Taking out a home loan can be tricky, especially if you’re unfamiliar with the process. Not knowing enough about the whole process and what’s available to you could cost you dearly, especially if you’re trapped in a loan that you can no longer afford, or an inflexible one that limits what you can do with it. It helps to be aware of these potential traps when you’re taking out a home loan, these include:
1. Honeymoon rates.
Don’t get sucked in by the name, honeymoon rates are designed to draw you into the loan by giving you attractive rates during the so-called honeymoon period. This is ideal if you want to slowly ease into the loan and minimise its initial impact on your finances. However, make sure that you know how much you’ll have to pay once the period is over and determine whether or not you can still afford the loan. If not, walk away and look for a better-balanced loan even if it comes with a slightly higher rate.
2. Not reading the fine print.
People say that the devil is in the details, and they couldn’t be more right when it comes to your mortgage. Make sure you review your options carefully, and ideally with the help of a solicitor who can translate some of the legal jargon for you. This will help you avoid any traps in the future. This fine print could include fees and charges if you make extra repayments, which aren’t ideal if you want a product that’s flexible and allows you to pay off more of your loan when your finances allow you to do so.
3. Not considering your full financial situation.
Review your complete financial situation, as you may be able to harness or utilise some of your assets to get a better deal on your home loan. These can include extra income or assets that you may use to purchase the property. If you have already built up a considerable amount of equity in your existing property, you may use a portion of it for your purchase.
4. Getting too caught up in finding your dream home.
This is especially important if you’re buying an investment property. Don’t get too attached to a property because it may lead you to make irrational decisions, such as over borrowing just to get the property, or not considering potentially better options. So, always take a look at your purchase with an objective eye.
5. Not seeking advice from a mortgage broker.
A mortgage broker’s advice is invaluable and it never hurt to get a second opinion. Our services are free and we can connect you with a network of lenders without having to do the legwork. We do all the hard work and negotiating for you to find a home loan that’s not unsuitable for you and your personal situation. Plus, the application process will be more convenient too, because they can manage the entire process on your behalf.
So, if you are thinking about taking out a home loan, remember to consider the traps above to prevent falling victim to a home loan that doesn’t service your financial needs. If you would like to speak to someone about your home loan or would like a second opinion, give us a call today.