Questions To Ask When Looking For a Home Loan

How much can I borrow?

As a general rule of thumb, you should borrow the equivalent of 3 years salary. Be wary of lenders who offer you substantially more than this.

What are the loan application fees?

Some lenders will charge an application fee. Find out if the lender does, how much it is, can you get a refund if they decline your application or if you change your mind.

What are the establishment fees?

Are there any ongoing account keeping fees?

If so, what are they? Are they monthly or yearly?

What will the repayments be?

Can you comfortably afford these repayments? Do you have room to move if interest rates rise a couple of percentage points?

What is the term of the loan?

Ie; 20, 25, 30 years.

What documents will you require?

Identification such as passport, drivers license, birth certificate etc.

Proof of earnings such as pay slips, letter from your employer, previous years tax returns.

Documents to show other forms of income (if you have any).

Bank statements showing proof of savings.

Details of any loans you may have (ie; car loan) & how much money is outstanding.

How long will it take to get an approval?

Once approved, how long will it take to process the loan?

Are there any fees/penalties for paying out the loan early?

If so, how much?

What type of loans do you offer?

There are many different types of loans such as no frills, line of credit,  fixed, variable, low doc, split, bridging, 100% offset, no deposit. Find out the pros & cons of each type.

Can I make extra payments, if so is there a limit to how much I can pay extra per year?

Generally, variable loans permit you to pay as much extra as you like but you may only be able to pay a certain amount extra per year on a fixed loan.

What is the current variable interest rate?

Find out what current interest rate they are offering & compare it to other lenders.

If the interest rate is fixed, how long will this be for? 

1, 3, 5 years?

Is there a honeymoon period? How much will the interest rate go up once the honeymoon is over?

Some lenders will offer honeymoon rates (also known as introductory rates) for the first year of the loan. These offer a lower interest rate for a fixed period. Once this period is over, the interest rate will revert to the standard variable rate. Can you afford the loan at the rate once it reverts?

Do you require a down payment? If so, how much?

Some lenders will permit you to borrow up to 110% of the value of your home. You will probably have to pay mortgage insurance if you borrow more than 80%. Other lenders may require a deposit. This is usually around 20%.

If I decide to switch from variable to fixed, is there a fee to do so? How much is this fee?

If you feel interest rates are on the rise, you may decide to lock in your loan for 1, 3, 5 or 10 years. Many banks & mortgage lenders will charge you a fee to switch from variable to fixed.

Does the loan have a redraw facility?

Some loans allow you to make extra repayments then redraw them if you need.

Is there an offset account attached to the loan?

Ie; you can put your savings, wages etc., into the offset account & this will be offset against your home loan, saving you on interest.

If I decide to switch banks, is there a fee? How much?

If so, how much is it?