Mortgage

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This fact sheet is general information only. If you need a lawyer, try LawMatch™ a free service that matches you with a lawyer who meets your legal needs and preferences.

What is a mortgage?

A mortgage is a type of loan. The loan is guaranteed by the property you are buying, so the lender (called the "mortgagee") can sell your house if you don't pay the loan.

There are a number of different places to get a housing loan:

• banks;
• building societies;
• mortgage providers;
• life insurance companies;
• co-operative housing societies;
• credit unions; and
• other finance providers, such as solicitors who run mortgage funds.

Make sure you check out the "net", there are a number of special deals being offered if you complete your application via the internet.

Of course, most home buyers get a loan from a bank or other mortgage provider. For the sake of convenience, we will call these "financial institutions". A mortgage must be:

• in writing; and
• lodged with Land and Property Information.

Types of mortgage

There are many types of mortgage on the market. They all do similar things, but are packaged differently to suit different people's needs.

Mortgages are usually either fixed rate or variable rate. Some of the variable rate mortgages are:

• a principal and interest mortgage - this is a mortgage where you make payments over the term of the mortgage. Check the effect on your payments if interest rates change.
• a discounted rate mortgage - this is a mortgage which starts with a low interest rate. Check what the rate is after the discount period and whether there are early repayment fees if you pay the mortgage out during the discount period.
• a standard variable rate mortgage - as the name suggests this is a mortgage at the lender's normal rate.
• a wholly variable mortgage - this is a mortgage where the lender has total flexibility in changing the interest rate
• a home equity mortgage - this is a mortgage that allows you to re-borrow money that you have already paid off the loan.
• a split mortgage - this is a mortgage that uses a fixed rate for part of the loan and a variable rate for the rest of the loan.

Should I read the mortgage?

Yes. The "mortgage" is likely to be a single sheet that only refers to the standard conditions that have been registered at Land and Property Information.

But it is worth asking your lawyer to look at the mortgage contract. Some are better than others, and it may influence your decision about the financial institution you choose. Be careful about signing any document that says you have read and understood the contract, especially if you really don't understand it!

What costs are there?

Costs vary amongst lenders and they may be negotiable. Partly it depends on who does the work, whether it is done "in house" or by an outside solicitor.

There may also be fees once you have signed up.

Possible costs and fees include:

• a fee for valuing the property;
• mortgage insurance;
• an application fee, based on a percentage of the value of the loan;
• solicitor's fees for preparing the mortgage contract;
• lodgment and stamp duty fees on the mortgage;
• a fee for "breaking" a fixed interest mortgage; and
• an early repayment fee.

Talk to your lawyer before you sign any letters of acceptance.

When do I get the money?

The bank's representative hands over the money at settlement.