Are you in the market for a new mortgage? Before you sign anything, ask your lender the following questions to make sure you're getting the best possible deal.
When it comes to home loans, all products are not created equal, explains Linda Clucas, personal mortgage advisor with Smartline.
The best loan for you will depend on the type of mortgage you’re seeking, your reason for borrowing and your personal situation. For example, if you’re an investor buying your fifth property, you’ll have very different needs to a first-home buyer.
That’s why it’s so important to talk to your financier about your options before you make a decision. Clucas recommends that you ask your lender or mortgage broker the following questions:
1. Do you offer any first homebuyer discounts/specials?
“Sometimes, lenders will reduce or discount the application fee for first home buyers,” Clucas says. They may also offer intro or honeymoon interest rates for new applicants.
2. If mortgage insurance is payable, what will the premium be?
Premiums will vary from lender to lender, depending on how they evaluate you as a “credit risk”, so it’s good to shop around.
3. What fees are payable on this loan?
Be sure to ask what upfront and ongoing fees are payable, as well as valuation, legal and application fees. “Also ask if there are any early termination fees attached to the loan,” Clucas advises. “This varies from bank to bank.”
4. What is your rate-lock policy with fixed rates?
If you want a fixed rate loan, you may be able to secure “today’s rate” when you file your application. Some lenders charge a fee to lock in the rate, however, so don’t make any assumptions – check their policy before you sign up.
5. How long are your interest-only terms?
If you’re applying for an interest-only loan, the standard term is generally five years, but it may be possible to lock in loan term of up to 10 years, depending on the lender.
6. What is your mortgage repayment schedule like?
Double check that you can make repayments monthly, fortnightly, weekly – or whenever it suits you. “Some banks will only do monthly repayments, and some banks do fortnightly repayments on certain days of the month, such as the 1st and 15th,” Clucas explains. Others may even require a direct debit “sweep” of your savings account to meet the monthly mortgage payment. Be sure to check your lender’s repayment policies to ensure they match with your situation.
7. Can you redraw on your loan?
And are there any restrictions? “Some banks will charge the customer to do a redraw, and some will have a minimum amount that you can redraw each time,” Clucas says.
8. What types of packages do you offer?
You may be able to package up transactional accounts and credit cards with your home loan in a “professional package”, which will save you money on annual credit card fees, ongoing account keeping fees and even loan application fees.