Many borrowers often make the mistake of looking for a lender that offers the lowest interest rate instead of taking the time to check all the available options and asking the right questions.
Taking out a home loan is a huge financial decision, and you would need a little more time to scrutinise and find which ones are worth pursuing. There are many other components that can affect how much you spend or save over the life of the loan, and this is one aspect that you should be able to ask your potential lenders.
Asking the right questions is the key — below are 10 of the most crucial questions you should ask lender to know find the right loan for you.
1. What is the comparison rate?
While it is a legal requirement for lenders and home loan providers to display the comparison rate next to the advertised rates of their home loans, some borrowers might still get confused. This makes it important that you ask your lender about comparison rates.
In simplest terms, a comparison rate is a number that encapsulates all the fees and charges that come with the loan, giving you an idea of what you will be spending once you end up getting the home loan. Most of the time, comparison rates are higher, especially if the loan comes with other features and some fees.
There are times, however, that comparison rates are the same with advertised rates. This is true for some no-frills, basic home loans with no fees and no extra features.
It is also possible for comparison rates to be lower than the advertised rates, especially in the case of fixed rates being higher than the variable rate at the time of application. Comparison rates can also be lower than the advertised rates when lender offers discounts over the life of the loan.
To help you see the current home loan rates available in the market, use this comparison table:
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 STAR CUSTOMER RATINGS |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure | |||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% |
| Disclosure |
2. What is the best rate you can offer me?
As the mortgage industry is extremely competitive, you have the opportunity to negotiate with your lender about the interest rate being offered. Advertised rates are not set in stone — you can still get a lower rate if you just ask your potential lender about their options.
There are certain arrangements that can help you lower your rate, like making a bigger deposit, or perhaps getting a bundle. Many of the bigger lenders will be open to discussing different options with you.
3. What repayment options do you have?
Typically, lenders offer either monthly, fortnightly, or weekly repayments. Still, it would be useful to check what repayment frequency options are available, as you may wish to change payment frequencies in the future. However, you should check if there are any fees involved in changing repayments as some lenders may charge fees.
4. What home loan features do you offer?
Going beyond interest rates means also considering home loan features as factor when choosing home loans. Home loan features allow can help you save thousands of dollars on your home loan. However, some lenders may charge fees on these features, which could end up costing you money — better to ask all the necessary information about these features before signing any deals.
5. What information do I need to provide for my application?
Even if this is not your first rodeo, it still pays to check with the lender what documentation is necessary for your application. This is especially important if you are applying with a different lender, which may have its own rules. The sooner you provide all the information, the quicker they can process your loan application.
6. How long will it take for my loan to be approved?
Time is sometimes important for many homebuyers, particularly when competition is high. This is an important question to ask as it will not only give you a timeframe to work with, but it will also give the lender a deadline to ensure your application is not dragged out.
7. Are there any loyalty benefits?
This is a great way to see if lenders value their customers throughout the loan term, not just at the beginning. Lenders who are determined to keep their customers will often offer loyalty benefits after a certain period. This is often in the form of a bonus rate drop or discounts on other financial products.
8. What amount is required for the deposit?
Lenders use the loan to value ratio (LVR) to determine how much you can borrow and this will affect the deposit amount you will need to save. Most banks typically require an 80% LVR, which means that you will have to provide an equivalent of 20% of the property’s value as your deposit upfront. Lenders have their own maximum LVRs, which means you can potentially borrow more, even up to the full amount of the property.
9. Will I need to pay Lenders Mortgage Insurance?
This question relates to the previous one — Lenders Mortgage Insurance (LMI) has a purpose of protecting the lender in the situation where you are unable to meet repayments. Most lenders will charge LMI if the LVR is over 80%, however, you should check with your lender as they may offer high LVR loans without insurance.
Use our LMI calculator tool to find out the possible cost of your LMI: Lenders Mortgage Insurance
10. Are you a member of the Mortgage Finance Association of Australia?
This question might be overlooked but it is crucial to check if your lender, especially if it is a small one, is a member of the MFAA.
The MFAA has a Code of Practice which supports ethical behaviour and professionalism. If a lender is a member of the MFAA, they are required to adhere to the code, and you can have greater confidence in the services the lender provides.
Collections: Home Loan Application Home Loan Lender
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