Loans are anything but standard. Even for the same product, terms and conditions vary between the banks (or non-bank lenders). And there are also many products to select from. You must also pay attention to a lender’s track record (some lenders, especially non-bank lenders, offer low rates today but may raise rates faster than the RBA).
We suggest using a mortgage loan broker who can help you choose what is best for you. The broker’s fee is paid by the lender. As products and offerings change very frequently, brokers will be best equipped to find what is right for you. However, brokers are also motivated by the commissions/fees that the lenders pay them. Therefore you need to stay on top of your game and ask the right questions.
Important questions to ask your Broker when deciding on a loan product:
- What is the variable mortgage rate?
- What is the fixed mortgage rate?
- What are the bank origination fees?
- Is an offset account available (allows your deposit account to offset against interest charged on mortgage)?
- What are the mortgage closing costs (bank, solicitor and registration costs, etc)?
- What is the annual loan fee, if any?
- Are there any costs for fixing interest rates at a later date (fixing costs)?
- Does the discount (below bank index rate) that you are quoted for variable rate apply to fixed rate as well if you fix later on?
- Are there any partial prepayment penalties (what is maximum partial prepayment you can make before it is considered termination)?
- Are there any termination costs if you refinance (if you have variable rate)?
- What are the termination costs if you have fixed rate?
- How quickly can you get a pre-approval?
- How long will the formal loan approval take once you give the address of target property?
- Will an onsite appraisal be needed or is it a curb side appraisal which is needed?
- How quickly can bank move from formal approval to settling the loan?
- Which banks are being more conservative right now on valuations?
- Which banks are faster at settlement right now?
- Is there any package with the loan where you get free chequing and credit cards?
- If you plan to have multiple mortgages is there any package where you only pay fees once?
- What percentage of appraised value they will lend you?
- What loan service to income ratio do they use?
- What types of income can the Bank use for the income calculation (onshore vs. offshore, level of disclosure)?
- What supporting information will you need to give for the loan approval?