Tips for getting a mortgage
Choosing the lowest-cost loan and repaying it quickly can save thousands of dollars.
For most of us, it’s a case of going out and looking at lots of different properties before finding the right home. It pays to be just as careful when choosing a home loan. The idea is to:
- Shop around for the best mortgage – there’s no obligation to go with your regular bank.
- Negotiate – for example, another bank may offer a better rate on the condition that you switch your everyday and savings accounts to them.
- Mortgage brokers deal with a number of lenders, so they can save you time shopping around.
- Don’t overcommit – that 95% loan may sound great, until it is time to pay it back.
- Only borrow what’s needed – some lenders may try to tempt you into borrowing more.
- Make repayments as high as possible – the sooner you pay off that mortgage, the less you’ll pay in interest.
- Beware of ‘revolving credit’ – a home isn’t an ATM! This type of loan requires a lot of discipline.
Where to get a mortgage
You can get a mortgage directly from a bank or through a mortgage broker. Both have their advantages and disadvantages.
Home loans are also available from ‘non-bank lenders’ such as building societies, finance and insurance companies, trustee companies and credit unions.
‘Non-conforming lenders’ are an option for people who can’t get a bank loan, because of a bad credit history or lack of proof of income. These lenders usually only accept applications through mortgage brokers.
Banks
Advantages
- Banks offer a wide range of mortgage options.
- Competition between banks can sometimes lead to great deals, such as a bank contributing to legal bills, discounting insurance or lending at a low fixed-interest rate.
- Banks can offer discounts on day-to-day banking costs or even waive transaction fees altogether if you have a mortgage with them.
- Their loan application fees are usually negotiable.
- If there’s a dispute, you can go to the Banking Ombudsman.
Disadvantages
- Banks tend to be more cautious and are more likely to turn you down if you don't have a good credit history.
Here are some questions for lenders to have on hand when meeting with a bank.
Mortgage brokers
Brokers deal with a number of lenders, so they can save you time shopping around.
Advantages
- Mortgage brokers know the interest rates and application criteria for different lenders, and can negotiate on your behalf.
- Brokers can help you put a loan application together.
- They may be able to help you find a loan if a bank says no, and may be able to get a better deal than if you went direct.
- All mortgage brokers are now required to be Registered Financial Advisers. They must have a complaints process in place and belong to a dispute resolution scheme. Check the official Financial Services Providers Register at the Companies Office website.
Disadvantages
- Brokers don't cover all lenders. Some banks don't deal with mortgage brokers.
- You have to shop around for a mortgage broker first, settle on one, and then let them shop around for you.
- If you don't end up borrowing through a loan they find, you may still have to pay a cost. Make sure to read the fine print.
- Different lenders pay different commission rates to mortgage brokers. This means that they may prefer to place you with one lender instead of another because it benefits them more. It may not be the best deal for you.
Types of mortgages
There are many types of mortgage, each with its own interest rate, fees and degree of flexibility. All these things affect how much the loan costs and when it will be paid off.
Guide to different types of mortgages
Managing a mortgage
Once our mortgage is in place, there are steps we can take to make sure it keeps working for us.
Guide to managing a mortgage
