1. Take your time while reading the fine print
Reading the fine print in detail may not be the most exciting process of getting a home, but this is where important fees and charges are buried. Things such as the loans ongoing fees, settlement fees, features such as offset accounts, one-off payments, redraw fees, and more can be found in this section which will help you know whether the loan is affordable or not. Keep in mind that every feature your loan has will probably come at a cost, and skipping this segment can bring some shockers later on.
2. Mortgage registration fee
Some home loan borrowers who fail to read the fine print are surprised to find that there is a mortgage registration fee that can impact the paying off your home loan. This fee which varies across each state is charged by state and territory governments to register the security for the loan. This can cost you anything from $116 in states such as Victoria to $187 in Queensland. If the contract comes with any additional fees that you don’t quite understand, it is important to ask your lender about them.
3. Keep an eye out for LMI
Almost 40% of home loan borrowers in Australia did not understand what lender’s mortgage insurance was. Underestimating this hefty fee can impact home borrower’s ability to pay their home loan off. LMI applies to borrowers that borrow more than 80% of the value of their home, which puts the lender at risk. You will then be charged with LMI fee to protect your lender from you potentially defaulting on your payments. It is advisable to have an adequate saved up to avoid attracting an LMI fee.
4. What is defined as ‘defaults’ in the loan
You may think you know the meaning of the terms stipulated in your loan, but you will be surprised how these meanings differ across lenders. The most common fee that you will be charged with is defaulting on meeting your repayments. Other fees that could be applied are:
- Arrears management fee may be applied.
- Defaulting interest rate may be charged on overdue payments which can be higher than the overall rate you are paying on your mortgage.
- A dishonour fee may be charged if your method of payment is rejected due to insufficient funds.
- If you have been declared bankrupt, your lender can charge you for the legal fees they have incurred if you haven’t rectified this.
5. Carrying out renovations that dishonour your mortgage agreement
In order not to come into contention with your mortgage agreement there could be some terms that require that you keep to renovations that are approved by the council. Carrying out renovations that make your house unlivable could be in breach of your mortgage agreement.