Beware of These Common Mortgage Mistakes
Is your home your palace or a monkey on the back?
Your answer to this question would completely depend upon your mortgage. Getting a reasonable property at an amazing rate could make you feel as if your life could not be any sweeter than this.
But, when you ask someone who has bought a home with mortgage, which they never understood and could not really afford, they’d likely tell you that their home has brought them nothing but disappointment and tears.
So, if ever you are in the market to purchase a new place soon, then ensure that you’re avoiding the following common mortgage mistakes.
Not Reviewing the Credit First
If you want the best terms on a mortgage loan, then you’ll have to see to it that your credit score is in great shape. Before you go to your first open house, you must take a look at your credit report.
This way, you could find out and correct errors if any, in the record before applying for a mortgage loan. If errors are found in your credit report, you could end up getting a less favourable loan term.
Besides your credit report, it is equally crucial to check the credit score. If you find out that you have a poor credit score, then before signing up for any loan, you must raise it quickly.
However, the bottom line is that you must spend time to get credit in its best possible shape in order to ensure that providers offer you some of the most favourable terms.
Failing to Get Pre-Approved
The next mistake you could possibly make whilst applying for a mortgage loan is failing to get pre-approved from your respective bank. By getting pre-approved for a specific loan amount, you can easily prevent the heartbreak, which comes from falling in love with a beautiful house that’s way out of your budget.
This could in turn give you an edge, especially if yours is not the only offer for that particular property. Generally, a vendor feels more confident selecting a bid from someone who has a mortgage pre-approval, instead from an individual who has not even started the process.
Nevertheless, do not get carried away by the pre-approval amount you get from your bank. Bear in mind, what your bank thinks you could afford and what you could actually afford, might be poles apart. Many people lose their house simply because their bank gave them a loan, which they weren’t able to repay. So, make sure that you aren’t making the same mistake.
Likewise, never mistake getting pre-qualified for a loan with being pre-approved. Getting pre-qualified usually includes a brief look at the assets just to give a rough idea regarding your qualifications.
On the other hand, being pre-approved for the loan requires in depth evaluation of your credit and financial picture, that permit the provider to give a specific amount that you’re approved for.
Not Shopping around for the Best Rate
It is generally seen that half of the mortgage borrowers do not shop around, which is one of the biggest mistakes. Seasoned shoppers always look for best deals on furniture, cars, and other amenities, yet fail to search for a better mortgage rate on their loan.
It might be suitable to employ your primary bank to take out a mortgage loan, but even that could possibly burn a hole in your pocket if the rates offered by them aren’t competitive enough.
So, if you dabble around a bit with the mortgage payment calculator, you could easily save some money even from a seemingly small difference in the interest rate.
Ignoring Mortgage Fees
Whilst you are investigating interest rates, do not overlook the mortgage fees. Most of the mortgages come packed along with charges of all kind. Some of the common charges applied on a mortgage loan are adviser fees, mortgage broker fees, arrangement fees, valuation fees, and many more.
So, before closing you must be provided with a good estimate of the fees charged. Always ask your provider to review what the charges are for, and accordingly, see if it’s possible to negotiate a lower price.
Saving too Little for a Down Payment
If you don’t have a down payment stashed, then you’ll perhaps sink all your prospects of getting a mortgage loan. After being bitten by a fall in the house sales, most of the providers shy away from giving mortgages, especially to those who bring nothing to their table.
Likewise, most of the mortgage providers expect you to have a down payment even before they agree for a mortgage.
Typically, if your deposit is large enough, then you’re likely to have access to better interest rates. Yes, saving a huge deposit is always easier said than done, so if you’re a first time buyer then it’s better to seek professional assistance.
Not Understanding the Mortgage Terms
This is one of the biggest mistakes that an individual makes while taking out a mortgage loan. By simply signing on those dotted lines without even understanding what mortgage you’re entitled to, you could end up losing your house.
You may think that you’ve hit a jackpot by signing for standard variable rate mortgage, and you’ll probably be fine for some initial years, whilst the rate is fixed and low. But, when it’ll be set to the present market rate, then that affordable monthly payment could turn into a horrifying nightmare.
So, the bottom line is, you must always comprehend what you are actually signing up for. It is just not enough to simply know what your monthly payments are. You also have to check whether the rate of interest could be changed, and if yes, then when and by how much will it be raised.
If you feel that the loan terms aren’t suitable enough or you don’t understand them, then it is better that you walk away instead of attempting an expensive mistake.
Applying for Loads of Mortgages
Every time you apply for a credit card, loan or mortgage, a “footprint” will be left behind on the credit file. Individually, this isn’t a bad sign, but a lot of them in a short span of time, would set the alarm bells ringing with your provider.
Of course, it is okay to apply for more than one mortgage loan if you’re not successful in getting one, but always choose cautiously and try and seek advice to make sure that you’re applying for appropriate products.
Overlooking Insurance Options
Once you finally secure your mortgage, you will, for sure, want to ensure that you’re protecting your investment. Home insurance will make sure that your home is secured, but it’s worth considering an income protection insurance or life insurance, to ensure the mortgage loan would still be paid if the worst is to happen.
However, you must also check for PPI (Payment Protection Insurance) on your mortgage, and if you’ve been mis-sold a policy, it’s imperative to claim PPI yourself, in order to get a refund.