IN my years as a mortgage broker, not only have I dealt with many home buyers, but I have also encountered many of the common mistakes that they make.
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For those of you who are thinking about buying a property in the near future and want to secure the best home loan product for your needs, I have put together a list of the few common mistakes you should avoid making:
Conducting inadequate research
Savvy mortgage choices are made by researching different types of lenders, home loan types and the range of features available, as well as the documentation you will need to apply for a loan and what paperwork is involved.
Failing to budget
Without a budget, how will you know if you can stick to one once you have a mortgage?
A budget helps you monitor spending and determine what mortgage repayments you can service. Furthermore, a good budget can help you when it comes time to apply for a home loan.
Banks favour borrowers who can show they have genuine savings and can easily service their mortgage repayments.
Dismissing the value of pre-approval
A loan pre-approval, which generally lasts for three to six months, provides assurance as to what you can borrow before you go property hunting.
It is a terrible feeling to have your heart set on a property and find out you can't borrow enough money. Pre-approvals also help at auction, when you usually have to pay a deposit on the spot if you are successful.
Blindly taking the advertised rate on face value
Many people fail to look past their honeymoon (introductory) period, which is when the interest rate on their mortgage is lower than it will be for the remaining loan term. If it hasn't been budgeted for, you could be in for a shock.
A clever move is to make mortgage repayments as if the honeymoon period doesn't exist, so you're prepared for its completion and ahead on your payments.
Attaching unnecessary features to your loan
A lot of borrowers will choose a home loan because of the features it boasts, simply because they have heard that feature is handy to have.
The reality is, additional home loan features sometimes come at an additional cost and every borrower's situation is different, so what home loan feature may work for your friend may not work for you.
■ Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone: Richard Windeyer on 1800 01 LOAN.
