If you’re looking to get your first mortgage, or even to refinance, you’ll most likely have a meeting with a lender or mortgage broker – someone who’s an expert in mortgages and home loans. The problem is these experts sometimes forget that we’re not all experts, and they might bamboozle you with mortgage terminology or bank jargon that starts to make little sense. But it’s really important that you understand what they’re going on about – this is your money, and most probably it’s quite a lot of your money.
Don’t be afraid to ask questions. Recently I sat with a friend of mine and a mortgage broker I’d introduced her too. He knew that with my background, I understood most of his home loan jargon, but my friend kept looking at me with big, wide eyes and I’d stop him and ask him to explain each concept with an example, so that my friend better understood where her money could be going. Like any expert – doctor, lawyer, plumber – these people have an obligation to explain the details so that you understand the consequences of signing a contract.
Before you meet a professional lender or mortgage broker, do some research of your own to make sure you understand the basics of how different loans work. Check these explanations of interest rates, the various types of lenders and the different kinds of mortgages to help you get prepared.
Finally, think about the various questions you might need to ask about the loan products being explain to you. Before you agree to sign a contract, make sure your mortgage broker has been able to answer these questions to your satisfaction:
- Is the interest rate fixed or variable? What do they recommend at the moment? Make sure you understand the pros and cons of these two choices.
- Can you make larger repayments, repay the loan early or redraw against your extra payments on the loan, and will there be particular costs involved with these actions? You probably want a loan that is flexible enough to change with your future circumstances, because you can’t be sure what they’ll be.
- Which bank, credit union or building society will the mortgage be managed by? These days, mortgage brokers have access to so many different lenders that you can easily get confused about who you will be in debt to.
- Can your mortgage broker show you the comparison rate for the loan? That is, what is the true cost of the loan product compared to others – remember that the lowest interest rate does not always equal the cheapest loan.
Remember, your mortgage broker might speak to you with a whole heap of big financial words, but it’s also their responsibility to explain them to you if you ask. Don’t be afraid of looking stupid – this home loan could be the largest investment of money you ever make, and you deserve to do it with a full understanding of what you’re getting yourself into.