There’s a lot more to a mortgage than just the interest rate. That’s why, during your research process, you need to drill down into the fees, features and application process of each loan.
Here are five key questions to ask when you’re shopping for a home loan.
1. What is the comparison rate for this loan?
The comparison rate can be more useful than the interest rate when you’re comparing home loans. That’s because the interest rate only tells you how much interest you’ll be charged on your loan balance every year.
While that’s important, it’s not the real cost of the loan. To understand that, you also need to consider other fees and charges that may come with the product.
That’s where the comparison rate helps. It combines the interest rate with these other costs to give you a more accurate picture when you’re comparing loans. To get a more personalised comparison rate to help compare – always get a key fact sheet (more on that later!)
2. Can you give me a full list of fees for this loan?
Speaking of fees, not all of these are included in the loan’s comparison rate. These fees can add up, so you need to be aware of them before you sign on the dotted line.
Fees to look out for include:
- An establishment fee – when you first take out a loan
- A discharge fee – when you pay off the loan or refinance
- A break fee – if you end a fixed-rate loan early
- Redraw fees or offset account fees
- Additional repayment fees
Some lenders, like Well Home Loans, are fully transparent about their fees so you‘ll find this information easily on their websites. Unfortunately, other lenders may not be – so you need to ask them directly for this information.
3. Does this loan come with an offset account or redraw facility?
Offset accounts are a form of transaction account linked to your home loan. The balance of this account is then offset against your loan balance, reducing the amount of interest you have to pay.
A redraw facility lets you make additional repayments on your mortgage. These repayments can then be withdrawn or ‘redrawn’ if you subsequently need them.
However, not all mortgages come with these features. So it’s important to check with the lender before you take out a home loan.
4. Can I make extra repayments with this loan?
Paying off your mortgage faster by making extra repayments can potentially save you thousands over the life of the loan.
So you need to check that the loan you’re applying for allows you to make extra repayments without being penalised.
5. Can I apply online?
Your free time is valuable. So likely you don’t want to spend it having a long, drawn-out meeting with a lender and a mountain of paperwork.
Applying online from the comfort of your living room doesn’t just save you from this. It often makes the application process easier and more efficient.
Key fact sheets
The simplest way to find out this information from a lender is to ask them for a key fact sheet – which, by law, they have to provide. This sheet summarises everything you need to know about a home loan product, so you can make a well-informed decision.