Questions you should ask your home loan lender
Shopping around for a home loan is one of the most important purchase decisions you’ll ever have to make. It can also be one of the most difficult, but if you follow this guide you should at least get off to a good start and avoid some of the stress during this complex yet exciting time.
1. Does this loan include any special features such as an offset account or introductory rate?
Apart from the interest rate, one of the deciding factors for many people in purchasing a loan is the included features. Some features, such as an offset account, can save you thousands if used in the right way, whereas others can save you a little, at least in the short term, such as an introductory interest rate. However, even though an intro rate may be appealing, be wary that you’re not paying a higher rate than usual after the intro rate expires. Use an intro rate comparison calculator to compare two loans and you’ll instantly see which one is cheaper in the long run! The differences can be enormous.
2. How is the interest calculated?
Different lenders sometimes calculate the interest on your loan slightly differently, so it’s always a good idea to find out exactly how each lender calculates interest.
3. What will repayments be if interest rates increase by 3 - 4 %
It’s important to consider whether you will be able to afford a loan if interest rates were to increase substantially. This is likely to happen at some point during the term of your loan at least once, so you must factor in an increase in costs.
4. What are the fees for redraw?
Although many lenders offer redraw for free, some will charge you a fee. Find out what this is, and you won’t have any nasty surprises down the track.
5. How often are repayments allowed?
Some loans allow you to make as many repayments as you like, whereas others will not allow more than a fixed percentage of the total loan size each year. If you intend to pay the loan off quickly, or think you may come into some money at some point, be sure to find out if you will be able to put this into your home loan. Since paying off the loan early is the best way to save massive amounts of interest, it is very important to find out if extra repayments are allowed.
6. How can repayments be made?
Find out how you can make repayments to your home loan, and decide whether this will be convenient for you. Salary direct deposits are a popular option, while other people may prefer to keep their home loan separate.
7. Does this loan allow me to switch to a different loan and lender?
The ability to switch loans may not seem crucial when you sign up, but years down the track the chances are that you will at least consider switching at some point. Ask your lender if the loan is portable. This means you can switch to a different lender.
8. How much does switching cost?
The costs associated with switching home loans in Australia are massive. Do your research and find out what the exit fees are. It could save you a bundle if you need to switch at some point during the term of your loan.
How do I compare home loans?
RateCity.com.au is the best website to shop for all home loans, as well as most other financial products. At RateCity.com.au, you can use expert comparative data from CANSTAR CANNEX, Australia’s leading financial research and ratings firm. CANSTAR CANNEX has analysed and evaluated hundreds of financial products to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
Use our easy search tools to compare home loans at RateCity.com.au.
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