GETTING A HOME LOAN - WHAT TO LOOK OUT FOR?

Are you looking at getting your first home loan, or perhaps your second and not sure what to look out for? With all of the talk about interest rates – falling, rising, fixed or variable - it's sure to have you confused and uneasy about whether you’re making the right home loan decisions. We've put together a list of items for you to consider when applying for a home loan.

1. Making Extra Payments - Will They Cost Me Extra?

Locking into a home loan and knowing that you can make those few helpful extra payments can take a stress off your shoulders. However, depending on which home loan you choose and with which company, you can wind up paying penalties for making those extra repayments. Generally, Fixed Rate Loans will not allow you to make extra repayments, as it can put the bank at a disadvantage due to the fixed interest rate. However with Variable Rate Loans most banks will allow you to make extra payments, just look out for which bank charges you penalties and which doesn't!

2. Exit Penalties - What Am I Up For?

If you are to choose a large, fixed home loan over 30 years, and suddenly decide that you can pay off the loan quicker than originally arranged, it can often cost you in Exit Penalties. These penalties are often referred to as an 'Early Termination Fee', and is in place to cover the bank's losses if you decide to end the loan earlier than intended. Most home loans will include an exit fee, so make the most informed decision about your timeline and payments that you can!

3. Splitting My Loan - Can It Be Done?

Split loans refer to allowing you to split your loan amount into different portions of both fixed and variable interest. Generally, the maximum of times you can split your loan is about five. Currently, split home loans are especially beneficial with the various rate rises, ensuring that you can make those extra payments on the variable loan, while maintaining your regular payments on the fixed loan. A split home loan can often include a fee, so make sure you do your research!

4. Moving My Loan - Is It Portable?

For those who have a home loan in place but still plan or need to move around a portable loan can be very useful. These give you the opportunity to change the security held by the lender over your loan yet still maintaining your original loan, and not having to exit and make an entire new one. Fees can apply once again depending on the bank, so ensure that you ask all necessary questions.

5. Redraw - Can I Have It?

The redraw facility is available generally on variable home loans, in which you have made extra repayments. The facility allows you to withdraw money from any extra repayments you have previously made to the home loan. This can be most useful to those who are going to renovate, or buy a vehicle. However, there are often fees for redrawing; so find out about the terms and conditions first.

6. Ahead In Payments - Can I Stop Paying For A While?

Most loans will allow you to stop paying for a certain period of time due to other obligations, of course depending on the bank. However the loan has to note this feature and it must be cleared by the bank that you choose - generally the longest you can stop paying is around 12 months. You are able, however, to make payments during your 'stopped' period if you wish. There are fees included with this feature, so give the bank a call.

7. Transaction Accounts - Can My Loan Operate Similarly?

One home loan option that operates similarly to a transaction account is an offset loan. With this loan you can store and withdraw money from the one home loan account, similar to a transaction account. Deposits will offset the amount of interest charged on your home loan. However the downfall of offset loans is that they aren’t advantageous unless you keep a substantial amount of money in your account.

8. Top Ups - Can I Add On?

The top-up facility allows you to borrow more and add this onto your current loan, as the equity in the value of your house increases. Therefore if your plans for the future include things like renovation, for which you may need to increase your loan, the top-up facility can be helpful. Make sure you know all fees included, and other options if necessary.