A home loan is a significant financial commitment, especially for first-time home purchasers. Gaining a better grasp of what you’re getting yourself into will help to alleviate many of your fears. Before you take out a loan, here are ten questions you should ask your lender.
1. What is the best sort of loan for me?
Different loans are appropriate for different people and lifestyles. For first-time home purchasers who desire the security of guaranteed repayments for a certain period of time, a fixed-rate loan can be ideal. A variable rate loan may appeal to consumers with more disposable income who desire the option of making additional repayments.
Interest-only loans may also appeal to first-time home purchasers who aren’t sure if they’re ready to make the often-difficult transition from rental to mortgage payments. When compared to an interest-only loan, house loans with principal and interest repayments are ideal for those who are ready to take on a home loan and wish to spend less in total interest.
2. What is the loan’s interest rate?
One of the most crucial aspects of a loan is the interest rate. You want your interest rate to be as low as possible so you don’t end up paying a lot of money in interest. You should also enquire about the loan’s comparison rate so that you are aware of its genuine cost.
3. How much will I have to pay back?
Knowing how much you’ll have to pay back is crucial to determining if you can afford a loan. To avoid missing payments and defaulting on the loan, be sure you can service it. To calculate your repayments with us, use our loan repayments calculator.
4. What is the maximum amount I can borrow?
When looking for a home, figuring out how much you can borrow is a good place to start. It can offer you an estimate of how much the lender will lend you, which can help you limit down the price range of the houses you’re interested in. This can also help you prevent disappointment if you have your heart set on a home only to discover that the lender won’t let you borrow as much as you require. To find out how much you can borrow from us, use our Homestar borrowing power calculator.
5. How do I get started?
It’s critical to have all of the evidence the lender requires when examining your loan application, especially if you want a rapid approval. We require at least the following:
- 100 points of ID (a passport, drivers license, Medicare card)
- Proof of employment from your employer and your two most recent payslips
- A list of current loans and expenses
View our full home loan application checklist here.
6. What are the loan’s fees?
The comparative rate discloses the genuine cost of the loans and their fees, but it doesn’t mean you shouldn’t also enquire about the loan’s exact costs and how much they cost. The last thing you want is to be surprised with a price you didn’t anticipate and haven’t budgeted for.
7. How much of a down payment do I require?
When applying for a home loan, the majority of lenders will want a 20% deposit. If you put down less than 20%, you’ll have to pay lenders mortgage insurance, which can cost tens of thousands of dollars. You will pay more interest throughout the life of the loan if you put down a smaller deposit. We typically require a minimum deposit of 10% at Homestar.
8. What features and benefits does the loan provide?
Redraw and offset options can help you save money on interest while also giving you more flexibility. A redraw facility allows you to make additional home loan payments and withdraw them as needed. When interest is calculated, an offset account is a transaction account linked to your house loan that offsets your home loan debt. When lenders offer these, they may boost your interest rate, so make sure you double-check.
9. How long will it take for your application to be approved?
Because most potential borrowers want to be authorised as soon as possible, find out how long your lender expects it to take.
10. Is there a charge for making additional payments?
You may want to make additional loan repayments if you obtain a cash windfall, have more discretionary income, or just decide to do so. Some lenders will not allow you to do this, while others will charge you a fee.
Contact us today to talk with one of our helpful lending consultants!
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.
