Taking out a home loan is a big decision to make, and it’s important that you have all the information you need before you commit. There are some specific questions to ask your home loan lender to make sure you are getting the best loan for you. Here is a list of the most important home loan questions you may want to ask.
1. What is the comparison rate?
It can be difficult to compare between home loan products when they each come with different types of fees that are not reflected in the headline interest rate. Other costs the home loan might come with are annual fees or establishment fees. A comparison rate is a rate that factors in these other costs. Having a comparison rate makes it much easier to compare home loans with different interest rates and fee structures.
You can also ask a lender for what is called a Key Fact Sheet. A Key Fact Sheet is a short document that gives you all of the essential information about your particular loan. It will be tailored according to the size of your loan and the value of the property. A Key Fact Sheet will give you the comparison rate, as well as a figure for the true cost of the loan over its full duration. As an example, you can look at the Key Fact Sheet section on Greater Bank’s website. All you have to do is pick a home loan, decide on the loan term, and then fill in the property value and loan amount. You will get a much better idea of the cost of your specific loan.
2. Is this the best deal you can offer me?
Under certain circumstances, banks and other lenders will be willing to make you a better offer on a home loan in order to get your business. This is more likely if you are borrowing less than 80% of the property value, or if the loan amount is particularly large. A lender might be willing to negotiate on interest rates. The market for home loans is competitive and it is a good idea to shop around and ask lenders whether they can offer you a better deal.
3. Are there any other applicable fees?
Although the comparison interest rate will reflect definite ongoing fees for a home loan, there are also some fees that will only apply in some situations. These fees can be really important to the value of the loan. Some fees that you will want to look out for, for example, are early repayment fees and late repayment fees. Expensive charges for early repayment fees could make it really costly to try and pay your loan back faster. Some home loans, like Greater Bank’s Great Rate Home Loan, allow you to make unlimited additional repayments.
There might also be charges for changing your loan conditions, such as repayment frequency and minimum repayment amounts. While these fees may not be applicable to you now, or even in 5 years, they may be important later on when your financial situation develops.
4. What other features does the loan offer?
In the same way that you want to be careful about hidden fees, you should also take note of extra features offered with a home loan that may make it more valuable to you over time. For example, some home loans, such as Greater Bank’s Ultimate Home Loan, come with free offset accounts. An offset account allows you to save money, which is then taken off the balance of the loan when your interest is charged, potentially saving you money in interest. The benefit of this is that you can still use the account like a normal bank account and withdraw money from it, giving you flexibility in paying back your loan.
Different home loans will provide benefits like free redraws, linked credit cards, and free additional repayments. These benefits will be more or less valuable to you depending on your specific situation. It’s a good idea to talk to your lender about what benefits they can offer you and the impact they will have on the value of your home loan.
5. What is the application process?
Once you have decided on the best home loan for you, make sure you ask your lender to provide you with a list of all the documents you need to provide, as well as a timeframe for approval. Different lenders can sometimes require different documents and the sooner you provide all the information they need, the sooner you can be approved. Asking for a timeframe will not only give you a better idea of the process, but it will also give your lender a deadline to work to.