Your financial decisions can greatly affect your daily living most especially if you are planning on availing of a mortgage package deal. Once you have decided on getting that mortgage loan, you need to fully understand what you are getting yourself into.
Fees and Charges
Home loans normally involve various fees and charges. You will be surprised at how these fees can easily add up. Thus, it is important to have a good understanding about what these charges are. Loan providers can charge you with an application fee for more or less than $600, including the valuation fee for at least $300 and a loan settlement fee for $200 or more. Also expect that you will be paying for the mortgage insurance. This is a standard procedure particularly if you will be borrowing over 80% of your new home value. Hence, this can cost you over 2% of the loan cost.
There are also fixed monthly fees and other related charges from using the loan and on what has been stated in your contract, lenders or loan providers can increase these monthly fees any time. An Early-Exit fee depends on the lenders guidelines and can have names like “deferred establishment fees”. These charges are important and you’d most probably wish to pay off your loan or decide on re-financing it to another potential lender.
Ask the potential lender for the exact costs and early-exit fees. Put in mind that if possible, you need to negotiate with the lender to lessen the existing fees to and to somehow reduce your loan amount as well. In case you are not good at negotiating, you might as well hire a mortgage broker to help you secure an ideal deal.
Extra Payment Limitations/ Re-draw
There are loan types that may limit you from having additional repayments into your mortgage account. This is essential since it will let you put money into your loan and will lessen your interest charges. There are certain loans which permit you to pay extra repayments but limit you from redrawing the certain amount of money. Always determine if you are required to apply the loan through writing, how long it might be approved and find out if there are any charges required.
Borrowers must be cautious when dealing with the so called “honeymoon loans”. They might sound great and competitive for six to twelve months of your loan but the truth is it can only lead you to unexpected fees when they regress to a higher rate and will obscure the standard variable rate.
Bells and Whistles loans
Numerous loan types are out in the market and you will be attracted because of the interesting features, before you do that think twice and contemplate if you really need it. Paying extra charges for a home loan which has bells and wishes is just a waste since you will not be using some of its features.
Most of the time, home loans are not laid down for the borrowers need to make them realise that they need to negotiate with the loan providers. One of the best things to do before signing any loan agreement is to make a research. Try as best as you can to gather all the necessary information you need for your preferred loan. Otherwise, you can always ask the assistance of a licensed mortgage broker.
Do not accept interest rates at the original amount or face value, try to discuss with the lender if you can possibly have lower rates. Once you achieved low rates, it will be a great help in reducing further expenses for the life of your loan. With regards to fixing your interest rates, beware of the increased break costs. This is a big factor which you need to look into and perhaps you want to revert it into a variable rate. This includes paying all the lost interest rates to the loan provider if you have already paid the higher rate at the end of the fixed loan term and will accumulate into a significant amount of cash.
Sealing the Deal (On-the Dotted Line)
Most importantly, do not sign any document which you don’t understand or are not sure of. If you are doubtful, try to seek a financial or legal adviser. Searching for the right mortgage may take you more time, but getting the right one will help you save more money and be constantly stress-free.