Shopping for a home loan

Besides choosing whether you want to go fixed or variable, you’ve also got to work out which lender accommodates your needs and situation the best. Each lender and loan has different rates, product features not to mention fees, so it really does help to shop around before you diving into the market.

Whittling down your options

First, you should be aware of your current financial predicament as well as future goals. This will help when shopping around and looking at features of each home loan on offer – you’ll be a bit more prepared for the onslaught if you understand your needs.

Shopping around means exactly that – don’t fall for the first smooth talker because you’ve been told it’s the cheapest and best value. Visit different lenders and grab a Key Facts Sheet from each one. This Key Facts Sheet will outline the total amount to be paid back over the term of the loan, repayment amounts, fees and charges. All the important, nitty gritty information you need to know. These sheets save you the time, hassle and headache of reading through the bevvy of brochures each institution will throw your way and make it far easier to compare products between institutions.

Once you’ve got your short list and Key Fact Sheets, get your spreadsheet prowess cracking and create a table comparing the interest rates, fees and repayment amount of each loan you’ve honed in on. MoneySmart also has a checklist for choosing a home loan to help you compare loans.

Word to the Wise

When shopping around for home loans, don’t hand in an application form unless you want to be bound to that institution. What happens is that if you file an application form the lender will request a copy of your credit report to assess your eligibility for the loan. If you have multiple enquiries listed on your credit report, instead of putting it down to you being a clever little shopper, the lender will assume you’ve had trouble getting a loan or generally aren’t a safe bet. When enquiring about home loans, always ask if and when they’ll conduct a credit enquiry and only let them do it once you’re comfortable to proceed with that bank or lender.

Keep your options open

If you want to whittle down the list of potential lenders in the first instance, don’t be afraid to ask your home-owning friends and peers who they went with and if they’re happy with them. That doesn’t mean you should leap on the bandwagon, you still should follow the above steps, but it does give you a starting place.

Also, it can be helpful to get a mortgage broker onto your cause. Not only do they represent myriad banks and products in a one-stop-shop, they can do the legwork for you (find you the loan that best suits your situation) and deal with the admin debacle.

Choosing a mortgage broker is another thing you need to shop around for, though. You want experience (in this case, you want a broker who specialises in home loans) and a solid reputation, as well as someone who can break the options down for you in a digestible manner.

The difference between a suitable home loan and one committed to in haste is thousands of dollars and years of repayments, so before you get locked into anything, it’s imperative that you shop around and understand which home loan is best for your circumstances.