Ask these 8 questions before you get a home loan and you can save thousands
We’ve pulled together the best home loan questions to ask your lender before you sign on the dotted line.
These eight questions will help you find the best home loan so you can save money on interest repayments and get a loan with features to match your personal situation. These are the questions you need to ask yourself when you’re comparing home loans, and these are the questions you need to ask your lending specialist if you’re already in touch with a home loan provider.
- Am I eligible to receive any financial assistance from the government?
- Am I able to repay more the minimum each month?
- Are there any discounts for sticking with your current financial provider?
- What happens if I want to refinance my mortgage with another lender?
- How much interest will i pay if I repay the loan monthly compared to fortnightly.
- Are there any fees for switching the features on my home loan.
- Can I put my pay directly on my home loan?
- Will the lender accept the property as a security?
1. Am I eligible to receive any assistance from the government?
The good news is, ‘yes’. Both the state and federal governments have concessions and grants for home buyers, especially for owner occupiers looking to purchase their first home.
State government grants and concessions.
Stamp duty is one of the major fees you’ll pay when you purchase a home. State and territory governments offer concessions for certain types of buyers, like first home buyers and owner occupiers for instance.
Have a look at our stamp duty page by clicking on the below link. We provide up to date information about the different stamp duty concessions on offer from each state and territory governments.
Federal government assistance.
The federal government gives potential home buyers a helping hand through the first home owner’s grant. This is a lump sum payment from the government to put towards the cost of buying your first home.
To find out whether you’re eligible for the first home owners grant, have a look at our guide by clicking the below link.
2. Ask yourself how much you can afford to repay.
Compare home loans and use a repayment calculator to get an idea about how much you need to pay each month, fortnight or week. Can you afford to pay more? And if so, how much? It’s important to have an idea about your how much extra you can afford to repay, it will help you figure out the type of loan to go for.
For example, some fixed rate loans let you make up to $10,000 in additional repayments each year without penalty. If you can only afford to pay a couple of thousand extra off your loan every year, you may want to factor fixed rate mortgage products into your comparison too.
Be aware of break costs with fixed rate loans. This type of mortgage has a determined contract length, and you may be charged extra for finishing the contract early. Find out from your loan provider whether making additional repayments on a fixed rate loan will save you more in interest repayments than what’s charged to leave the contract early.
3. Do I get a discount if I bundle my home loan with other financial products?
Have this at the back of your mind when you’re having a chat with a mortgage specialist. A lender may give you a discount if you have more than one financial product with them.
For example if you have a Commonwealth Bank Home Loan there’s a discount on the annual fee on a Commonwealth Bank credit card.
Discounts for bundling products is hardly a deal maker, but it’s the type of sweetener that may push the home loan ‘over the line’.
4. Find out about the lender’s policy towards refinancing.
Make sure you find out about break fees, discharge fees, early termination fees and transfer fees. They go by a number of names, but get the facts about what you may have to pay if you choose to refinance your home loan with another lender.
In some cases, these fees and charges can negate any potential savings you may have made by refinancing your contract with another lender.
It’s better to have this information earlier than later.
5. What's the best repayment schedule?
It may be the case that paying your home loan every fortnight rather than every month means you pay less overall for the loan.
You can read about the how the repayment frequency effects the interest calculation through the link below.
6. Are there any switch fees for changing the features on my home loan?
Be aware of whether you have to pay extra to change the features of your home loan. A classic example is changing from a variable to fixed rate of interest and vice versa. St.George is one institution that charges a ‘switch fee’ when you do the aforementioned interest rate switch. Find out how much it’s going to cost to amend the terms of your loan to see whether the changes will be worth while.
7. Can I pay my salary directly into my home loan account?
This can be a good way to reduce your interest repayments over the life of the loan, the quicker you can deposit money into your home loan account, the lower the interest calculation on the principal amount of the mortgage. The money can be paid directly onto the mortgage or it can be deposited into an offset account and redrawn using a linked debit card (or credit card).
Some lenders charge when you take advantage of this loan feature, so make sure you double check with the lender’s mortgage specialist first to make sure that it's not going to cost you extra to do this.
8. Can you use the property I want to buy as a security for the loan?
This may come as a shock to some borrowers, but there are instances when the lender won't accept the property you want to purchase as a security for the home loan.
Brenton Tong, of Spectrum Financial Planners said there are some common reasons why a lender may reject the property as a security for a loan: it may be too small, in the wrong suburb or the lender may have too many borrowers in the one building already.
Double check that the lender will actually use the property you want to purchase as a security for your home loan early on to avoid disappointment, wasted time and money.