What should I be aware of when taking out a mortgage?
Loans that seem too good to be true
If you think you’ve found a home loan that sounds almost too good to be true, unfortunately, it probably is. Here we look at some of the traps you should look to avoid in taking out a mortgage.
In the mortgage market, you come to expect certain things. e.g If you have a small deposit, you’ll pay more over the term of the loan; that having a bad credit history is going to cost you; that certain loans have certain interest rates, etc. So if you’re offered a home loan that seems much better than normal, look closely at the fine print. Free lunches are as rare in home loans as they are elsewhere in life.
Interest rate fixation
Most people looking for a mortgage are preoccupied with finding the lowest interest rate. But have you considered all the fees and charges, and the account flexibility you need? You need to consider the entire cost of the loan – not just the interest rate.
Ignoring mortgage fees and charges
Don’t ignore any fees or charges linked to a home loan; you never know how your circumstances may change. Upfront fees for taking out a loan and monthly fees are pretty easy to understand. But, are there other fees that you may incur? Will you be able to pay extra if you have a sudden windfall? Will you be charged if you decide to move or refinance your home loan? Can you increase your mortgage repayments?
Lack of flexibility
Different loans have different levels of flexibility i.e EFTPOS, internet banking, redraw facility. Ensure your home loan has all the features you want and don’t get locked into a Mortgage that will cost you if you change your mind.
Some property developers offer “vendor financing”. This may seem attractive because you don’t have to deal with a lender, or because they’re willing to give you a loan when others won’t. But be careful you’re not paying above market rates – for the property or your mortgage.
Get specialist help
The mortgage market is extremely complex, and getting what’s right for you is not as simple as finding the lowest interest rate. You need specialist help – the sort of help you get from an MFAA member. They are the Essentials of Borrowing. Talk to Bevon Sinnott by emailing [email protected].
An MFAA Approved Credit Adviser is more than your average mortgage broker.