Six questions to ask before choosing your home loan
Fri Oct 21 08:30:00 AEDT 2016
Choosing a home loan will probably be the biggest financial commitment you will make in your life, so it’s important to consider all the details before you jump in. Here, Choice Home Loans has compiled a list of six important questions to ask before you make any final decisions.
1. What does the whole package look like?
The interest you pay on your monthly repayments is only one part of the overall fee package you will be charged for your loan. Make sure you factor in other costs like one-off establishment fees, and charges for additional features like credit cards or offset accounts. Mortgage calculators like Choice Home Loans’ Complete Loan Comparison Tool can help with this.
2. Are there discounts available?
All major lenders have a standard variable home loan rate, but this is not necessarily their only or best offering. Ask about a ‘basic’ rate, which often includes a rate discount if you opt to have fewer features included in your home loan package. If you have a large deposit, banks may also offer you a rate reduction.
3. Do you have a good credit history?
Banks often offer discounted home loan rates to their long-time customers, providing you have a good credit history. While it’s still worth shopping around to check other lenders’ deals, you probably stand the best chance of negotiating a lower rate with your existing bank, who can easily verify your credentials. Banks may also offer you lower rates if you have a higher deposit lined up in your savings account relative to the value of the property you wish to borrow – this is called loan-to-value ratio (LVR).
4. Can you make extra payments?
The only way to pay off your mortgage faster is to make extra repayments. This will also reduce the amount of interest you pay over time. It’s a good idea to ask your mortgage broker if there is a limit on the amount of extra payments you can make in a year, and if there are any penalties for paying out your loan early. These penalties and limits usually exist on fixed rate loans.
5. Is there a redraw facility?
Some home loans allow you to redraw any extra payments you have made. While the extra payments will reduce your loan, lenders may choose to charge a fee to redraw funds.
6. Have you consulted a mortgage broker?
Mortgage brokers can offer you valuable advice on how to accurately compare the home loan rate market, and they can often secure you exclusive low rate deals through their relationships with lenders. To find out more, talk to one of our Choice Home Loans brokers.
Get the right advice
If you’d like to know more about your options in the home loan market, you can make an appointment to speak to one of Choice Home Loans’ experienced and knowledgeable brokers today.
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