Are you looking to secure a mortgage on your dream home or investment property in 2023?
While mortgages are one of the most significant purchases you’ll make in your life, there are many ways to streamline the process and save money.
Still, mortgage mistakes are often made by borrowers despite many ways that they can be avoided. Whether you’re just getting started in the property market, or looking to add to an existing property portfolio, it pays to be educated.
So if you’re looking to secure a mortgage without any added headaches (or financial mistakes) here’s what you need to know.
Start By Figuring Out What Type of Borrower You Are
Before borrowing any money for the purchase of a property, questions should always be asked first.
You must determine which borrower type you are first.
This can be done by looking at the circumstances of your life. Taking into account whether you are buying a home for the first time, investing in a new home, or even refinancing will reveal a borrower type and will lead you to question what the goal you plan to accomplish is.
In 2019, the mortgage market is currently full of mortgage products. Your chosen broker should be able to find a product to suit your needs if you know your borrower type.
The following six mistakes are ones that are often made by borrowers.
1. Sticking With A Bank And Forgetting The Mortgage
You should never force yourself to only use products from one lender, and you shouldn’t forget to review your mortgage regularly. Robinson Accounting, an accounting team who have experience managing the finance of home buyers, says that loyalty to one bank is something that people think they have to practice. Often times, these banks may only have a limited selection of products.
They explain “brokers on the other hand, have a wide variety of products that can be useful for your particular situation. Finding out just how competitive your mortgage is in the current market is something that should be done regularly.”
Lenders will often have different costs for refinancing, but it can be possible to get a lower interest rate and get that money back as time passes.
2. Going With A Mortgage Just Because of The Interest Rate It Has
Interest rates for home loans are looking pretty attractive these days. The rates are lower now than they’ve ever been, but that doesn’t mean you should instantly jump on them. There is a downside associated with simply selecting a mortgage that looks better than the others.
The circumstances for which the loan needs to be applied and the loan’s features are the most important things to think about. For a better comparison of mortgage interest rates, comparison rates should be looked at because they include fees, discounts, and other rates.
3. Not Taking The Time to Prepare
When it comes to mortgages, those who have knowledge and their paperwork in order have all of the power.
Around 16,000 brokers are part of the mortgage broking industry, and those who have a faster and easier time getting a mortgage are often the applicants that have well organised documents.
That paperwork with all of your financial details should be ready when applying for a mortgage.
The value of preparation is emphasised by entrepreneur Pearl, who runs cake making business Pearl’s Creations. She explains, “my home is also my place of work. For this reason I had to make sure the process of finding the right property and applying for a mortgage did not receive setbacks – otherwise I risked setting back my business. By asking your broker upfront how much paperwork you’ll need, you can avoid any last minute missteps.”
4. Ignoring The Structure of A Mortgage
There are some mortgages that are simply bare bones with no additions. Others come with additional content, such as credit cards, redraw facilities, and even offset accounts.
You have to choose a product that fits your needs. The broker or bank who is guiding you can help you choose between interest only and interest and principal structures.
Choosing the wrong structure is a common mistake that can affect tax deductibility in more ways than one.
5. Going With A Fixed Term Without Knowing If It’s Needed
If you have to break a fixed-term interest rate mortgage for any reason, you may be faced with costs in the thousands. Only get a fixed-term mortgage when it necessary.
For those who need to stick within a certain budget, fixing the interest rate of a mortgage will be a preferred option. For some, it is a good choice, but for others, it’s not a wise decision, because a period of five years is a long time to be stuck on a fixed term.
6. Going in Without Getting A Pre-approval Done
When borrowing money for a property purchase, it shouldn’t be assumed that a pre-approval has already been given unless the lender specifically writes it.
Although borrowing calculators and other tools can be used to create borrowing figures, banks will want to know more before they lend out their money.
Chiropractor Keith Maitland recommends factoring in your income to ensure your pre-approval process is a success. He says “your income will impact both your pre-approval chances and your ability to successfully pay your repayments, so it should be central to your mortgage process. If you have a promotion in the future it may even be worth your while to wait until your income changes if it helps your application process.”
Did we miss any valuable mortgage mistakes to avoid in 2023?
Write in the comments below about any mortgage mistakes you’ve made in the past and how to avoid them.
Author Bio
Fiona White is an Australian freelance writer and Sydney-based university student. As an accounting student, she has a passion for learning about global changes in business culture and specialises in entrepreneurship and innovation-related topics. When Fiona isn’t at her desk, you’ll find him exploring National Parks.
