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Getting a mortgage to buy a property
A mortgage is a type of loan that is most often used to finance the purchase of property, such as a new home or an investment property.
When you are considering buying a property and need to obtain a loan to pay for it, you should shop around to compare the interest rates offered.
Banks will negotiate according to factors such as the quality of the property, the amount of down-payment, your credit rating and other factors.
When you are ready to meet financial institutions to discuss a mortgage, be prepared to provide information about the property, your income, expenses, assets, liabilities and the cost of the property. The financial institution will register a claim on the property until the loan is paid off.
Once you compare interest rates, fees, and charges, and you agree to a mortgage, you will also be given a complex agreement. You should ask your lawyer to review it before you sign anything. It is a legally binding document once you sign, and it is important that you understand what you are agreeing to.
If you are seeking a mortgage for a rental property as an investment, then ensure the rental income will be more than your costs including the cost of borrowing, any service fees on the property and the likelihood it may take time to rent the property
NOTE: This document is not to be taken as legal advice nor does it provide all the details that will be in a mortgage agreement. The obligations remain on the borrower to understand their obligations.
Hint: Download this page and take it with you when you meet your lender, so you remember to ask the questions.
You have the right to ask questions to ensure you understand your key obligations before signing. For example:
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The amortisation period of the mortgage loan: how many years will it take to pay off the mortgage?
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What is the annual interest rate?
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How much principal and interest will be paid at the end of the term of the loan?
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What are the charges for obtaining the mortgage?
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Registration of the mortgage.
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What are the fees and charges if I miss a payment?
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What are the fees and charges if I change the payment amount?
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What are the fees and charges if I renew the mortgage?
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The term of the loan is the length of time that the bank will provide you the loan: the mortgage loan agreement normally terminates after a period of time (for example, 1 to 5 years), after which you may ask to renew the loan for the balance of the loan, pay it out or transfer it to another financial institution.
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Does the interest rate change, and if so, when?
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What is the penalty amount if the mortgage is paid out before the loan’s termination date?
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Legal fees, Appraisal fees, Administration fees, Inspection fees.
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What are the fees and charges if I am late on a payment?
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What are the fees and charges if I change the payment due date?
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What are the fees and charges if I want to add a lump sum payment?
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Last updated on: Friday 05 August 2022
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