Consumer groups are urging borrowers to be careful when selecting a home loan, warning many new home loan products can cost more in the long run. Many products brought onto the market in an effort to assist with low housing affordability, such as 40-year mortgages, no-deposit home loans and shared-equity loans, are now being labelled as risky.
Steven Anderson is head of research at independent financial information provider Infochoice. He has spoken out saying no-deposit loans were of the most concern in a recent report produced by the group.
"If you can't put up some of the deposit, you can't afford the house,'' he said.
No-deposit home loans offered by some financial institutions also come at a cost - usually a higher interest rate and mortgage insurance.
The Infochoice report also states borrowing 100 per cent on a $400,000 home loan could cost up to $12,900 in mortgage insurance.
A 40-year mortgage has lower repayments, which is the attraction for many borrowers, however they can cost more in the long run due to increased interest.
National Australia Bank offer no-deposit loans, but general manager of retail banking Ann-Marie Chamberlain says that NAB encourages customers to think carefully before taking out any type of loan.
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