The decision to step into home ownership or upgrade an existing property is a significant one, making it crucial to consider these 9 factors.
When you’re shopping around for a home loan, often it can be information overload.
It can be confusing, time consuming, and leave you scratching your head about which path is right for you.
Greg Hooper, Newcastle Permanent Head of Customer Lending, highlights the importance of choosing a lender wisely.
“Choosing a lender is a big commitment,” he says, “so do some research into their track record.”
“Looking online, talking to friends or colleagues and scanning websites for awards can also help narrow the field.”
Having been in the community for 120 years – Newcastle Permanent get it.
They understand that it’s not just your finances that come into play, it’s your unique personal circumstance too, making choosing a home loan, and a lender, a massive life choice.
But ultimately, according to Hooper, a good lender “will communicate effectively and efficiently, making sure you understand all the information along the way.”
9 things to think about before choosing a home loan lender
1. Borrowing power
Understanding your borrowing power is the first step in the home loan journey.
It’s important to do the groundwork to evaluate your current financial situation, income, expenses, debts, and credit score.
Consider how your loan options may be impacted based on whether your goal is to buy a home to live in, or an investment property.
“This is why it’s important to have a lender that will help you have a good understanding of the product you are choosing and making sure it suits your needs,” Hooper says.
2. Maximising your deposit
Keeping your savings for a deposit separate to your everyday banking and other savings is “really key,” says Hooper, adding the importance of choosing “the right savings account or term deposit so you can take advantage of interest earnings.”
Maximising your deposit may result in lower interest rates and may avoid lender's mortgage insurance.
Things like certain types of savings accounts, as well as potentially closing down credit card accounts can have huge impacts on your deposit. Picture: Getty
A good lender will help you understand what is possible with your funds, and whether or not you qualify for one of the Government’s Home Guarantee Schemes.
3. Interest rates
Understanding interest rates and repayments is crucial when making such a large financial commitment.
“Your lender should help you to gain a good understanding of the differences between products and how this can impact on the repayments,” says Hooper,
“It’s also important to understand what impact rate rises will have on variable loan repayments.”
4. Additional costs
Being aware of upfront costs helps avoid unpleasant surprises.
Besides your down payment, it is important to factor in other costs into your total purchase price, such as inspection fees, stamp duty, conveyancing charges, and potential mortgage insurance.
Additionally, says Hooper, “some discharge and government fees can apply, particularly for refinance customers.”
“It’s really important to check the product disclosure statement carefully and talk to your lender about things like break costs before you commit to help avoid any nasty surprises.”
5. Loan features
Often, Hooper says, people neglect to consider how a loan will “operate and fit in with their lifestyle” once it’s set up.
He recommends considering loan features, from managing your loan completely online to having face to face conversations, as well as home loan types.
“Different home loan types will offer different features like offset accounts or the option to make additional payments, which can potentially take years off your home loan and save you thousands,” Hooper says.
Your home loan type will greatly impact the features of the account. So make sure you understand all the details. Picture: Getty
Ask your lender to go through a variety of options to align the loan with your needs and desired flexibility.
6. Fixed verses variable
Considering the pros and cons of both interest rate options, with fixed, says Hooper, “you can lock in your interest rate for a certain period and plan, knowing that your repayments will stay the same during that time.”
“With a variable rate loan, your interest rate can rise or fall throughout the term of the loan, but often comes with more features and flexibility.”
7. Existing equity
Hooper says that for those looking to upgrade, existing property equity can be an asset.
“Equity can assist in many ways, and one of the most common uses is helping to secure an investment property by using equity in your current home to cover the deposit.”
Your lender can also provide information on how to utilise equity for a loan for home improvements.
8. Can they help review your current mortgage?
If you already have a mortgage, review it to explore potential savings and features better suited to your current needs.
Perhaps you can look to a new lender for a better rate, use your equity of home renovations, or for another property.
People's circumstances change, so you want a lender who is able to change with you. Picture: Getty
Find a lender that can provide tailored advice for your specific situation, whether in person, online, or through a mobile lender.
9. Do they understand what’s important to you?
Choosing a home loan requires careful consideration of various factors, and not all lenders are equal.
For example, do you want a lender that is only app-based, or prefer one that has more of a community feel?
Do you want a major bank, or a locally-based alternative? Is customer service both online and in-person important to you?
Consider your unique needs so you find a lender that not only assists, but offers you a personalised, professional, and knowledgeable approach to home financing.