A house is often the biggest purchase of our lives, and a mortgage (also called a home loan) is typically our biggest financial commitment.
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.
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.
Advantages
Disadvantages
Here are some questions for lenders to have on hand when meeting with a bank.
Brokers deal with a number of lenders, so they can save you time shopping around.
Advantages
Disadvantages
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.
How much you can borrow depends on what you can afford to repay on your current income, and how much a lender will lend against the value of the property you want to buy. Not sure how to calculate mortgage repayments?
Try our new mortgage repayment calculator and take a look at our guide to borrowing.
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. Find out more about the different types in this guide.
Once our mortgage is in place, there are steps we can take to make sure it keeps working for us. Read more in our guide to managing a mortgage
Check out our 6 steps Get Sorted program to get you on track.
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