Are you thinking about getting a home loan? Be sure to know your rights before you do. Buying a home can be a significant decision that will impact both your personal life and your finances.
Not happy with your current home loan? Most Australians purchase their home with the help of a home loan and there are a number of rights and responsibilities that come with a home loan.
1. Consumer credit laws protect you
When you apply for and obtain a home loan, keep in mind that consumer credit laws give you a number of important consumer protections. The National Consumer Credit Protection Act 2009, also known as the “Credit Act” is a law that outlines your consumer rights for loans, including home loans.
Consumer protections include:
- Requiring that important information is included in your home loan document.
- Giving you the right to apply for a home loan repayment arrangement if you face financial hardship.
- A default notice that gives you a minimum of 30 days to repay any missed payments must be issued to you before any court actions or repossessions.
- Certain procedures must be followed if your home will be repossessed.
2. Consider different home loan options
When you apply for a home loan, you have the right to choose your home loan provider. This allows you to shop around, and consider the pros and cons of different providers and their home loan products. It is highly recommended that you consider various home loan options because:
- You shouldn’t be pressured or forced to select a certain home loan
When home loan sales people suggest that you must take a deal now, you have the right to refuse them. You can simply reply that you are shopping around and comparing deals. You should take your time with selecting your home loan and home loan provider, as it is a big decision, and you may find better options by shopping around.
- You can compare home loan prices
While home loans can help you pay for your home, there are significant costs with applying for and maintaining your loan. For instance, there can be home loan application fees, admin fees and of course the regular interest charges. So you may be able to save money if you take the time to compare home loans and their fees.
3. Is your home loan provider licensed?
Your home loan provider and any broker who assists you must be licensed with ASIC or they must be an authorised representative of someone who is licensed.
Check that your home loan provider or broker is licensed by searching ASIC’s Professional Registers. You can also call the ASIC Infoline on 1300 300 630.
4. Ten details to check in your home loan contract
If you’re getting a home loan, then the home loan contract must contain all of the following information. If your home loan contract does not contain these details, then you should ask that it be included in your contract. If parts of your home loan contract are unclear, then you should ask your lender to clarify and explain them to you.
- Information about the lender’s licence with ASIC
- Total amount of your loan
- Total amount to be repaid, including the interest payments
- Interest rate of the loan, and an indication whether it is fixed or variable. (‘Fixed’ means that the interest rate will stay the same for a certain number of years. ‘Variable’ means that the interest rate changes based on market rates.)
- Whether the loan is secured. (Generally a home loan is secured, which means that the lender has taken a mortgage over the house. If you don’t make the loan repayments, then the lender could take the house and sell it to repay any money owed.)
- Length of time to repay the loan
- Amount and frequency of the loan repayments, and whether additional repayments are allowed
- Whether any insurance is necessary
- Fees for repaying the loan early
- Changes to the interest rate if any repayments are missed
5. What to do if you’re behind on a home loan repayment?
If you’re having trouble staying on top of your home loan repayments, then it’s important that you take responsibility and take certain steps so that you don’t make matters worse. You’re more likely to get a positive result if you handle the problem immediately.
If you missed a home loan repayment and you don’t think that you’ll be able to catch up with your repayments, then you could do some of the following:
- Apply for a repayment arrangement due to financial hardship
- Refinance the loan
- Negotiate for time so you can sell the property
- Apply to delay any formal enforcement proceedings
6. How to complain about your home loan provider
You can complain to ASIC if you believe that there has been any misconduct regarding the management of the home loan provider, its directors or employees.
7. How to complain about your home loan
If you’d like to complain about your home loan, then you can do the following:
- Contact your home loan provider to complain.
- Make a formal written complaint to your home loan provider, following their complaints handling procedures.
- If you’re unhappy with the home loan provider’s response, raise the dispute with an external dispute resolution scheme, such as the Financial Ombudsman Service.