If you’re booked in for a loan interview and wonder what you should ask, here are a few tips to help.
Lenders are required by legislation to assess an applicant’s ability to repay a loan based on their financial situation.
Financial commitments such as credit card debt, school fees and personal loan commitments will be relevant considerations so be sure to disclose all your financial commitments.
Consider concessions that apply to you.
First home buyers can access the First Home Owners Grant
(FHOG) to purchase a residential property. The FHOG currently applies to both new and established homes, but will cease for established homes from 1 July 2014.
There are also stamp duty concessions available in the City so ask your lender how this could affect your loan.
Choose your repayment schedule.
Can you make loan repayments
when and how you would like to? What is the most cost effective payment method?
Can you make top-up payments throughout the year? Some loans have a cap on additional repayments and charge a penalty fee for exceeding this so talk to your lender about what will suit your situation.
Discuss the type and length of your loan
Consider the interest rate you’d like applied between a fixed or variable
rate, or a mix of both. Ask which is best for your situation, and the pros and cons of each.
Ask about the details.
Don’t be afraid to ask about the simple things such as how the approval process
works, how long it will take, who will be your main point of contact and who you can talk to if there is a problem or you don’t understand something.
Know your upfront costs.
Deposit requirements vary depending on the institution and are calculated based on a percentage of the purchase price.
In addition to deposit, ask about other costs such as loan establishment fees, stamp duty, valuation and conveyancer fees.
whether your loan has any ongoing fees like a monthly service fee. Some lenders have fees for late payments; using a redraw facility; making additional payments or changing from a fixed to variable interest rate.
They may even charge you for making a payment from a different account, so be sure to ask.
of Lenders Mortgage Insurance (LMI). Most lenders require LMI on loans of more than 80% of the property’s value.
By saving that 20% deposit or looking for a lender that does not require LMI, you can reduce your upfront costs significantly.
Check out how Samson bought his first home with a HomeStart Loan. He got started after migrating to South Australia.