Guide 4. Things to look out for when selecting your mortgage loan

Home Loans

If you're new to the mortgage application process, the options available and terminology used can be confusing to say the least. Working with an experienced mortgage broker is essential in order to ensure that you secure the loan that is right for you; but there are some of the things you should look out for. We've outlined them for you below.

Up-Front fees
Every mortgage will have its associated fees, but some mortgage brokers charge differently. You'll want to ask about any up-front fees prior to signing up with any specific mortgage broker.

Early repayment penalties
When you have settled on a mortgage broker and you begin looking at loan products, ask about whether or not the loan you are interested in has any early repayment penalties. Some mortgage lenders will assess a penalty to your loan if you try to pay it off early.

Introductory rates
If you're being offered an interest rate that seems too good to be true, check and make sure that it isn't an introductory rate, otherwise known as a honeymoon or teaser rate. Some lenders will offer very low initial interest rates, but those rates will rise substantially within six months to a year when the real interest rate kicks in.

Balloon payments
Be careful of loans that offer lower monthly payments but require a balloon payment at the end of the loan term. While the initial monthly payments may be more affordable, a large, lump-sum payment will be due at the end of the loan and if you are unable to pay the amount required, you could risk losing your home.

Predatory lending
If your credit isn't so perfect, you may end up as the victim of a predatory lender if you're not careful. While it is understandable that imperfect credit means a higher interest rate, predatory lenders tend to charge exceptionally high rates, oftentimes causing their borrowers further financial distress. If you have blemished credit, make sure that you work with a reputable mortgage broker so you can be sure to avoid the predatory lenders.

First home owner's grant
While there are things you should avoid, there are also things you should try to find. If you're purchasing your first home, ask your mortgage broker about the first home owner's grant. You may be eligible to receive a $7,000 grant towards the purchase of your home.

By knowing what to look for and what to avoid, finding the loan that fits your needs

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