Home loan dos and don’ts

You’ve found your dream home—the price is good, the location is great and you’ve got the 20% deposit and some extra for the sprawling $4,500,000 property.

With all the basics in place, financing the house should be a breeze, right? Well, you are only partially correct.

Though you have everything going in your favour, knowing a little more about the property market and taking care of some finer points can get your loan application over the line.

Here are some dos and don’t when it comes to your home loan that will save you some precious time.

Dos

The first and the most important thing you can do before applying for a home loan is to know the market well. It is easy to fall for a lender offering the lowest rates, however, hidden costs and fees can make the loan much more expensive than what you signed up for.

1. Ask the lender for a key fact sheet so that you can understand the loan inside out
2. Opt for an offset account linked to your loan, in which you can accrue thousands of dollars on interest payments
3. Have the freedom of making additional repayments against the loan without any cost. Why stay indebted for the stipulated 25 years, if you could pay off the debt earlier
4. Choosing the right broker can be the difference between a home loan nightmare, and an easy approval. Look for a reputed verified broker to get the best home loan deals in least time. Few brokers are ethically against monthly kick-back commissions and would be happy to refund these into your loan account, saving you quite a bit of money over the complete loan term
5. A clean credit file is pre-requisite for most lenders. Sometimes, due to paucity of time, it is possible to overlook small bill payments that can tarnish your credit history for years. Make it a habit to check your credit file yearly to fix the loopholes on time.

Don’ts

While there are several things you must do to get a loan faster, there are also several things you must avoid in order to get your home financed in least amount of time, hassle-free.

1. With a hectic work schedule, it may be difficult to keep a tab of all the paperwork to be submitted with the loan application. Don’t hesitate to utilise the services of an expert to ensure all your paperwork is correct, updated, and that your application is in order before it reaches the lender
2. Avoid making a hasty decision. It may require few hours from your schedule, but speaking with few lenders or comparing loans online is always a good idea to understand the market better
3. If possible, try not to switch jobs during the loan application process. Banks love clients who have stuck with an organisation for a year or more and have a steady cash flow coming in
4. Don’t forget about accessory costs. Keep some liquid savings (about 5% of the purchase cost) to take care of costs such as brokerage fees, stamp duty, loan fees and other such payments. Even though you have the required money in savings, it can be quite a headache to arrange it upfront at the last moment
5. Finally, don’t tailor yourself according to a loan, but tailor the loan as per your requirements. There are many features you could add to your package to get a perfect deal, such as additional repayments, offset account, redraw facility, loans for renovation, partially fixed or variable.