April 8, 2011
It’s not just interest rates that can hurt your bottom dollar. Fees and establishment costs can make a big difference to the amount you pay for your mortgage.
- Application fees: many lenders charge an upfront establishment fee and application fee.
- Valuation fees: lenders may also charge to have the property valued. If you’re worried you may not meet a lender’s requirements for the loan, ask them to approve this first, before going ahead with the valuation, as you may have to pay for the valuation even if your loan application is denied.
Look out for facilities and features that can make managing your mortgage easier.
- Extra repayments: Paying an extra 10% could save you thousands of dollars over the life of your mortgage so check to make sure you are allowed to make extra payments.
- Redraw facility: With many loans, if you make extra payments you can withdraw the money at a later stage if you need it. This has tax advantages as you can store your savings in your mortgage.
- Repayment holidays: Some mortgages allow you to take a ‘repayment holiday’ for a short period such as six months, for example, if you’re taking time off after having a baby. Check the small print though; sometimes this is only allowed if you’ve made extra repayments, and you may have to make higher repayments after the holiday.
- Account fees: Some lenders offer an exemption from fees on general transaction accounts.
- Mortgage offset accounts: This lets you deposit money in an account and receive interest in the form of a reduction in the interest due on your home loan. Because offset accounts don’t actually pay you any money, they don’t add to your taxable income. However, you need to ensure your offset account is worth the higher interest rate you might be paying. Some offset accounts can be used as your everyday transaction account, while others are only suitable for savings. You may be able to have one or more of a range of ‘ordinary’ accounts linked to your home loan all acting as offset accounts.
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