It wasn’t long ago that if you wanted a mortgage you had to don a three-piece suit, adopt a humble stoop and go cap-in-hand to a sombre gentleman who resembled one of the less likeable characters from a Dickens’ novel.
How things have changed. Nowadays competition is everywhere. There are big dollars to be made by lending money and because of that, and financial deregulation, suddenly the customer is king. No longer is it de rigueur to borrow from your regular bank. A whole host of lenders have come out of the woodwork, all fighting for market share in the lucrative residential home loan marketplace. These days the bank will come to you at a time that suits and their representative is likely to have a trendy hairstyle, open-neck shirt and a winning smile.
Mortgage terms are more flexible now and profit margins have been pared to the bone. Incentives are commonplace and a whole new industry – mortgage brokers – has appeared, offering to do the legwork of finding the best loan for borrowers apparently for free. Lifetime loans, revolving credit, 100% mortgages…the financial landscape has changed forever.
There is a bewildering array of lenders out there keen to provide you with a mortgage. Banks compete with non bank lenders like building societies, finance companies and credit unions. Some will offer you incentives, like holidays or renovations. But your primary concerns should be the long term security of the financial institution, their interest rates, fees, whether they make a contribution to legal costs and the facility to be able to repay a lump sum into the mortgage at any time.
Most banks have ‘mobile managers’ who will visit you at home. Take the opportunity to discuss every aspect of the loan with them in your own environment until you are completely comfortable and fully understand what is being offered. There is also a wide range of finance out there now for people who have had credit problems. Not surprisingly the interest rates for these loans are correspondingly higher.
If you decide to go with a finance company, rather than a bank, make sure they have a good, long track record.
Negotiate with your lender for your home loan. The home mortgage market is a crucially important component to banks and finance companies and they will often do a great deal to win a new customer.
This is an extract from The Streetwise Home Buyer. The full chapter covers much more and you can download it below for free.
- Types of loans and interest rates
- Mortgage brokers