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5 things to do before signing your home loan agreement

March 6, 2019

Lenders operate in a competitive market and thrive on the promise of processing your documentation in the shortest time possible. However, here are five things to do before signing your home loan agreement.

1. Negotiate the rate

Remember that you can always negotiate on the interest rate, especially if you are an old customer with a long relationship with the bank. You can haggle if you have a clean credit history record indicating that previous payments were made on time. A high credit score can give you a higher loan amount at better rates. Consider taking the loan at the end of the month, when the bank is more flexible as it tries to meet its monthly targets.

2. Read the definitions of defaults and penalties

Being a legal agreement, a home loan agreement can be incomprehensible. Lending institutions define ‘default’ differently. Getting a divorce after taking a joint loan, or involvement in civil litigation or criminal offence can render you a defaulter with some banks. Some have security clauses that entitle the bank to demand additional security when the property prices fall. Make sure you also find out about penalties on loan prepayment.

3. Check for hidden charges

Some banks will only state the processing charges and make you pay more at the time of disbursement. It is important to scrutinise the agreement and check for hidden additional charges like administrative and service charges. If you find any, you can discuss them or negotiate with your bank.

4. Counter-check before signing

Ask the loan officer to avail to you the complete loan documents at least 24 hours before closing the agreement. Ask your mortgage broker to explain everything to you before you sign. You can bring your closing attorney to help you with that.

5. Check the loan’s APR

A potential loan’s APR is a measure of how much it will cost you every year. This includes the interest, the amount to be repaid, and other fees. Remember that most loan agreements won’t state the APR explicitly.

Are you looking for a mortgage broker to find you the best home loan rates? Contact Empowered Finance today before signing the dotted line on a home loan agreement.

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