How To Get A Home Loan
How To Get A Home Loan
In years gone by only the major banks were able to provide borrowers with home loans and it was fairly hard to get one. In the 1980's, however the banking industry in Australia was deregulated and from then onwards home loans became a lot easier to obtain. Even though there are now more lenders to choose from and getting a home loan is easier it is still recommended that you read through the following advice and information, in order to make sure that you know how to get home loans from bank lenders before you apply for one.
Who Provides Home Loans
Any of the banks, credit unions and building societies in Australia will be able to provide you with a home loan. In fact they will be able to offer you a range of home loan options to choose from. There are also a number of other finance companies that specialize in providing home loans to a variety of home owners.
A lot of potential home owners have now taken to using the services of a professional mortgage broker in order to obtain the most appropriate home loan. This is probably because people are much busier nowadays and don't have the time to go through all of the home loan prodcust that different lenders are able to provide.
If you do use a mortgage broker to get a home loan you should check how many lenders that have on their books. This is because you want to ensure that they are looking through all of the available home loan products on the market before making a recommendation for you. Also you should ask the mortgage broker how much commission they receive from the lender that they are recommending to you, and whether or not all the lenders on their books offer them the same amount of commission.
Main Home Loan Features
Of all the different types of loans available in Austalia home loans have the most features. This is due to the fact that they are so common and also because recently there has been a significant increase in the amount of competition in the home loan market. Every home loan will have a range of different features and benefits, but the most important things to look out for are :
- Interest Rate - What is the interest rate including any ongoing fees and is the interest rate fixed or variable.
- Extra Repayments - Can you make additional payments into you loan so that you can pay it off as soon as possible.
- Redraw Facility - This facility allows you make withdrawals of any excess money that you have paid into the loan whenever you need to.
- Offset Account - This feature allows you to place your savings into an account that in tern reduces the amount of interest that you are charged on your home loan.
- Principle and/or Interest - Do you want to pay off the intrest and part of the principle each month, or simply just the interst.
- Repayment Flexibility - The choice of making repayments on a weekly, fortnightly or monthly basis.
- Choice of Loan Term - With variable loans you can choose between 25 or 30 years, whilst with fixed loans you can choose how many years you would like to fix the interest rate for.
Questions When Getting a Home Loan
A home loan is such a big financial decision that it is imperative that you understand how it works and all about the lender's terms and conditions. The best way to do this, regardless of who you get the home loan from, is to ask as many questions are you can. So make sure that you get comprehensive answers to the following important questions.
- What is the home loan interest rate, particularly the AAPR comparision rate?
- Is it possible to get a professional package which qualifies for a lower interest rate?
- Is the interest rate fixed or variable?
- For fixed interest loans how long is it fixed for and what rate will the loan default back to when that period ends?
- For variable interest loans how much notice is given before the rate changes?
- Is there a choose of interest only and principle and interest loan repayments?
- Is there any deferred establishment fees if I decide to change home loan lenders?
- Can I choose the frequency of my repayments (ie: weekly, fortnightly or monthly)?
- Is it possible to choose the number of years to pay the loan back over?
- Can extra repayments of any amount be made at any time?
- Is there a fee for making extra repayments?
- Is there a redraw facility on the loan and, if so, is there a fee for making a redraw?
- What is the maximum loan amount that I can borrow?
- How long will approval of the home loan take?
- Can I get pre-approved for the home loan and how long does pre-approval last?
- For the home loan to be approved what documentation must be produced?
- Is there a fee or penalty for paying the loan out early?
- Is there any monthly fees or other charges on the loan?
- What is the procedure if a payment is missed or you get into financial difficulty?
Also here are some extra questions that you will need to ask if you are using a mortgage broker to source the best home loan deal for you.
- How many and which lenders are you searching through when looking for the best home loan for me?
- What is the percentage of commission that you receive from all of the lenders on your books?
- Are you a member of the Mortgage & Finance Association of Australia (MFAA) or any other professional association?
- How many years have you been operating as a mortgage broker?
- Are there any fees for using the mortgage broking service?
If you are not sure about the meaning of some of the terms or abbreviations used by lenders then you can check out the home loan definitions page, which has a detailed explaination about some of the more confusing aspects of getting a home loan.