Getting a house loan

House Loan

When it's time to take the plunge into getting a new home loan, you want to be prepared so that you get the best possible deal. Here are some tips to keep in mind.

• Choosing the right home loan
  There are no right or wrong answers when it comes to choosing a house loan - it just has to be right for you. But you must know what all the options are before making a decision. A basic fact to keep in mind is that the more flexible the loan, the higher interest you'll pay. A variable loan which allows you to draw against repayments or offset savings against the mortgage will have a higher rate than a basic loan.
  
  Always compare loans with the same features when looking for the best interest rate. Shop around. And if you're earning more than about $50,000 a year, or $80,000 with a partner, ask about professional loan packages. A professional loan interest rate is usually half a per cent lower than the standard.
  


• Add up those home loan fees
  Once you've saved up the deposit for a home, don't forget to take into account all the extra fees that come with buying a house - some or all of these: stamp duty, legal costs, disbursements, mortgage insurance, pest inspection report, survey report, builder's report, strata inspection report, loan application fee, valuation fee, registration fee, sundry fees like refinancing or switching fees.
  
  On a mortgage loan of $300,000, expect to pay at least $15,000 in fees. With mortgage insurance, this will rise to about $17,470.
  


• Beware fixed rates
  Attractive when interest rates are rising, fixed-rate loans also lock you in for a fixed term and as such are less flexible than variable-rate loans. You may not be able to make additional repayments or pay the loan out early without facing high penalty charges.
  
  Fixed rate loans suit borrowers who really value the certainty of knowing exactly what their future repayments will be - property investors and borrowers on a tight budget, for example.
  


• Check if there are ongoing fees
  Many banks now charge monthly or annual administration fees on house loans. When comparing the cost of different loans, don't just look at the interest rate, look at the 'total cost of borrowing'. Many lenders are using 'average annual percentage rates' (AAPRs) as a means of comparing the true or total cost of loans. Although this measure incorporates fees as well as the interest rate, they can be misleading because an AAPR will vary on a particular loan depending on the amount borrowed.
  


• Check your statements for errors
  There are claims that more than 50 percent of home loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the lender. We all make mistakes, even bank computers make them and that's why borrowers should keep a close eye on loan statements. Various software for your home PC is available that can run a check on your statements.