Buying a house is one of the biggest purchases you will ever make, so you have to make sure that you finance it properly. There are many different ways of buying a property but the vast majority of us go down the mortgage route. Before we take a look at the mistakes that can be made when choosing your mortgage, we have to remember that there is also a number of options available for those that are trying to buy their first home. The first home kiwisaver is a scheme whereby you contribute for a minimum of three years which then gives you access to getting a grant to help purchase your home. Property management companies and real estate companies will be able to give you more information about these schemes, as well as the other schemes that are available. Let’s now take a look at some of the pitfalls you need to avoid when getting a mortgage to buy a home. You should also go through the below with a refinance lawyer in order to get a greater understanding.
- Not Looking At Enough Lenders
Getting a mortgage can be a minefield as most of us don’t know enough about what a mortgage actually does in terms of interest and repayment. The temptation is to stay with the bank that you currently bank with for your mortgage. In some cases, this can be a great idea as you may be offered favourable rates compared to a new lender. However, you may be able to get an even better deal if you shop around.
Shopping around for the best interest rates along with any cashback offers that are available is the best place to begin. Many lenders do offer great incentives for new customers which can help you to pay off your loan earlier or pay a lower amount each month. They can even offer lucrative cashback deals that get put into your account on completion of your purchase. The best advice is to shop around as much as possible, comparing the pros and cons of all. What’s important is that you don’t wait until the date of your onsite pre purchase inspection to decide that you don’t want your mortgage deal.
- Not Dealing With Credit Issues
From time to time our credit scores can fluctuate and this can be through no fault of our own. Not having credit can sometimes negatively impact your credit score as can having too much unaffordable credit, as this can also do the same. The best advice is to not shy away from credit problems when you are embarking on a mortgage. Don’t leave it to chance as there could be some simple fixes along the way which could save a huge headache down the line.
Your credit score could also affect the mortgage rate that you are offered. The problem, with this is if you accept a fixed rate mortgage deal at a higher rate because you have not corrected your credit score, you could end up paying a five-year fixed rate deal at a higher rate, when you did not need to. Fixing credit problems can be tricky and time consuming but being ahead of the game will benefit you in the long run.
- Moving Jobs
Mortgage companies will check to see if you as the applicant have the ability to pay back their loan. They will check a number of factors such as affordability and employment history. Mortgage lenders prefer applicants that have been in employment for a length of time so that they know that their employment is stable. If you change jobs before you mortgage application has been complete, some providers will feel nervous of this and perhaps refuse your application on the basis of job security. The same can be said for self-employed borrowers. They need to provide a minimum of two to three years of tax returns to prove that their business is stable and providing a reasonable income. Changing your business model at a late state, is the same as moving jobs.
- Providing Incomplete Information
A mortgage application can be a stressful period as the result of the application is the difference between getting your home and not. The temptation is there to omit mortgage information that you feel may negatively impact your application. You have to remember that checks will be made on the information that you have provided and also if you have supplied the correct information, the lender is then able to make an informed judgement of what they can offer you.
- Underestimating Ownership Costs
Buying a house at the top of your budget doesn’t give you any room for other ownership costs that you may incur. You have to consider your domestic bills, any taxes and rates that you may be liable for and if the property is older, you may have to pay some quite expensive maintenance repair bills. Good research should give you an idea of whether the house is affordable to you.
- Not Fixing Your Mortgage Rate
Getting a fixed rate mortgage helps a first-time buyer understand their financial commitment. Not fixing this rate could be a risky game because if the rate increases, your mortgage could increase dramatically. An example of this is if you have a mortgage fixed at 4%, you know your payments for the fixed term period. If you have a variable rate and the rates go up, you could end up doubling your monthly payments, in extreme situations.
It is clear to see that when applying for a mortgage it is advisable to take the above in consideration as this will reduce the chance of making mistakes which are avoidable and could jeopardise your mortgage application. Now that you’re more aware of the mistakes that can happen, we hope you’re able to to successfully secure your mortgage without too much hassle!