With online adds popping up for all things finance related, it is tempting to click and see where it takes you. When it comes to loans, in particular home loans, there are some things you need to be aware of before you go clicking away.
An enquiry may trigger a credit check. That in itself is not a big deal, but too many credit enquiries can adversely affect your credit score and therefore your future borrowing ability.
So before you click, you want to make sure you have done your research as there are many variances when it comes to selecting a home loan.
Fees: What are the upfront fees well as monthly and/or annually? The benefits of a really low interest rate could potentially be negated if there are large fees associated with your loan. These are sometimes hidden in the small print so be aware.
Interest rate: While there are some great interest rates advertised, you need to consider things like: is it a variable or fixed rate product, or is it an introductory rate? Breaking a fixed rate term can result in break costs which can be significant, so keeping your future plans in mind is important when selecting a fixed or variable loan. Introductory rates can be very appealing but be mindful when the discount period ends, you may end up paying more.
Structure: Do you want a packaged loan or a more basic product? A packaged loan generally comes with things like offset accounts and credit cards, and often have fees associated with them. Perhaps you just want a set and forget loan that has low or no fees. Regardless, before selecting a loan you want to make sure you understand how each type works.
Credit History: What is your credit history like? Lender credit polices vary significantly. Where some will require an absolutely squeaky clean history, others will consider adverse history ranging from one or two late payments through to bankruptcy.
Deposit: Not all lenders have the same deposit requirements. Some will let you go with a 5% deposit but others might insist on 20% or more. This might be due to overall lender policy or sometimes things like location or property type might affect the amount of deposit required.
Employment situation: How different employment scenarios are treated varies from lender to lender. For example, if you have been in a job for only a short time, this may not be acceptable for some lenders and loan scenarios. Being self employed also changes the way lenders view application and the documentation required.
If you are not sure about any of these points – and even if you are – it may be a good idea to consult a professional mortgage broker. They can help you navigate options and if you choose, even manage the process for you. Personal recommendation is often the best way to find a good mortgage broker. Otherwise mortgage industry professional bodies, such as the Mortgage and Finance Association of Australia & the Finance Brokers Association of Australia, have registers of accredited mortgage brokers.
If you do decide to go with an online option, make sure you fully understand your situation and requirements before you click apply. A hit and miss approach may see you with more misses than hits when it comes to getting a home loan.
** This is information is general in nature and does not take into account your individual situation or constitute financial advice.