7 Tips to Choose Home Loan Providers

Whether it’s your first house or an additional investment property, purchasing a home is a big milestone in your life. From deciding what type of house you want to buy or build, to planning what suburb you will live in, it’s an exciting time – but also a costly one. That’s why doing extensive research and being well prepared across all elements of the process is paramount. This is especially the case for choosing your mortgage broker.

There are a variety of factors that will affect what lender you choose such as flexibility, fees, interest rates and more. Check out our seven tips for choosing a home loan provider below.

Big banks or smaller lenders?

It’s easy to gravitate towards names you recognise, especially when making big financial decisions. That’s why people sometimes turn to big banks for their home loans. Banks are long-established and well-known and the brand familiarity can be favourable. They often have multiple branches in different locations too, meaning it’s easier to meet with staff throughout the home loan application process. There are also some drawbacks to working with big banks, however, such as higher interest rates and fees. Whether you are interested in a smaller lender or a big bank, a mortgage broker in Essendon can help you decide the best move forward.

Research reputation of lenders

Any big decision should begin with extensive research. A home loan is a long and expensive life investment, you want to be confident that your lender is trustworthy and reputable. To start off your investigation, there are several reputable review websites you can utilise such as Trustpilot. These websites allow you to easily search through various different lenders and you’ll find reviews and ratings on each one. These reviews should be carefully studied to help you assess who offers the best services for your particular home loan requirements. At the same time, it’s good to keep a list of pros and cons while you do your assessment of each lender.

Checking lenders’ website and their customer service ratings are also good ways to establish if they are reliable and approachable. Look for the lender’s ABN and credit licence listed on their website, this will be a good indicator of reputability. To greatly reduce your research time, engaging in a good mortgage broker will put your mind at ease by doing a lot of the legwork for you.

Check for hidden fees

Most reputable lenders will disclose all their fees when you apply, however, it’s good practice to make sure you understand everything and avoid any nasty surprises down the track. There are a variety of different fees involved in a home loan application. In order to cover the time and work that organising a loan requires, a lender will charge initial application fees. Ongoing fees are also a regular feature in home loans. These fees can be monthly and annually and are in addition to your regular interest rates. Costs will also vary depending on the terms of your loan and whether or not it’s fixed or variable. Small hidden fees can add up over time, it’s best to speak to a mortgage broker who can guide you through all the fees you’ll be expected to pay.

Establish who offers additional features

Although interest rates and fees are the main things to consider when choosing a home loan provider, it’s also worth taking note of each lender’s features. Depending on your needs, knowing about certain loan characteristics may help with making your final decision. Additional features can be the ability to have an offset account, to pay a repayment in a lump sum or even the option to split your home loan between fixed and variable interest rates.

Many of these features can help with reducing your interest rates and potentially allow you to pay your mortgage off sooner than planned. There are nuances to each feature, however, so when looking at the ones you like, it’s good to assess if there is any fine print associated with them. A mortgage broker in Essendon will be able to help you establish which features are right for you.

Look for early payout options

Depending on your financial situation, another attractive home loan feature is the ability to payout early. Some lenders may let you pay the loan off early but for hefty fees. If you can find a lender that has a competitive payout feature, it’s an incentive to re-pay the loan faster and save yourself a significant amount of interest.

Assess who offers the best interest rates

An important part of your research is interest rates. While it’s easy to be attracted to lenders that offer the ‘best or ‘lowest’ interest rates, it’s important to think carefully before you sign a contract. The best interest rates don’t always necessarily mean the lowest.  When researching what’s the ‘best, consider what is the most favourable package when fees and features are also taken into account.

What might seem low with one lender in the first few months, may greatly increase thereafter, or a lender may offer lower rates initially and then charge a hefty fee for paying the loan off ahead of time. Conducting a competitor analysis is a good approach to understanding what lenders are offering, if there are a few that seem exceptionally low, then it often raises red flags.

Establish your deposit requirements

Lastly, confirming exactly what you are able to front as a deposit may help you decide what lender to go with.  As a rule of thumb, it’s expected that applicants have at least a 10-20% deposit plus costs, meaning they only need to borrow 80-90% of the home’s total cost. However, lenders’ preferences vary and in some cases, you may be able to borrow up to 95% depending on your situation.

If you are looking for a mortgage broker in Essendon, get in touch with our helpful team at www.mortgagechoice.com.au