10 key questions to ask your home lender
Buying a home is stressful enough, without having to assess every single lender and product in the market. Here are some questions you should ask potential lenders to help you to find the right loan to suit your needs and lifestyle.
Most importantly ensure you choose a lender you are comfortable with, who is up front with you about all the costs involved and takes the time to answer your questions. A home loan lasts for a long time so it is important to have a good relationship with your lender and ensure that their after sales service is as good after you’ve taken out the loan.
1. What loan will suit me best?
Review all the loan features such as whether you can redraw or make extra payments.
2. What is the interest rate?
3. How much can I borrow?
Depending on the loan provider you can borrow a maximum 80-95 per cent of the value of the property. However you should always consider how much you could comfortably afford to pay each month by discussing the monthly repayment amount.
4. What deposit do I need?
Most lenders require a minimum deposit of 5 per cent of the property’s value. If your deposit is less than 20 per cent, you may need to take out Lenders Mortgage Insurance. The higher your deposit the better as it will enable you to absorb fluctuations in interest rates which will impact on your repayment levels and the total amount of interest you pay on the loan.
5. What fees do I have to pay up front?
Discuss all fees involved in taking out a loan, such as loan application fees and government charges – including stamp duty, mortgage registration, mortgage transfer and Certificate of Title search fees.
6. What other fees are payable?
Make sure you are aware of the all additional fees and costs associated with the loan. For example, are there any monthly fees or charges to redraw?
7. What is the total cost of the loan?
Ask for the Comparison Rate for the loan you are considering. This rate includes both the interest rate and most fees and charges payable during the life of the loan, which is useful when comparing loans.
8. Are there any benefits available to me when I take out a home loan?
Check if your lender offers any benefits for taking out a loan. For example, we offer our free pinnacle +plus program to customers borrowing $200,000 or more, which entitles them to no transaction or loan establishment fees, discounts on loans and bonus interest on term deposit rates.
9. Can I pay the loan off early?
Chances are you may want to refinance your mortgage before the term is complete, so check whether a lender will charge you a penalty for doing so.
10. What will repayments be if interest rates increase by 3 to 4 per cent?
Ask your lender how much your repayments will be if this happened. It’s important to consider whether you would still be able to afford the loan if interest rates were to increase substantially.
^Ross – General Manager Operations