6 questions you should ask about your home loan

Couple talking to a mortgage broker | buildtoday
Just like finding the right home, finding a loan that fits will make homeownership all the more satisfying.

Finding the right home loan can pay off in dividends. Not only can it save you thousands of dollars over the course of your loan, but it can ease the stress that can come with monthly repayments. Before you sign the paperwork and seal the settlement on your new home, make sure you ask these six important questions …

What is the comparison rate?

The comparison rate helps you figure out the true cost of your loan. It helps you figure out the interest rate plus most additional costs associated with the loan. Understanding the comparison rate will help you compare different loans and lenders, which makes it easier to choose a loan that fits your unique circumstances and goals.

How much of a deposit do I need?

The terms of your loan will depend on a few important details, including how much of a deposit you are putting down. While many lenders will pay up to 95% of the cost of your home (if you have solid employment history and credit score), this can come with additional expenses. This includes lenders mortgage insurance. Make sure you discuss how much of a deposit you’ll need to get the home loan terms that work for you. 

What documents do I need to provide?

Completing a home loan application is no small feat. You’ll have to provide a stack of evidence that you can reliably make the payments on your loan. This can include bank statements, previous loan applications and evidence of employment. To make things just a tiny bit more difficult, different lenders will have different requirements for what you need to provide. To ease the process and ensure a swift answer on your application, make sure you discuss everything you’ll need to provide before you’re ready to apply. 

What are my repayment options?

Coordinating a schedule of loan repayments takes some thought. Some lenders will offer monthly repayments. Others may offer a bi-weekly schedule. And others may prefer a weekly option. This can be tricky if your pay schedule clashes with your loan requirements.

Make sure you understand these terms to ensure you’ll always have the funds available to meet your financial obligations. Late home loan payments will wreak havoc on your credit score and may make it difficult to secure future financial investments.  

Are there any additional fees or penalties?

Understanding the comparison rate will give you a good idea of the total cost of your home loan; however, it’s often not the complete picture. You may be responsible for other fees such as lenders mortgage insurance or valuation charges. Be sure you ask your lender about all applicable fees before you sign. Don’t forget to cover any fees that may occur while you’re making payments such as redraw charges or prepayment penalties. 

How much flexibility does this loan offer?

While you’re discussing any applicable fees, it’s worth speaking to your lender about the flexibility of the loan. We all know how quickly circumstances can change, so it’s important to understand if your loan is adaptable. For example, can you swap to a fixed rate in the future? Can you suspend repayments if you’re unexpectedly out of work? Will you be penalised for paying your loan off early? Fully understanding all conditions of your loan will help you plan and live with more peace of mind.

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