Securing a home loan is a huge milestone, and one you will want to get right the first time. It can be easy, particularly for first-time home buyers, to make mistakes when securing a loan – which can cost both time and money during the process. At Borro, we’re committed to helping our clients to reach the best outcome possible during their home buying journey, so we’ve compiled the ten most common home loan mistakes and how to avoid them.
1. Not comparing lenders
Some homebuyers can fall into the trap of going with the first lender they come across without weighing up their options. It’s important to keep in mind that each lender will offer different interest rates, fees, and loan terms – all of which can greatly impact the mortgage that you end up with.
We recommend using a reputable mortgage broker like Borro to compare multiple lenders and find the one that offers the best deal for your situation .
2. Not seeking pre-approval
Although pre-approval isn’t a requirement, there’s a good reason why many seasoned homebuyers secure it before shopping for real estate. Pre-approval essentially confirms that you’re a candidate for a certain property you have your sights on, so you can avoid the disappointment of applying for a house but not securing finance in time.
We always recommend that our clients obtain pre-approval before they start house hunting, as this will give an accurate indication of what you can or can’t purchase.
3. Blowing your budget
Being pre-approved for a certain figure does not mean you should necessarily go out and choose a property at the top of your budget. Although we all want the best outcomes when house hunting, stretching your budget isn’t a wise decision – especially if interest rates rise in the near future or if your situation suddenly changes.
Committing to a realistic budget that leaves room for other expenses is advisable, especially since there are other hidden costs associated with buying a home.
4. Obsessing over interest rates
Interest rates are a hot topic and certainly an important aspect to consider when securing a mortgage. However, it can be a mistake to focus too much on interest rates and to overlook other elements of your home loan such as fees, features, and terms. Remember that these also make a great impact on the overall cost of your loan.
We recommend considering the total cost of your loan and what features you can utilise – interest fees are important but not necessarily the most crucial aspect of a loan.
5. Being unaware of additional costs
It can be easy to focus on the price tag of a property, but don’t make the mistake of thinking this is the total cost you’ll be paying. You may also be out of pocket for stamp duty, legal fees, lenders mortgage insurance (depending on your deposit amount), and other hidden costs of buying a home.
By engaging with a reliable mortgage broker, you can avoid being caught out by additional costs during the home loan process. We value educating our clients, empowering them with the knowledge required.
6. Not taking up beneficial loan features
When you are approved for a home loan, you may be so focused on the end result that you forget to take advantage of loan features that can be greatly beneficial. For example, redraw facilities, offset accounts or the ability to make additional payments are all useful features that shouldn’t be ignored.
Discussing your loan features with a broker can help to determine what could benefit you in paying off your loan faster or managing your finances in a smarter way.
7. Taking on new debts
During the home loan process, some individuals don’t consider the potential impact of applying for new lines of credit such as personal loans. This can affect your overall financial health and potentially jeopardise your home loan being approved.
We recommend avoiding taking on new debts during the home loan process if possible, as this may cause delays or issues.
8. Not thinking long-term when it comes to finances
In the excitement of purchasing a home, you could be forgiven for basing major decisions on temporary financial boosts such as bonuses or inheritances. However, this can cause long-term issues when your finances return to their usual baseline.
It’s important to base major decisions, such as mortgages, on a stable income to ensure you don’t struggle with repayments in the future.
9. Not considering the future
Similarly, it’s important to consider potential changes to your financial circumstances – whether that be changing careers, starting a family, or other milestones that may impact your income.
We recommend planning ahead to ensure the home loan you take on today will still be suitable for you in the future.
10. Failing to seek expert advice
Jumping into the home loan process without professional advice can result in not only missed opportunities, but also expensive mistakes.
One in three homebuyers utilise a broker for a reason. The mortgage brokers at Borro can offer expert advice, handle the paperwork, and help you to secure the best possible home loan.
At Borro, we’re here to guide you through the complexities of securing a home loan. By avoiding these common mistakes, you’ll be in a better position to find a loan that fits your needs and lifestyle. Contact us today to discuss your home loan needs.
