Whether you’re a first home buyer or a seasoned investor, making a bad decision on your mortgage could end up costing you in both time and money. When it comes to a mortgage, what you don’t know CAN in fact hurt you! Knowing what pitfalls to avoid will help you make better decisions. Here are 5 mortgage mistakes to avoid.
1. Not reviewing your mortgage
Interest rates are at historic lows so it makes sense to review your home loan to ensure it’s still market competitive. We recommend you review your home loan preferably once a year, as you could be missing out on improved home loan features and maybe a better rate if you simply stick to the same home loan and lender.
2. Setting a longer loan term
While it may make sense to choose the longest loan period when you’re buying a home, this may even be your first home and initially you’re on a tight budget, later, once you are a little more settled, why not consider paying even a small increase in your instalment. This action will reduce the overall loan term and could literally shave 1000’s of dollars off the cost of your loan.
3. Going direct to your lender
Going directly to your everyday bank isn’t necessarily the best option. Working with a mortgage broker means you have access to a large pool of lenders and lending options. What’s more, if you don’t meet all of the big banks’ lending criteria – if you have bad credit or are self-employed – a Mortgage Express broker may be able to connect you with one of our non-bank lenders who specialise in handling this type of lending.
4. Focusing on interest rate only
The interest rate is only one of the factors that should influence your decision when it comes to choosing a mortgage. Going with a lender who offers the lowest rate may not mean you’re getting the best home loan for you and your circumstances. While some lenders may offer low or “honeymoon rates” – these lower rates may end up being uncompetitive and expensive – there are other costs that can push up the cost of your loan, including establishment fees, break fees, and legal costs. Also, a cheaper rate could mean far less product options; there is a reason they are called “Basic Home Loans”. It’s important you factor all of these costs into your choice, which is where a mortgage broker can assist you.
5. Not setting up your loan features correctly
Designing a home loan around the features you need now and in the future is key to ensuring your loan is set up correctly. Choosing between a fixed or a variable interest rate can make a significant difference to how much you pay each fortnight or month, while an offset account linking your everyday banking to your home loan could help reduce the amount of interest you pay on your home loan.
Consolidating all of your debt into your home loan could help you gain control of your debt much faster, while a redraw facility lets you make additional payments when you can effectively helping you pay down your mortgage much faster. Your Mortgage Express broker can guide you through the various home loan features available to you, so you can make an informed decision around the features that best fit your needs. Get in touch with one of our team today.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA