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Top mistakes people make when choosing a home loan
June 3, 2011
Phil Naylor, CEO of MFAA, reveals where you can go wrong trying to find the right mortgage products in a crowded market place.
Focusing on the headline rate:
“Don’t focus on the lowest interest rate without investigating the loan’s other conditions,” Naylor says. “A different loan with higher interest might have more benefits such as flexibility.”
Fixing your interest rate without proper advice:
“People often worry about interest rates going up and fix their mortgage for three to five years,” says Naylor.
“But then, as happened in 2008, rates don’t go up, they go down and people get caught out and are locked in at the higher interest rate. I’m not saying don’t fix your rate, I’m just saying get some professional advice before you do.”
Not factoring in enough of a buffer and getting into financial strife:
“Banks will normally add in a buffer when they approve your loan, but if you get the loan and race out and get a lot of extra unsecured credit on cards or for things such as plasmas, you can get yourself into trouble. The bank looks at your ability to pay back the loan, but they have no control over any other debt you may take on,” advises Naylor.
Trying to do it yourself:
“There are so many options out there that, unless you’ve got loads of spare time on your hands, there’s no guarantee that you’ll find the right home loan. This is where using an approved mortgage broker can help and save you a lot of money.”
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