Choosing a home loan

A home loan is a debt you will live with for many years. There are many types of loans with different fees, conditions and charges.

Do your research

You need to do careful research before talking to any financial institution. This will help you compare and fully understand the various options so you can choose the best one for you. Talk with many different lenders so you can compare responses.

You should look at a lender’s comparison rates. Comparison rates will combine the interest payments with other fees and charges.

Ask questions

When you meet with a lender, ask the right questions to decide if a loan is the best mortgage option for you. The following list of questions will help.

Main details

  • What is the maximum amount I can borrow?
  • What will the repayments be?
  • How long is the maximum term of the loan? (This will affect the size of your repayments)
  • What is the interest rate, and is this fixed or variable?
  • What is the comparison rate of the loan?
  • What is the minimum amount I need for my deposit?

Fixed/variable options

  • Can I fix the interest rate and are there any restrictions for doing so?
  • Can part of my loan be at a fixed rate and part at a variable rate?
  • Can I swap between fixed and variable rates during the life of the loan without any charges?

Repayment options

  • Can I make fortnightly (or weekly) repayments?
  • Will it cost me if I want to change how often I make repayments?
  • Can I make extra one-off repayments without any changes? (Important if you’re applying for grants)
  • How much of each repayment is interest and how much is principal?
  • How will interest rate rises affect my repayments?

Rates, fees and charges

  • What upfront and ongoing fees and charges are there?
  • When and how do you calculate interest charges?
  • If my repayments or interest rates don’t change, what is the total interest for the life of the loan?
  • How much is the application fee, and can I pay it upfront to minimise interest payments?
  • How much will it cost to pay out the loan early?

Loan features

  • Does the loan have an offset account?
  • Can I make extra payments?
  • Is there a redraw facility?
  • Will I need to pay mortgage protection insurance, and how much is it?

Problems and disputes

  • How easy is it to talk to my home loan manager when I need to talk about my loan?
  • Does the institution have a dispute resolution system in place?
  • What happens if I am late or miss a repayment?

Other details

  • Do I need income protection insurance (compulsory or recommended)?
  • What name will appear on the property’s title deed?