As many Australians rose bleary-eyed from their new year’s celebrations, borrowers also woke to a timely pick-me-up from the federal government, with Canberra’s banking reform legislation now making it compulsory for lending institutions to supply a home loan fact sheet to prospective borrowers, upon request.
This welcome initiative will put valuable information in the hands of homebuyers, and should encourage more competition between lenders to win homebuyers’ business. The home loan fact sheets will bring greater transparency to the home loans process and make it easier for borrowers to compare products. In turn, this should allow many homebuyers to secure a better loan.
The home loan fact sheets should prove especially beneficial to first-time borrowers, with the fact sheets presented in a standardised format that highlights important information, such as the headline and comparison interest rates, the loan fees and charges, the total financial cost over the life of the loan, and information about the impact of rate changes. Also, the validity of each home loan fact sheet is confirmed by the words, “This Key Fact Sheet is an Australian Government requirement under the National Consumer Credit Protection Act 2009”, displayed in the top right corner.
Importantly, borrowers should note that lenders are not obliged to voluntarily provide a fact sheet to them, unless borrowers actually request one, and that a home loan fact sheet does not represent an offer of credit. As with any loan, prospective borrowers will still need to go through the application process and meet the requisite lending criteria.
Furthermore, a home loan fact sheet should not be the only source of information prospective borrowers consult before signing up to a loan. Borrowers are urged to shop online for the best home loan to suit their needs. By doing so, borrowers stand to save tens of thousands of dollars over the life of a home loan if they do compare home loans and choose the right option for their personal circumstances.
For example, on a $400,000 home loan, RateCity calculates that borrowers which move from the current standard variable rate of 7.30 percent to a cheaper comparison rate of 6.35 percent, could save around $240 in monthly repayments and more than $72,000 in interest over 25 years.
This demonstrates the benefit of doing some homework before booking an appointment with a lender, but when you do sit down to discuss a loan, don’t forget to ask for your home loan fact sheet, and as always, read the fine print before signing on the dotted line.