Tips for getting a home loan (also called a mortgage)
- Shop around for the best home loan – you’re under no obligation to go with your regular bank.
- Negotiate – for example, another bank may offer a better rate on the condition that you switch your everyday and savings accounts to them.
- Mortgage brokers deal with a number of lenders, so they can save you time shopping around.
- Don’t over-commit – that 95% loan may sound great, until you come to pay it off.
- Make your repayments as high as you can afford – the sooner you pay off your mortgage, the less you’ll pay in interest.
- Beware of ‘revolving credit’ – your home is not an ATM! – this type of loan requires a lot of discipline.
Where to get a home loan
You can get a home loan directly from a bank or through a mortgage broker. Both have their advantages and disadvantages.
Home loans are also available from ‘non-bank lenders’ such as building societies, finance and insurance companies, trustee companies and credit unions.
‘Non-conforming lenders’ are an option if you are unable to get a bank loan, due to a bad credit history or lack of proof of income. These lenders usually only accept applications through mortgage brokers.
- Banks offer a wide range of home loan options.
- Competition between banks can sometimes lead to great deals, such as a bank contributing to your legal bills, discounting your insurance or lending at a low fixed interest rate.
- Banks can offer discounts on your day-to-day banking costs or even waive your transaction fees altogether if you have your home loan with them.
- Their loan application fees are usually negotiable.
- If you have a dispute, you can go to the Banking Ombudsman.
- Banks tend to be more cautious and are more likely to turn you down if you don't have a good credit history.
Brokers deal with a number of lenders, so they can save you time shopping around.
- It is no more expensive for you than approaching the lenders direct. You don't pay directly for their services - they are paid a commission by the lenders they use.
- Brokers know the interest rates and application criteria for different lenders, and can negotiate on your behalf.
- They can help you put your loan application together.
- They may be able to help you find a loan if a bank has turned you down and may be able to get you a better deal than if you went direct.
- All mortgage brokers are now required to be Registered Financial Advisers.
- Brokers don't cover all lenders. Some banks don't deal with brokers, for example.
- Different lenders pay different commission rates.
Tips for first home buyers when applying for a loan
The financial process of buying your first home can be nerve-wracking, so we’ve come up with a few tips that can help your chances of getting a loan:
- Talk to your bank or broker early on and find out what their lending requirements are
- Find someone you feel comfortable dealing with and keep in touch with them
- Create a good savings history – even three to six months of regular saving can help
- Work out a budget before you see the bank to show you are well organised financially
- Pay off as many debts as you can before you apply for a loan (having other debts can reduce the amount you can borrow)
- Try to gather up the information the bank needs before you apply (it’ll save you time and means you’ll get your answer faster)
When you’re applying for a home loan
When applying for a home loan, you'll need to have the following information on hand to provide to your bank or mortgage broker.
- Details of your annual income, including any overtime and commission.
- Details of your debts and expenses, such as credit cards and other loans.
- If you've already made an offer, any details on the property you have in mind.