Buying a house is stressful on its own. Add in a pile of paperwork, lingo you’ve never heard of and confusing decisions to make. It can be daunting and overwhelming beyond belief. If you haven’t done this before or haven’t got anyone to show you the way, then your own research will be very important.
When it comes to home loans not all products are equal. There are so many varying factors to take in to account. What’s right for one person won’t always be right for YOU!
It’s important to ask a few questions before you sign on the dotted line…
1. Do you offer any discounts?
If you’re a first home buyer, then you will be entitled to some discounts. If you’re new to a specific bank/lender then you may also be entitled to some form of discount or cashback incentive.
2. Will there be any mortgage insurance payable?
This will depend on your deposit. Lenders mortgage insurance protects your lender in the unfortunate event of you defaulting on your home loan. When lenders agree to lend a customer money, there is a small risk that they won’t get the money back if the customer is not able to meet the repayments. You’ll need to work out what this amount could be as sometimes it’s large and can affect your borrowing capacity.
3. What will the fees be?
After you’ve been approved there will be fees. An application fee, legal costs and yearly fees. It’s wise to factor all of this in before you’re approved. Be aware of any termination/payout fees. Plus, a transfer fee – for example what if you want to change lenders down the track?
4. Fixed vs variable rate costs?
If you lock in your fixed interest rate what will the fees be if you want to switch to variable? Consider both options carefully.
5. Interest only loans?
If you’re building a new home, you may be able to secure an interest only loan on the draw down amount. Check all fees and costs associated with this because you don’t want to start building your new home and get caught out paying more than you thought.
6. What is your mortgage repayment schedule like?
Double check that you can make repayments monthly, fortnightly, weekly – or whenever it suits you. This is important because you may need to schedule it with your own income payments.
7. Can you redraw?
If you pay extra in to your home loan can you redraw any of this amount back over the period of your loan? Will there be any costs involved in this process and is there a minimum amount to redraw?
8. Are there any packages they can offer?
Ask about additional savings accounts, offset accounts or credit cards. Check fees associated and any penalties if you decide to close these accounts. If they are part of a package be aware they usually all need to stay open (and most likely have fees associated with them).