Questions to ask before you sign

Before you sign on the bottom line of any loan contract, you should be really clear on what the loan will cost and what features are included.

Here are some questions to ask your broker or lender before you pick up a pen.

What's the Comparison Rate?

A few years ago lenders would only advertise the interest rate they charged. This allowed them to charge really low rates but really high fees. To simplify matters, and help borrowers compare apples with apples, the Government made it mandatory for all lenders to publish a Comparison Rate.

This rate helps borrowers get a better indication of the cost of a loan over the long term. It’s calculated using a standard formula that takes into account:

• The amount and term of the loan.
• The repayment frequency.
• The interest rate.
• The loan’s fees and charges.

What features do I get?

While the comparison rate can give you a good idea of the true cost of the loan you should also consider the money saving features you might get with a loan that has a slightly higher comparison rate against one with a lower comparison rate but no flexible features.

Redraws, direct debit, and flexible repayment can make a huge difference to the overall cost and convenience of the loan.

So ask:

• Can I make unlimited extra repayments without penalty?
• Will I get free redraws that I can use at any time? Can I access redraws over the phone or online?
• Can I switch from a variable loan to a fixed or split loan at no extra cost?
• Can I transfer my loan to another property when I move?
• Can I have my salary paid directly into my loan account?
• Can I pay weekly or fortnightly rather than just monthly?
• Do I have the choice of Principal and interest or interest only repayments?

What are the fees and charges?

The comparison rate does not cover all the fees and charges associated with a loan.

The comparison rate includes:

• The interest rate.
• Loan approval and any other up-front fees.
• Any ongoing account keeping fees.

The comparison rate does not include:

• Government and statutory fees—although these are standard across all lenders and loans.
• Lender Mortgage Insurance or valuation charges.
• Fee waivers or any discounts that your lender might apply to the loan.
• Event based charges, like redraw fees or early repayment fees.

Ask about the costs of all these things and consider how often you are likely to use these features.

Continue to information about finding your property.