Six ques­tions to ask be­fore choos­ing your home loan

Whitsunday Times - - REAL ESTATE -

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.

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.

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.

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