Organising a home loan is a daunting task, especially for a first-time home buyer unfamiliar with the puzzling protocols and bewildering jargon involved.The best way to wrap your head around a home loan is to sit down with your mortgage broker and ask a series of straightforward questions. A good mortgage broker understands how overwhelming it can be for the uninitiated, and will provide a no-nonsense response to each query.
Try the following seven questions in a one-on-one with your mortgage broker to get a better understanding of the ins and outs of your loan.
- What Kind of Loan Is Best For Me?
Variable rates, fixed rates, interest only–a whole host of different home loan types are available to Australian investors.So which is best for you?
It depends on your circumstances. A good mortgage broker will ask you an array of qualifying questions to gauge your financial situation and individual needs. The more questions they ask, the more interested they are in finding the perfect solution.
- What’s the Interest Rate?
The interest rate will determine how much you pay each month–or, more importantly, how much you pay for the entire loan. You want to go with the home loan that has the lowest interest rate, right?
Not necessarily. A good mortgage broker will explain it’s more important to consider the comparison rate, which factors in all the fees. By weighing up the comparison rate of competing home loans (rather than the interest rate), you can get a good idea of the best option overall.
- What Are The Fees?
It’s worth finding out what the fees are when comparing home loans as well.A good mortgage broker will explain all the relevant fees in plain English and can answer any questions you may have.
After all, there may be preferable low-fee or no-fee home loans to consider as well.
- Can I Lock That Interest Rate In?
Nobody wants to start paying more on their monthly home loan just because the Reserve Bank decided to up the interest rate. And thankfully, nobody should have to.
A good mortgage broker will use a lender who offers a ‘rate lock,’ which lets you lock in your home loan for up to two months from the date it was approved. And if interest rates happen to go down during that time, so will your loan. It’s a win-win.
- Can I Make Additional Repayments?
It makes financial sense to pay off your home loan fast as you’ll pay less interest in the long term. But some fixed loans, for example, won’t allow this.
A good mortgage broker will explain which plans allow additional payments and the fees involved. You’ll also learn whether there’s a cap that inhibits how much you can pay off each year. If you expect to be able to afford additional payments in the future, then it’s wise to find a loan that will let you make them.
- How Long Will It Take to Be Approved?
First-time homeowners will be particularly excited to get the ball rolling in this nerve-wracking time. So how long will the process take?
A good mortgage broker will explainhow approvals work in three pivotal phases:
- Pre-Approval, which you can get instantly but isn’t legally binding and can’t be used to make an offer.
- Conditional Approval, which you can get in three days after submitting documentation to prove you have adequate income. Once an assessment approves your submission, you can then make a conditional offer on a specified property.
- Full Approval, which generally takes up to one weekand shows the lender has approved both you and the property for a loan. At this stage, you can make a formal offer and bid on auctions.
- What Do I Need To Apply?
A good mortgage broker will provide you with a user-friendly checklist that covers all the documentation you need to apply for a loan. Feel free to ask any questions if required.
Whether you’ve got a mortgage broker in Melbourne or elsewhere in Australia, ask them these seven questions to get on top of your home loan. With the right information at hand, you’ll soon be ready and willing to make an offer on your dream home.