Securing a home loan is by-far the biggest and most impactful financial decision many Kiwi’s will ever encounter. For most, it is a lifetime commitment to their lender for helping them secure a house.
Because securing a home loan is such a huge decision it’s critical you fully understand what you are committing to and what each parties responsibilities are. It is for that reason, you must be prepared to ask the hard questions, do your research, shop around and seek advice from experienced individuals, such as the team at The Mortgage Supply Co.
A good place to start on your home loan journey is to ask potential lenders the following questions. The answers you receive should give you a good platform to continue your search for the best mortgage available.
What fees are included?
Securing a mortgage can be a fairly expensive process, especially if you apply at multiple lenders or are turned down several times. It is, for this reason, it’s important you understand exactly how much the process will cost you.
Make sure you ask about the overall application costs and low equity fee’s required by potential lenders. If you are shopping around, be mindful that each institution's fees will vary, so don’t assume that all are the same.
If you are seeking a fixed-interest loan, it is important you ask if there are is an additional charge if you want to increase your repayments, make a lump sum repayment or pay the loan off early. Understanding this is important in the event you receive a pay rise or come into a substantial windfall and want to put it towards your loan.
What is the total cost?
A mortgage is a massive financial commitment, one that will generally be with you for 25 + years. Thus, it is important you understand what the full amount of the loan will be over its lifetime. When you ask lenders this question make sure they include all potential costs, including principal, interest and additional fees.
When you’re asking this question, it’s a great idea to ask the lender to include what your repayments would look like over a year if the interest rates increased by one per cent. The point of this, is it will help you understand if you can afford the repayments should there be a sizeable increase.
Can I alter my loan in the future?
As mentioned above, you never know when you may come into a bit of extra cash which you might want to put towards your mortgage.
Different lenders will have different rules around making changes to your home loan repayments or structure. So make sure you know what these rules are before committing. Ask if it is possible to increase your regular repayments, pay a lump sum or even pay off the loan before the predetermined time.
If you are seeking a fixed-interest term, it’s recommended that you ask if you are able to change to a full or partial floating rate at the end of your current term.
Can I transfer my mortgage if I buy another house?
If you are looking at buying your first home, chances are it won’t be your ‘forever’ house, first homes rarely are. So with this in mind, if you are using your first home as a way to get your foot on the property ladder and build some equity in order to buy another home, later on, this is important.
If the simple answer to this question is yes, it is likely to save you a lot of money when you eventually look to upsize. As you won’t be required to pay the fees associated with applications and establishing a mortgage.
As part of this question, it is wise you ask the lender what their rules are regarding extending your loan to buy an investment property or a bach, just in case this becomes a viable option in the future.
Searching for the right loan for you and your family can be a long and complicated process. Not only do you need to find a loan that suits your current situation but one that is flexible enough down the road. As a result, you need to ask as many questions as possible until you are satisfied you have the complete picture.
If this is your first time going through this process or simply want some help and guidance, make sure you speak to one of our advisers. At The Mortgage Supply Co., we have a wealth of experience helping Kiwi’s secure the right home loan for their situation.