Recommended NZ | Guide to Money | Gimme: Competitions - Giveaways

Facts About Finance

Contributor:
Mark Tregoweth
Mark Tregoweth

One of the most important steps in securing a home is arranging finance.

When it comes to selecting a loan there are plenty of options to consider, repayment choices, interest rates, different loan types and fixed term or flexibility to suit lifestyle changes.
 
To cater for individual needs most home loans are spread over a period of years (up to 30 years) with options for owners to change terms as their needs evolve, i.e. reducing the term of a loan or increasing repayments.
 
Instalments can be tailored to fit salary cycles and pay periods and suit individual circumstances.
 
From fixed term to floating interest rates the decision on how to repay interest can make a difference especially when interest rates rise rapidly.
 
Floating or standard variable interest rates reflect current market conditions. Interest rates fluctuate according to market movement which results in repayments increasing or decreasing due to this activity. A floating interest rate also offers the flexibility to make changes and lump sum repayments without penalties.
 
Fixed term interest rates offer certainty for homeowners that the interest rates will not increase during a period of time when a rate is fixed. If market conditions change and interest rates rise payments remain the same during the fixed period. When a fixed rate term expires it can either be re-fixed at a new rate or convert to a floating rate. When a fixed term expires the time is often right to review your current loan requirements, extend the term of a loan or change repayment details.
 
When you sell one home and purchase a new one, some home loans (dependent on loan criteria and type) can be transferred from property to property by exchanging the security to the new property but transfer fees may apply.
 
When circumstances change suddenly and managing a home loan becomes difficult most major banks offer assistance by allowing you to take a holiday from your mortgage.
 
Depending on the assistance an individual lender offers you may be able to suspend interest and principal instalments for up to three months.  The principal and interest instalments suspended during a mortgage holiday will be added to the term of the loan and interest will continue to accrue on all outstanding principal.
 
Whether you are a single income family or two income couple, talking to a bank, meeting with a mortgage broker or consulting with a financial advisor will ensure you understand the ins and outs of a home loan.

All articles and comments on Voxy.co.nz have been submitted by our community of users. Please notify us if you believe an item on this site breaches our community guidelines.