When going through the a home loan and mortgage application process, you are likely to be inundated with documents and agreements.
Some of which you will understand and read, others you may not understand fully.
In order to fully grasp the whole process, mortgage lenders have people on hand available during the process that will answer any questions you may have. In order to make sure you are well-informed during the process. Here are a few questions you should be asking during the process to make sure you’re on top of things.
A mortgage is the biggest credit liability you’ll ever have so you need to make sure you get the right one. Here are the questions you have to ask any potential lender before you sign up to a loan. They could save you a fortune!
Buying a home is without doubt one of the most exciting experiences there is and when you’re accepted for a mortgage you’re one step closer to “the dream.” But before you get carried away, a word of caution. Choose the wrong mortgage and your property dream could rapidly become a nightmare.
Here are the questions you MUST ask your mortgage lender (without fail) before you sign on the dotted line:
1. What is the interest rate?
The answer to this question determines how much you'll repay on top of what you borrow. Interest accrues over the life of the loan, and with the average mortgage lasting 15 years you want to make sure your rate is affordable.
2. Is the rate permanent or just a promotion?
Lenders often give new borrowers an attractive low rate to win their business. This low rate is normally temporary, and sees you revert to the lenders standard rate when the promotional period is over. Find out whether the advertised interest rate is permanent, and if it isn't what's the lenders standard variable rate. There's no point getting a great rate for a year if you're going to pay over the odds for the remaining term.
3. Why have you selected this loan for me over other loans?
By law, mortgage brokers must choose a home loan for you that is 'not unsuitable'. This means the features, rates and fees should be a good match for your personal circumstances. Make sure you find out how your broker arrived at the decision to suggest a particular home loan for you, including which of your personal circumstances were taken into account.
4. How much of a deposit do you need?
Ask how much of a deposit the lender wants, and find out whether the size of the deposit affects the interest rate of the loan. Sometimes a lender will give you a better rate of interest if you put down a larger deposit. This is mainly because you're less of a risk, and the lender already has some of it's money secured in the property.
5. Can you make overpayments?
The quickest way to repay your mortgage and save money in interest is to make overpayments whenever possible. Double check your lender is happy for you to do this without penalty. Some lenders charge an admin fee to process the additional payment. Whilst you're on the subject of overpayments you should also find out whether your monthly payments adjust in line with any additional payments you make.
6. Will you be charged for early repayment?
Lenders make their money from the interest you pay over the life of the mortgage. If you repay your loan early they don't make as much from the deal, and often charge an early repayment penalty to recoup some of their lost profits. Ask whether you'll be charged for early repayment, and if so how much?
7. What are the additional charges?
The most common charges you'll run into when getting a home loan are valuation fees, arrangement fees, and legal fees. It's not unusual for lenders to run special promotions where you get free valuation or help with fees. Ask if there are any additional charges, and find out whether they can be paid upfront or have to be added to your loan.
8. What documents will you need to provide?
Normally lenders need to see 3 - 4 months worth of bank statements, along with a couple of forms of I.D, and proof of your assets and liabilities. Ask whether your lender has any other requirements as this will speed up your application process. Read our home loan checklist for more information
9. How long does it take to process the loan?
In the property market a few days can make a big difference. Try to get an estimate of how long the application process will take, and don't try to settle on a property too early into the process. It's a good idea to get a decision in principle before you go hunting for the home of your dreams.
These are the most important questions to ask your lender before you agree to any deal. If there's anything else you're not sure of don't be afraid to speak up. You won't take a bigger loan in your lifetime, so you want to be 100% happy you understand what you're signing up to.
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10. What documentation do I need?
This is a very important step in the home-buying process. Many documents are required to get a mortgage application approved and to determine mortgage rate. Should any piece of documentation be forgotten or mislabeled, a it could spell the end of your mortgage application and the loss of your new home.
In order to avoid this disaster, make sure you ask, ahead of time, what documentation will be required of you and how you may go about acquiring it. In addition to acquisition, many banks require certain formats of each document to ensure a its prompt processing. Make sure that you are aware of each stipulation and rule before submitting any document. Occasionally, some lenders will offer templates that can assist in the documentation a process, ask about these as well before setting out to deliver each of the documents.
11. How long will it take?
Knowing how long each process will take is also a crucial question. Many documents or application materials are time sensitive and will become invalid if submitted at the wrong time or too late.
To ensure that nothing is forgotten or invalidated, know how long each process takes and when everything will need to be where. With this knowledge you are sure to never miss a deadline and will always have things in at the time required. Ask this question with everything that is asked of you- how long will it take and when is it due.
12. What are my closing costs and fees?
These two things often come as a surprise during the home-buying process. Though the explanation of what is required of the applicant during the mortgage process, often times the closing costs and other associated fees of buying a home are forgotten.
These are not trivial amounts and should be well known by all parties throughout the process. By understanding how much is expected of you, you can then discuss options with your mortgage broker regarding how to lessen these costs. Always know what you are expected to pay, regardless of perceived importance.
13. What is my mortgage interest type?
This is the single most important question when considering a mortgage offer. Interest will account for a big portion of the total repayment amount for a mortgage loan. Over the long course of a mortgage term, understand what your interest percentage will be.
Is it variable? Will it change, or is it fixed? What is that amount? Can that amount be lessened by any actions available before final documentation is signed? These are important questions- even by reducing your interest amount by a percentage or two, you may save yourself thousands of dollars by the end of the mortgage term.
How does a mortgage broker help?
When you deal with a mortgage broker, the answers to these questions should be used in your comparison of loans. Remember, a mortgage broker is there to help you get a home loan!