It's important to know just what we can and can’t do with a loan, and what the costs are, before signing up.
For all loans, ask about application fees and other charges such as a low equity fee.
For fixed-interest loans, ask what fees apply if you increase repayments, make lump sum repayments, or repay the whole loan early.
The lender will have to make an assumption about interest rates to do this calculation. But it will show how much you’ll pay back in total. (Note that the lender is required to disclose the fees and interest separately.)
Also, ask for the total regular payment in a year if the interest rate were to be 1% higher than now. That will give you some idea of the risk if rates rise.
For all loans, ask whether it's possible to increase regular payments from time to time, pay in lump sums, and pay off the mortgage in full before the end of its term.
Ask if there is a required period of notice before reducing or paying off the loan with a one-off payment.
Fixed-interest loans normally convert to a floating rate at the end of the term - ask about taking another fixed term instead at no charge.
If the answer is yes, it's likely to save money in fees.
Approach the lender with a complaint or problem in the first instance. If that doesn't result in a satisfactory resolution there are independent bodies available which can investigate and help settle disputes such as the Banking Ombudsman and the Financial Services Federation, which represents some non-bank lenders.
It's easy to find details on using KiwiSaver for a first home, but they don't really say whether it's a good idea or not.
12 Comments | 27 Mar, 2017
If there’s one gift we give ourselves this Christmas, let’s make it one that could make the most difference – taking steps to be debt-free sooner.
23 Nov, 2015