Questions About Your Loan
Questions you must ask to see if your loan is right for you!
1. What type of interest will I be paying?
Is the loan set on a fixed rate for a certain period, is it a floating or variable rate? How will this change in the future and how will this affect my payments. All these questions should be asked, the biggest single factor to how much your loan will cost you over the life of the loan is the interest rate you will be charged. Your broker may be able to show you how to reduce this rate before final documentation of the loan.
2. What other fees and cost will I incur?
There can be many extra costs in getting a home loan, it is important you discuss this with your broker, from government fees to bank fees, to early repayment costs, the quickest way to repay your mortgage is making extra payments, some lenders charge you for processing this, others will put a limit on how much extra you can pay in a year.
3. How much do I need as a deposit?
Some lenders will loan up to 95% of the purchase price, but this will depend on many other factors. The bigger your deposit the more favour you will have with a lender, this sometimes can reduce your interest rate, or remove the need for lenders mortgage insurance, saving you thousands over the life of the loan.
4. What documents will I need?
One of the biggest hold ups in the processing of home loans is not having enough information for the lender. It is important to correctly fill out all requested application forms and supply original documents upon request. From proof of identification and proof of income. You should always be able to show 3 months of bank statements and if some of your deposit has been gifted to you, you may need to show where that has come from also.
5. What happens to personal information I give to my broker?
Your broker must comply with APP regulation (Australian privacy principals). All brokers in Australia are governed by the privacy act 1988 and must obtain your consent to collect personal information, your broker must ensure that any information collected is only used for the purpose that it was collected, they cannot disclose of information without express written consent of borrowers.
Questions About Your Broker
Here is a list of questions about brokers your mortgage broker should be able to answer for you!
1. Are you a member of any financial associations or brokers associations?
Your broker should really be a member of either MFAA Mortgage Finance Association of Australia, or FBAA Finance Brokers Association of Australia. This gives you assurance they are qualified and have satisfied industry regulation body requirements. This also gives you a third party to go to should you have any complaints.
2. Do you have a credit licence or are you a credit representative?
Your broker must have at least one of these and must be able to produce a credit representative number or credit licence upon your request. Owning a credit licence means you can legally engage in all credit activities, being a representative means you can act on behalf of a licence holder, but you still must adhere to all credit licence regulations.
3. How do I know my broker is working in my best interest?
Most brokers get work by referral, so if they don’t work in the interest of the client then they sure won’t last long in the industry. Mortgage brokers are governed by law they must choose a home loan for you that is “not unsuitable” your individual needs. They cannot knowingly put you in a worse financial situation than where you started.
4. Do you charge for your services?
Some brokers do charge a service fee, it is important to ask this. Most Brokers will only charge the financial institution but for some loans that are more complicated like build and construct loans or self-employed for less than two years, there can be additional fees. Your broker should be able to give you a complete breakdown of fees.
5. What other fees could I encounter while borrowing?
Your broker should be able to show you which government fees you will have to pay, like stamp duty or mortgage registration fees even mortgage discharge fees, also every bank has a different fee structure.
6. How long does it take to process a loan, and is it quicker to go to a bank?
All loans vary greatly but your broker should be able to give you an accurate time line of the process. Some brokers do have a channel of access to the banks to get priority service, but the best way to get your loan processed quickly is to have all your documentation completed right, the first time. Your broker should help with this.
7. Is there an advantage of using a broker instead of going direct to the bank?
Mortgage brokers are not employed by banks, they bring a neutral and balanced recommendation from more than the one institution. A broker can give you options that a standalone bank cannot. If a broker wins your business they don’t forget about you once the paper work has been finalised, they will help you along your financial journey to home ownership and investments. A bank employee can leave a job at any time and your relationship with that establishment goes with them.