Handling your home loan is a cinch if you know what to expect. However, plenty Australians may not know the bare minimum, as according to a Credit Union Affiliates survey 28 per cent of mortgage holders in the country don’t even know what their loan’s interest rate is.
With the goal of helping new home buyers better navigate their loans, we’ve whipped up a handy list of four often-unexpected mortgage fees. With a little bit of prior knowledge, and the right advice from a local mortgage broker, your repayments will be as easy as pie.
1. Establishment fees
An establishment fee under any name is still an establishment fee. This one-off payment, charged when starting your loan, may be called an application, up-front, start-up or set-up fee.
In some cases you may not be charged this, and in others you may be charged more, so be sure that your lender is clear about whether or not starting your mortgage is going to cost you.
2. Lender’s Mortgage Insurance (LMI)
If you’re a first home buyer without security against your loan or a reliable guarantor, there’s a good chance you’ll be charged LMI. This is particularly true for those who apply for high loan to value ratio loans (for those buying with a deposit under 20 per cent of the homes value).
This fee varies, and is used to insure your lender’s losses in the event that you default on your mortgage repayments. A savvy mortgage broker with solid relationships with lenders may be able to help you completely avoid LMI in certain situations.
3. Fees for making extra repayments
If your home loan has a fixed interest rate there’s a good chance you’ll be charged if you make additional repayments.
This is one of those fees that seem just a little unfair to the average mortgage holder. Regardless, if your home loan has a fixed interest rate, there’s a good chance you’ll be charged if you make additional repayments.
This cost does vary from lender to lender, and it may be worth considering a split rate mortgage if you want the best of both worlds, whilst avoiding those pesky extra fees.
There are so many little details involved in every mortgage that it’s easy for the small essentials to be forgotten. Make sure you’re walking into your home loan with your eyes wide open by enlisting the expert assistance of a mortgage broker like us.
With the right help, nothing about your home loan will catch you by surprise.