HOME LOANS

THE APPLICATION PROCESS

The lender will ask you to fill out and sign a loan application. You will have to provide details of your financial circumstances and give written permission for the home loan lender to look at your file with CRAA. You may be asked to pay an application fee at this stage. The lender will either reject your application or make a loan offer to you. The loan offer will include details of the contract such as the amount you can borrow, the interest rate, the length of the loan, the approximate repayment amount and the initial and ongoing costs of the loan.

If you decide to accept the offer, you will need to sign a loan contract. You will probably be asked to give a mortgage over the property you are buying/refinancing. You may also be asked whether another person such as a friend or relative will provide a guarantee. Once the loan contract, mortgage or guarantee is signed it is legally binding. The loan money is usually paid at settlement.

CHANGING YOUR MIND

If you have only made the loan application or received the loan offer you are not obliged to sign the loan contract and go through with the loan.

If you have signed the loan contract and the loan money has not been paid out by the lender you can still choose not to go ahead with the loan. You can cancel the loan contract by notifying the lender in writing before the settlement. The contract cannot be cancelled once the lender has paid any of the loan money to you or another person, such as the seller of the house.

Lenders will ask for an establishment fee once your loan has been approved. If you have paid the establishment fee up front and then your loan is declined, you may be entitled to a refund. However, if your loan is approved and you decide not to go ahead with the loan, it is unlikely the fee will be refunded.

See:
introductory rate – interest rates
fixed interst mortgage

HOW INTEREST IS CALCULATED

Interest is calculated on the outstanding balance of your loan. If you make repayments that are more than the minimum repayment or make additional payments, you will pay the loan off sooner and pay less in total interest. Be Careful! Some loans will not allow you to pay extra, or a charge may apply for early repayment.

The interest rate is the amount you each for every $100 you borrow. It does not matter how complex the calculation is, to find the annual interest see how much you will per annum on the loan amount and convert that to an equivalent amount for $100. This is the effective annual rate.

MAKING ADDITIONAL REPAYMENTS

The ability to make additional repayments may depend on the type of loan you choose. Most lenders will not charge you for making additional repayments if you have a variable rate home loan. However, if you plan on paying off your fixed rate loan early, or make additional payments, or want to change it to a variable rate, you may have to pay fees. You should discuss this with your lender.

IF I HAVE BEEN MAKING ADDITIONAL RE PAYMENTS CAN I GET ACCESS TO THE SURPLUS IN MY ACCOUNT?

Ask your lender if this option is available. You may be able to redraw the surplus payments. However, a minimum withdrawal amount may be required and a fee may apply.

See:
start up costs - loans
borrower
CRAA
guarantee
interest - finance
mortgage
refinancing
bank fees and charges
insurance
ongoing fees
real estate finance