The 5 mistakes people make with home loans
A home loan is arguably the most expensive purchase you will make, so you can’t afford to make mistakes. RateCity has compiled a list of the most common miscalculations you can make when choosing a home loan:
- Only looking at the interest rate
Do you want an offset account? Do you rely on a careful budget and would be better off paying a fixed rate? If you’re only looking at the lowest interest rate without examining all the loan features you may miss out on a product that suits you.
- Making too many applications
Every time you apply for a loan it is recorded on your credit history, however it will not specify if your loan was approved or not. If you apply to several lenders they may assume that you have been turned down by all the others, so your application would be more likely to be rejected.
- Borrowing more than you can afford
The banks will approve your loan amount, but you should still use a mortgage repayment calculator to determine what monthly payments you’ll be looking at and if you can realistically afford it.
- Underestimating the cost of the purchase
Purchasing a home will not just cost you at the auction. You need to ensure you’ve budgeted enough to pay off various fees, such as stamp duty, valuation costs, application fees and legal fees.
- Sticking with your childhood bank
It can be tempting to stay with the familiar, but the bank you’ve been with your whole life may not have the most competitive interest rates. That’s why it pays to do your research before buying. If you, for example, are with one of the big four banks, you could be paying almost 2 percentage points higher than if you were with a smaller lender.