Mortgage mistakes are easy to make. To help ensure you don’t make some of the worst (and most common) errors in choosing a home loan, we’ve made a list of five of the worst offenders to avoid.
1. NOT REFINANCING
Your initial mortgage may be for a 30-year term, but that doesn’t mean you’re stuck with exactly the same structure and interest rate for the duration. Refinancing offers you the opportunity to take advantage of lowered interest rates, to set up structures that better suit your needs, or to unlock equity for further investment (or a well-deserved holiday).
Make sure you regularly check your refinancing options to ensure you are still getting the best deal you can – especially after several years of good repayment behaviour and the stronger credit score that comes with that.
2. BANK LOYALTY
Banks aren’t the only people out there who can provide a loan. Smaller lenders can often give you a great deal, either through more competitive interest rates or better structure for your mortgage.
They are still regulated by the Reserve Bank just like the big banks are and often offer niche products that the banks are unable or unwilling to provide. They also tend to be a little more lenient in their lending criteria, so they are a good bet for those in slightly unusual financial circumstances that make it tough to secure regular lending. Don’t be afraid of approaching the little guys, or better yet, get a broker to do it for you.
A bit of caution now could save you a lot of money later.
3. IGNORING MORTGAGE STRUCTURE
Decisions on mortgage structure aren’t just about fixed rate vs floating. Always ensure you are investigating your options in offset accounts, split loans, lines of credit, interest-free periods and more.
There is a lot of flexibility in mortgages that can help you pay your debt off faster if used correctly. Don’t settle for regular principal-and-interest repayments if there’s a more suitable option. Be warned, however: these features are sometimes locked behind more stringent lending criteria, so be sure you work with a broker to search across multiple lenders for the best deal.
4. FORGETTING FEES
Fees are an unexpected sting in the tail for a lot of new mortgage-holders in particular. There are opening fees, closing fees, break fees for refinancing, and they aren’t always obvious when you first take on the loan.
Ensure you are looking at comparative interest rates (the smaller number in the corner of the big bold loan interest rates advertised) to ensure that you are really getting a good deal.
There’s more to your mortgage than the amount of monthly repayments.
5. FOCUSING ON MONTHLY REPAYMENTS ALONE
Monthly repayments are often the focus for loan-holders and are usually the deciding factor in whether or not to take on the mortgage offered.
However, don’t be tempted by a lowered monthly repayment if it stretches your mortgage out for longer: you may end up paying a lot more in interest on a 30 year mortgage than on a 20 year mortgage even if the monthly repayments are smaller. Always think ahead, your future self will thank you for the healthier bank balance.
Mortgage mistakes are easy to make, but not with a mortgage broker showing you the pitfalls. Get in touch with one of our expert mortgage brokers today to ensure you are getting the best deal for your home loan needs.