 1700 home loan products on the market, it’s easy to feel confused about what choice to make, says Resi Mortgage Corporation’s head of consumer advocacy Lisa Montgomery.

“Once you strip away all the packaging, you could count on two hands the different types of mortgages which are really on offer,” she says. “For most people, it’s a good idea to focus on obtaining a low interest rate, but also on having enough flexibility to pay off the loan faster if you can.”

Ms Montgomery said there were two important loan features to look out for. “These include the option to make extra repayments, and access to redraw facilities if you need them. “Low-priced standard variable loans, such as Resi’s Complete Home Loan, tend to suit most peoples needs.”

Ms Montgomery said a common mistake many home-buyers made was not doing enough research to make sure they got a good home loan deal.

“Often people will spend months searching for the right home, but hardly any time choosing a home loan. “Instead, they just walk into the nearest bank, or go to a mortgage broker who won’t always have the better-priced loans on their books. “A far better course of action is to undertake your own study,” said Ms Montgomery.

“Check out the finance sections of most metropolitan newspapers and the websites of independent financial research agencies, get advice from family and friends and ring around several lenders to find out more. “A few hours research might save you tens of thousands of dollars over the life of your loan.”

Ms Montgomery said prospective home buyers needed to be wary of gimmicks and industry hype. “Often, if you look at the facts, new promotions and special offers aren’t so attractive,” she said. “Honeymoon loans attract people with very low interest rates, but then revert to much higher rates once the short introductory period is over.

‘Mortgage reduction schemes can confuse home buyers with unrealistic budgets and calculations, and end up trapping them in a loan which is too sophisticated for their needs.”

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