5 things to do before signing your home loan agreement

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

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You may be half way through to the finish line once you have been approved and all that is left is for you to sign for your home loan. However, rushing the process to place your signature on the dotted line can backfire on you and possibly cost you thousands of dollars if you haven’t read the fine print. Here are a few fine print details that you should check before signing your home loan.

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.

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