7 QUESTIONS TO ASK A FINANCE LENDER BEFORE SIGNING
Before you can land the home of your dreams, you should first land the right lender to help you. Since mortgages involve a lot of money, you want to make sure it’s in the right hands. To help you choose, ask these seven questions to everyone you meet with.
Do you want a Standard or Basic loan?
You should figure out whether you want a basic or standard variable loan. But first, let’s define the two first. Standard variable loans have different features such as loan splitting, offset facility, and the like. However, the borrower will need to pay a higher interest rate.
Basic variable loans, on the other hand, offer none of the extra features, but have lower interest rates than standard variable loans. This kind of loan can be ideal for first time homebuyers.
You need to figure out if you can save more money with a basic loan, or would the bells and whistles be worth of the extra money you’ll pay?
Will the lender allow you to pay extra?
Extra repayments are possible—you just need to know if the lender allows it. Paying off extra amounts for your loan can help save on interest and pay off the loan faster. Look around for lenders that allow extra repayments.
Will the lender allow you to redraw that money at a later date?
If you needed money for an emergency, will the lender allow you access to the extra repayments you made? They may or they may not, so make sure you ask before you choose a lender.
Will there be exit fees?
If you decide to refinance to another lender or you’ve paid off the loan in full, you might need to pay exit fees as you’re discharging your existing home loan. Exit fees will always be there, however you should shop around for loans that have the least exit fees as possible. If you foresee that you’ll be selling and buying a new home as you fix your loan, ask if you can use portability so you could avoid exit fees.
Do they offer lower LMI rates?
Lender’s mortgage insurance or LMI allows borrowers who have small deposit or weak application buy their desired home due to the said insurance. However, look around for lender that have lower LMI premiums before choosing.
What are terms on interest-only loans?
When you choose an Interest only loan, you only need to pay the interest on the mortgage monthly. These types of terms usually lasts between 5 to 7 years, so after the term, you would need to pay to principal, increasing your monthly payment. Ask lenders about the maximum interest term you’re allowed to have.
Do they offer an offset facility?
An offset facility is a savings account linked to your mortgage account. The account’s balance “offsets” against your mortgage balance; through this, you’re only paying interest on the difference between the two. It sounds nice, however, this facility will only be truly beneficial depending on interest rate and how much money you can put on the offset account.
When choosing a lender to finance your home, always remember your needs and goals before deciding—you must choose a lender that will cater to those needs and goals. Do your research, look around and compare. We know it can seem overwhelming, and you don’t have to do it alone! Don’t hesitate to reach out if you need more help or advice! We’re here to make the process easier, give us a call any time or leave us a message on social media.