The average borrower tends to make mortgage-related mistakes and here’s how one can avoid them.
Karina Wolfin, a home furniture expert at Direct Appliance Rentals says, “life brings along with it several memorable moments. One of which is moving into a new house. This event requires research. Asking the right questions before this moment can help avoid silly mistakes. From choosing the right furniture to place in every section of the house up to buying it by cash or mortgage.” With more than a hundred mortgage-related products on the open market, there’s more than enough room for each type of borrower. As a result, it becomes essential to understand what the different types are and which one is best suited to the situation at hand. Mortgage brokers can be a great help, but you need to help yourself as well.”
Here are the most common mortgage-related mistakes people make.
1) Never Reviewing the Agreement
Each mortgage agreement is different and it’s important to go through each detail as often as possible. Sticking to one lender is not mandatory and shouldn’t be the approach one takes. Instead, it’s smarter to compare at least 5-6 different options to see which one works best. This ensures the final decision is in line with expectations.
This is something many individuals ignore and as a result, end up with a bad mortgage under their name. Many brokers can showcase over 40+ products at once allowing clients to choose what works best for their needs.
An example would be refinancing and being able to take a look at the various rates before signing up. Each lender is going to have its rate making it important to go through the fine print.
Always read the fine print, and make sure you understand it. This is likely one of the biggest expenses of your life, so it is important to enter into it educated. Ask the financial provider or seek a legal professional if you need help understanding anything.
2) Only Focusing on the Interest Rate
The interest rates seem to be going lower and lower with each passing day. This can be an intriguing proposition for mortgage applicants. However, experts believe interest rates are just a way to get people through the door before tricking them.
There is more to a mortgage than simple interest rates and that’s something people need to focus on. Each situation is unique and those circumstances determine whether or not the mortgage is a good fit. Otherwise, some agreements have lower interest rates but are packed with hidden fees, odd clauses, and other below-par features.
3) Avoiding Research
Being prepared is essential and many applicants ignore this part of the process.
Many applicants don’t even come in with the right documentation when it’s time to sign up. This can slow things down and lead to an elongated mortgage application process when it doesn’t have to be this way at all.
Taking the time to analyse different options, prepare all relevant documentation, and find the right fit is essential. It’s all about knowing what’s coming up and what decision will work best.
Remember to also consider non-financial aspects to help you avoid unnecessary stress and worry.
It isn’t always about the money, and a lot of people experience a lot of stress because they only considered what was cheapest. The right mortgage comes down to a variety of factors, including your household income, your saving skills, whether or not you have kids, how old you are and the degree of flexibility that you require in your life. Keep all of these in mind when choosing a mortgage.
4) Ignoring the Structure
Each agreement comes with its own stipulations and these can vary with features such as offset accounts, redraw facilities, lines of credit, and even new credit cards.
While each agreement is going to be different, it’s important to be aware of these differences in advance. Always seek a mortgage product that’s in line with your needs and suits your interests. For more information, it’s always best to speak to a qualified professional to learn more about what works best in your particular scenario.
Sometimes, the wrong mortgage structure becomes a major issue when it’s time to deal with tax deductions.
5) Sticking to a Fixed Mortgage
The average borrower sticks to a fixed-rate interest rate mortgage because it’s simpler. However, this decision can lead to thousands of dollars going down the drain for nothing. A smart person understands the differences and takes the opportunity to do their research.
While a fixed-rate interest rate mortgage has its advantages (i.e. stability), it also comes with an elongated term. This is why the concept of signing across 4-5 years can be troublesome at the best of times.
A variable loan has its drawbacks as well but will give you greater flexibility in paying off your loan. The building designers at Mortage Compare Plus speak to mortgage holders every day and have found “a large number of our clients have had to jump through hoops and pay large sums to refinance their fixed loan for their renovations. It’s good to know what the differences are between loans and choose the one that fits your plan for your home.”
6) No Pre-Approval
Pre-approvals are a great way to simplify the process as much as possible. Not having the money in hand is okay as long as the pre-approval has come through.
Using different online tools to learn about a lender’s rate isn’t always helpful. Those tools aren’t accurate and shouldn’t be enough to assume it’s okay to buy a new property. Gain a pre-approved mortgage before signing on the property papers.
So are you ready to choose a mortgage mistake-free?
Depending on your situation, finances and goals for your mortgaged property, there will be a mortgage right for you. Once you find a mortgage that you think suits you, you can use tools such as online mortgage calculators to compare your expected repayments to your income. A mortgage is a big decision, but with a bit of careful research and help from a mortgage broker, it can be a hassle-free process and you can get straight into enjoying your new home.