Home Loan Checklist for Every Home Buyer
If you are looking to get a home loan, don’t get confused with all the “jargons” used within the finance industry. Prepare for your home loan with the checklist of typical questions asked by the lending officers employed by the lenders/credit providers. This checklist is useful when you are looking to:
>> Buy your first home
>> Refinance your existing mortgage
>> Consolidate your debts
>> Upgrade or renovate your home, or
>> Invest in another property
Question – What is the purpose of the credit you are considering?
Your response should be anyone of the following:
>> Purchasing a home to live in
>> Investing in another property
>> Renovating your home
>> Consolidating your debts, or
>> Refinancing your existing mortgage or any other needs
Question – What kind of loan repayment type are you considering?
You should consider your loan repayment options, such as:
Interest-Only repayments – You will only repay the interest on your home loan, and your loan balance will not reduce
Principal and Interest – You will have to repay the interest and principal amount together. It means your loan balance will gradually reduce.
Question – What kind of interest type are you considering?
You need to consider the interest rate type in terms of:
A Fixed Rate home loan – With this type of home loan, your interest rate is set for a fixed period, and your repayments remain the same for the duration of the fixed period, usually between one and five years, or
A Variable Interest Rate home loan – This type of home loan is very popular with first-home buyers who just want a loan product that is simple, easy to manage and offers a number of features and benefits.
Question – Are you concerned with the amount of interest rate percentage being charged?
If you are concerned with the amount of interest rate percentage being charged on your home loan, you can use comparison rates because they are a handy indicator to help you compare loans more easily. An expert finance broker will readily provide you with a number of impartial comparisons to help you when deciding and which a bank aligned lending officer is not willing to provide you.
Question – Are you concerned with interest rate movements (i.e. up or down)?
If you are concerned with the interest rates moving upwards, you should consider a Combination (Split) interest rate loan because it will allow a mixture of security and flexibility. This is how you will pay:
>> A fixed interest rate payment for an agreed portion of your home loan, and
>> A variable interest rate payment on the remaining portion of the home loan.
Question – What kind of features and benefits are you considering with your home loan?
You should make sure you fully understand all the features and benefits available to you, such as:
>> Taking advantage to make unlimited “extra repayments” each month. So, you can pay off your loan faster.
>> Taking advantage of “redraw facilities”, so you can withdraw any extra payments you have made on top of your normal repayment amounts, if you need the cash.
>> Taking advantage of “100 percent offset accounts”. If you decide to put as much of your spare cash as you can into an offset account, and keep the cash in the offset account for as many days as possible, your home loan repayments will reduce. It is because your savings are bringing down the interest incurred, and ultimately your loan will reduce much faster.
Question – How long do you expect to remain in the credit contract (i.e. your required loan term)?
You need to consider if you expect to sell the security property in a certain time frame, for example:
>> Long-term – over ten years
>> Medium-term – 5 to 10 years, or
>> Short-term – less than five years
Question – What is an Exit Strategy?
An exit strategy is a plan for what will happen with your loan when you retire. The lender/credit provider will need to see that you will be able to afford the repayments without having to sell your property (i.e. selling your house is not seen as being a valid exit strategy).
So, now you have a checklist of questions to help you get organised when getting a home loan or an investment loan. And, you should now be better prepared to make a decision that suits your personal needs and budget.