Arranging a home loan is a bit like going on a first date. You want to convince the lender that you’re a sure bet, and they want you to believe they’re the best gig in town.
Unlike the dating pool, the great news is there are plenty of options, so it’s largely over to who ticks the most boxes for you.
Get your game face on, pull your figures together, and talk to a number of lenders and mortgage brokers about what they can offer.
Go direct or via a mortgage broker?
Whether you approach banks directly or enlist the services of a mortgage broker largely comes down to your personal preference.
Mortgage brokers save you having to meet with different mortgage managers. They’re paid a commission by lenders they use (so there’s no cost to you), and can help you access a range of lenders you may not have considered (e.g. building societies). Not all lenders use mortgage brokers, though, so you might risk missing a great deal from a non-broker lender.
By going directly to a bank or other lender, you could benefit from in-market competition and score a great deal such as discounted interest rates or money towards legal costs. It also enables you to target particular lenders. Dealing directly to find the right lender could take more time, but does give you hands-on control of your home loan.
Having conditional pre-approval from a lender up to a certain value gives you a good indication of what property price brackets you should be focusing on, and ensures you have confidence to put an offer in. When you’re starting to look at homes to buy, talk to lenders about what they can potentially offer and what they’d need from you to make it happen.
Questions to ask
- What are the features of each of your home loan products?
- What are your best interest rates at the moment?
- What fees apply?
- What penalties would be involved if you break a home loan (by switching to another loan provider)?
- Can you pay lump sums off your home loan from time-to-time?
- Can you lock in an interest rate? For how long?
- What information do you need to provide for your application?
Be the best you can be
Let’s face it – you’re asking a stranger to commit to lending you a large amount of money, so you’d better stack up well on paper – and not just in terms of how much money you earn.
- Be as debt-free as possible. Maxing out your high-limit credit card shows you’re a great spender… but sends alarm bells that you’re not necessarily a saver. Even if you don’t max out your card, lenders consider your limit as a debt. Hire purchase isn’t a loyalty programme, either – it just adds to your existing debt in a lender’s eyes.
- Show you’re a saver. Build a strong savings record so you can demonstrate that you’re committed to buying your home (and can afford the loan repayments).
- Keep your bank accounts in order. Avoid unauthorised overdrafts that signal you may not be in control of your finances.
- Build a strong and consistent employment record. If you’re self-employed you’ll need to build a strong history of business income to show you’re not a high risk to lenders.
This information is not intended as a complete guide, as it doesn’t consider your individual needs or financial situation. Trade Me accepts no responsibility or liability for any inaccuracies or omissions in the content. Always obtain independent legal advice before buying or selling property.