For most, signing onto a home loan is a big commitment – perhaps even the longest commitment of your lifetime. Given loan terms usually span 20 to 30 years, it’s important to know what you’re agreeing to. To help, we’ve listed 21 home loan questions you might want to ask your mortgage broker before signing the dotted line.
1. How are you paid for your brokerage services?
Knowing how the broker is paid can be an important consideration before agreeing to a mortgage contract. Whether they charge you a service fee or earn a commission from the lender, how the broker earns their money may be a factor worth your consideration.
Learn more about home loan fees: What are the costs involved in buying a home? – the upfront and hidden fees
2. What accreditations and qualifications do you have?
Finding out the experience of the broker as well as their qualifications can help you to decide whether to trust them with you home loan. It can also help you to work out whether you are getting a good deal. You may want to ask about their level of education and any certificates held, years of experience as a mortgage broker and whether they are licensed.
3. Can I read some testimonials or reviews from past clients?
Reading about the experience of past borrowers might help you to decide whether you want to go ahead with the broker’s services. It can also help you to determine whether they are good at their job and trustworthy. You can either ask the broker directly or check their website, social media page(s) or google business page for reviews.
4. Are there any fees and charges involved in my home loan application?
Chances are you’re trying to get the best home loan deal possible – so it might be worth asking about any ‘hidden’ costs. From possible broker fees to extra charges for paying off the loan early or refinancing, asking now could help limit the chance of future surprise.
5. Are you a member of the Mortgage Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA)?
Asking your mortgage broker whether they are a member of the MFAA or FBAA can help establish their credibility, as both organisations have certain expectations of their members. Membership can also help demonstrate if the broker is able to adhere to a professional standard, which may give you more confidence in their service.
6. Do you have your own Credit License or are you a Credit Representative?
Since 2010, all mortgage brokers have been required to either a) hold an Australian Credit License (ACL); or b) be an Authorised Credit Representative (ACR) under a credit license holder (such as a mortgage aggregator). Having either is a legislative requirement, so it is important to check your broker has or operates under one of these.
7. How do you decide which loan is right for my personal circumstances?
It can be important to identify what factors the mortgage broker is considering when deciding what home loan product is best for you. This can help you to determine if the broker is taking your whole financial situation, needs and preferences into account.
You might also like: Why is it Important to Find the Right Mortgage Broker?
8. Do you offer the choice of a range of different lenders?
Many people choose to get their home loan through a broker – rather than a bank – because it gives them access to more mortgage products. To get the full advantage of choosing a broker, you may find it beneficial to check how many lenders the broker has access to.
9. What impact will my credit card limit have on my borrowing capacity?
Credit card limits can count against your borrowing capacity due to the potential for the credit limit to turn into future debt. If this could apply to you, it may be beneficial to ask what impact your credit limit could have on your application.
You might also like: What is a credit score and how is it calculated?
10. What fees will I encounter when taking out a home loan?
Knowing what fees you could be liable for is a question on the forefront on many home loan applicants’ minds. Asking your broker what fees you could face may give you a truer idea of cost.
11. What is the comparison rate?
The comparison rate can help you to decide whether the home loan is a good deal, so it can be an important question to ask your broker. While the advertised rate might look like an attractive option, there could be associated fees that reduce the value of the product. The comparison rate is designed to act as a fairer representation of the home loan package.
Compare competitive rates from over 25+ lenders
12. What features are included in my home loan?
Depending on the home loan package chosen, you could have a variety of features available, such as access to an offset account or redraw facility. Knowing what features you have access to can help you to make informed financial decisions.
You might also like: What is an offset account?
13. What financial information do I need to provide with my application?
When attending your first home loan appointment, you may find it useful to ask what information the broker will need to process your application. This might include bank records, salary information, tax records, etc.
14. What process do I need to follow to gain finance and have my home loan approved?
When first meeting with a mortgage broker, prospective borrowers may find it useful to ask for an overview of the application process. From gaining pre-approval to having the home loan settled, having and understanding of the total process can help borrowers on their home buying journey.
15. Can I choose to fix my interest rate at a later stage?
While you may initially choose a variable rate home loan, you might want to switch to a fixed rate later. Talking to your broker about what the options are as well as whether there are extra costs involved can make you more informed.
You might also like: The cost of breaking a fixed rate home loan
16. If I choose to take out a fixed interest rate, can I change it later on?
As interest rates continue to drop, you may want to ask your mortgage broker how long you are ‘locked-in’ to your interest rate and what the process of getting a more competitive interest rate later on is.
17. How long will it take to get my application approved?
When you’ve got your finger on the pulse as far as the property market is concerned, it might be useful to get an overview of how long the application process will take. Depending on the market, properties can sell quickly – so it’s helpful to know when you will have finance available.
18. Will I have to pay Lenders Mortgage Insurance (LMI)?
In most cases, LMI applies when the deposit is less than 20% and it can cost thousands of dollars. Ask your broker if this extra fee applies to you.
Learn more: Understanding Lenders Mortgage Insurance (LMI)
19. Will you process the First Home Owner grant for me?
If you are planning on using a first home owner incentive to purchase your home, it can be helpful to know what your obligations are and what your broker will take care of on your behalf.
20. Will you process my HomeBuilder scheme application?
The HomeBuilder scheme is a large sum and will likely have a large impact on your available finance. It may be useful to find out if your broker can apply for the grant on your behalf or if you will need to handle to application.
21. Would a default on my credit report impact my home loan application?
If you have a default on your credit report, your broker will be able to advise what impact this could have on your finance options. While in some cases it might not make an impact, in others it could mean a higher interest rate or disqualify your application altogether.
Need some help with home loan lingo before walking into your mortgage appointment? Check out the eChoice glossary of finance terms
Words by Kathryn Lee
We’re committed to making your home loan journey go smoothly! Our eChoice brokers can help get you a credit report to see if your expenses will affect your application and discuss any unnecessary debts that might jeopardise your chances of a home loan approval.