FAQs
What to expect
1. The extra costs
There can be extra costs when buying a home these include: stamp duty, legal costs, disbursements, mortgage insurance, pest inspection report, survey report, builder's report, strata inspection report, loan application fee, valuation fee, registration fee, sundry fees like refinancing or switching fees.
2. Understanding the housing market
We have come through a period of growth in the housing market, the cyclic nature of the property market essentially means what goes up will one day come down - or stay the same. It is good planning to budget on a 1,2 or 3% increase in interest rates and see how much capacity you have to make repayments, you can create a buffer somewhat by making sure you have a decent size deposit, this helps lower the size of your repayments. Property is a long term investment and for those who see it as a short term investment can increase their risk. When you can you can make extra repayments further reducing the amount you need to pay
3. Check your statements for errors
There are claims that more than 50 percent of home loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the lender. We all make mistakes, even bank computers make them and that's why borrowers should keep a close eye on loan statements. Various software for your home PC is available that can run a check on your statements.
4. Compare loan features, not just rates
The more flexible the loan, the higher interest you'll pay. A variable loan which allows you to draw against repayments or offset savings against the mortgage will have a higher rate than a basic loan. Always compare loans with the same features when looking for the best interest rate.
5. Ensure your mortgage broker really delivers
Getting a broker to arrange your loan can certainly save a lot of time and hassle, but borrowers really must ensure the service they expect is the one that's delivered. Ensure the broker fully explains why his or her loan recommendation is the best for your circumstances, not just the loan that earns the most for the broker. Ensure brokers also fully outline all upfront and ongoing "trail" commissions they will earn from lenders for your loan business. At Investors Choice Mortgages you pay nothing and all monies earned by your broker will be declared to you.
6. Pay your loan off quicker with fortnightly or weekly repayments
Dividing your minimum monthly repayment into two fortnightly or four weekly payments can reduce the term of your loan in two ways: because there are more than two fortnights or four weeks in every month, dividing your original monthly repayment into two or four means you actually pay more over the course of a calendar month.
When interest is calculated daily, the more frequent repayments result in less interest being charged to your loan over the course of a month.
But watch out. If requesting fortnightly or weekly repayments, make sure you specifically ask your lender to halve or quarter the monthly repayment. Unless you ask them, many lenders these days will just calculate the more frequent repayment on the basis of the minimum required fortnightly or weekly repayment, delivering very little extra repayment advantage.