People put so much emotional and physical effort into finding the right property that it's easy to neglect the importance of finding the right mortgage.
It is not just about choosing the loan with the rates and repayment options that suit, it is also about being aware of other "accessories" and obligations that go with it.
You don't want to encounter any nasty surprises, so the Mortgage and Finance Association of Australia (MFAA) has put together the top five tips for borrowers.
1. Shop around for the most suitable deal. The lowest rate doesn't necessarily mean the best mortgage. If you don't want to do all the shopping around yourself, you can use the services of a mortgage broker. Mortgage brokers assist you in looking for the best overall loan for your current situation from a panel of different lenders.
To ensure you have a level of consumer protection, make sure the broker you are dealing with is an Accredited Finance Broker (AFB) with the MFAA. AFBs have satisfied certain educational and professional entry levels.
2. Read the mortgage contract carefully. Before you sign up for a home loan you should always read and understand the credit contract from the lender. This contract by law must outline the terms and conditions of the loan in plain English. Seek independent legal and financial advice when you are entering into any contract, especially one of this magnitude. Remember, once you have signed their credit contract you are bound by the lender's terms and conditions.
3. Borrower's obligations. As the borrower, you have ongoing obligations to your lender after the mortgage has been approved. The most important issue is that you need to make all repayments either on or by the due date. Put the due dates in your diary or arrange for your bank to automatically deduct the amount each month to avoid any problems.
4. Be comfortable with your repayments at any time. It is great to get the home you always wanted but be realistic about where you are at in your life.
Draw up a regular budget and where possible, allow for any planned changes to your circumstances such as paying for a wedding, stopping work to have a baby, starting a business.
5. Have the mortgage, but thinking of refinancing. There are many merits to refinancing into a new loan or with a new lender but first, make sure you are aware of all the cost associated with refinancing.
Refinancing is not free. Costs associated with refinancing may include: break costs if you have a fixed interest rate, early repayment fees, deferred establishment fees, along with government and mortgage discharge fees, plus new loan application fees, stamp duty, mortgage registration fees and mortgage insurance costs.
By taking time to think before jumping into anything, your journey to home ownership can be a pleasant one.