Common Mortgage Mistakes

Mortgage Broker The first thing that most people look for in a home loan is the head line interest rate. Although this is an important consideration it is a common mistake people make when choosing a home loan. There are many other factors that can add significantly to the cost of a loan far more than interest rate alone. Loan fees and restrictive features can prevent you from paying or exiting your home or in loan early.

1. Entry Fees

Varies from lender to lender and can be anything from $0 to $1,000 plus dollars. This can add significantly to the cost of a loan by increasing the real interest rate of the loan.

2. Mortgage Insurance

Mortgage insurance is a premium that is passed on to you from the lenders if your loan is above 80% of the properties valuation. This varies significantly from lender to lender and can vary by thousands of dollars.

3. Ongoing Fees

These fees are either charged monthly or yearly by the lender. Some lenders charge up to $500 yearly for some loans. These ongoing fees can add significantly to the cost of your loan. If you did not have to pay the fees and add that amount opt your loan you could save thousands off the total cost of your loan.

4. Early Exit Penalty Fees

Early exit fees for regulated mortgages have been banned but lenders still charge a discharge of mortgage fees. These fees are supposed to represent the legal costs for discharging a mortgage but they vary significantly from lender to lender. Fees range from $0 to over $1,000 for some lenders.

5. Discharge of Mortgage Fees

Early exit fees for regulated mortgages have been banned but lenders still charge a discharge of mortgage fees. These fees are supposed to represent the legal costs for discharging a mortgage but they vary significantly from lender to lender. Fees range from $0 to over $1,000 for some lenders.

6. Offset Accounts and Redraw

These features offer flexibility and can be valuable tools for reducing your mortgage quicker. Offset accounts acts like a savings account but instead of it earning you interest you offset your mortgage interest with the amount in the account. It is similar to making extra repayments but you have access to the funds.

7. Making Extra Repayments

The quickest way to save on interest repayments is to make extra repayments and pay your loan earlier. If you cannot make extra repayments a low interest rate loan may not be as attractive as it seems

8. Redraw Fees

If you are ahead of your loan repayments you may be entitled to redraw these funds. These fees can be as much as $50 per redraw. Find a loan that has nil redraw fees.

9. Fixed Rates and Break Costs?

Many people do not understand that there can be sever penalties for breaking a fixed rate contract early. Sometimes this can cost into the tens of thousands of dollars and it is important that you understand what you intend to do with the property in the future before entering a fixed rate contract.

10. Loan Portability

Portability allows you to transfer your loan from property to property without incurring the excessive fees of closing out a loan and applying for a new one.

11. Reputable Lenders

Lenders that have been in the mortgage market for a short while may not offer the same level of service or ongoing competitive pricing. Lack of flexibility in loan products can also add significantly to the cost of a loan especially for property investors