10 questions to ask your lender pre-settlement

A home loan can be a huge responsibility to take on, especially for first home buyers. Gaining an understanding of what you’re getting yourself into can alleviate much of the concerns you may have. Here are ten questions you should be asking your lender prior to applying or settling on a loan.

What type of loan is best for me?

Different loans suit different people and their lifestyles. A fixed-rate loan can be great for first home buyers who want the security of fixed repayments for a period of time. A variable rate loan may appeal to those with a greater disposable income who want the flexibility of making extra repayments.

Interest-only loans may also appeal to first-home buyers, who are unsure they’re completely ready to make the often harsh change from rental payments to mortgage repayments. Home loans with principal and interest repayments are great for those ready to take on a home loan who want to pay less in total interest, compared to an interest-only loan.

What is the interest rate on the loan?

An interest rate is arguably one of the most important features of a loan. Ideally, you want your interest rate to be as low as possible, so you’re not paying an exorbitant amount of interest. You should also enquire as to what the comparison rate on the loan is, so you know its true cost.

What will my repayments be?

Knowing what your repayments will be is vital to know whether you can afford to take out a loan. You need to ensure you can service the loan to avoid missing payments and defaulting. Use our calculator to see what your repayments will be with us.

How much can I borrow?

Figuring out how much you can borrow can be a great place to start when searching for a home. It can give you an idea of how much the lender will let you borrow, which can narrow the pricing range of homes you’re looking at. This can also help you avoid disappointment, so you don’t have your heart settled on a home, only to find out the lender won’t let you borrow as much as you need. Check out our calculator to see how much you can borrow with us.

What do I need to apply?

Having all the documentation the lender needs when reviewing your loan application is vital, especially if you’re looking to get quick approval. We require:

• 100 points of ID (a passport, drivers license, Medicare card)

• Proof of employment from your employer and your two most recent payslips

• A list of current loans and expenses

View our home loan application checklist.

What fees does the loan have?

The comparison rate reveals the true cost of the loans and its fees, but that doesn’t mean you shouldn’t be also asking about what specific fees come with the loan and how much they are. The last thing you want is to be stung with a fee you weren’t aware of and not have budgeted for it.

How much of a deposit do I need?

Most lenders will require you to have a 20% deposit when applying for a home loan. Anything less than a 20% deposit will incur lenders mortgage insurance, which can potentially cost tens of thousands of dollars. A lower deposit will also mean you pay a greater amount of interest over the life of the loan. At loans.com.au, we require a minimum deposit of 10%.

What features does the loan come with?

Redraw and offset facilities can be a great way to reduce the interest you pay on your loan and grant you flexibility. A redraw facility allows you to make extra repayments on your home loan and withdraw these when necessary. An offset account is a transaction account linked to your home loan, which offsets your home loan debt when interest is calculated. In some cases, lenders will increase your interest rate when offering these, so make sure to double-check.

How long will it take to be approved?

Potential borrowers typically want to be approved as quickly as possible, so ask your lender how long they expect it will take. We can grant home loan pre-approval within 48 hours, while from receipt of your signed loan application and all supporting documents, we can grant formal approval in just a few days.

Is there a fee to make additional repayments?

If you receive a cash windfall, have a greater disposable income, or just decide you want to, you may want to make additional repayments on your loan. Some lenders won’t allow for this, while others will charge you for doing so. We allow for unlimited additional repayments.

To speak to one of our friendly loan specialists, call 13 10 90.

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