Tips for getting a mortgage
Tip: Choosing the right loan and repaying it quickly can save you thousands of dollars.
You’ll probably look at many properties before you find the home you want. It pays to be just as careful when choosing your home loan.
- Shop around for the best mortgage – you’re under no obligation to go with your regular bank.
- Negotiate – for example, another bank may offer a better rate on the condition that you switch your everyday and savings accounts to them.
- Mortgage brokers deal with a number of lenders, so they can save you time shopping around.
- Don’t over-commit – that 95% loan may sound great, until you come to pay it off.
- Only borrow what you need – some lenders may try to tempt you into borrowing more.
- Make your repayments as high as you can afford – the sooner you pay off your mortgage, the less you’ll pay in interest.
- Beware of ‘revolving credit’ – your home is not an ATM! – this type of loan requires a lot of discipline.
Where to get a mortgage
You can get a mortgage directly from a bank or through a mortgage broker. Both have their advantages and disadvantages.
Home loans are also available from ‘non-bank lenders’ such as building societies, finance and insurance companies, trustee companies and credit unions.
‘Non-conforming lenders’ are an option if you are unable to get a bank loan, due to a bad credit history or lack of proof of income. These lenders usually only accept applications through mortgage brokers.
- Banks offer a wide range of mortgage options.
- Competition between banks can sometimes lead to great deals, such as a bank contributing to your legal bills, discounting your insurance or lending at a low fixed interest rate.
- Banks can offer discounts on your day-to-day banking costs or even waive your transaction fees altogether if you have your mortgage with them.
- Their loan application fees are usually negotiable.
- Banks tend to be more cautious and are more likely to turn you down if you don't have a good credit history
Brokers deal with a number of lenders, so they can save you time shopping around.
- It is no more expensive for you than approaching the lenders direct. You don't pay directly for their services - they are paid a commission by the lenders they use.
- Brokers know the interest rates and application criteria for different lenders, and can negotiate on your behalf.
- They can help you put your loan application together.
- They may be able to help you find a loan if a bank has turned you down and may be able to get you a better deal than if you went direct.
- All mortgage brokers are now required to be Registered Financial Advisers. They must have a complaints process in place and belong to a dispute resolution scheme. You can check the official Financial Services Providers Register at the Companies Office website.
- Brokers don't cover all lenders. Some banks don't deal with brokers, for example.
- Different lenders pay different commission rates.