Your mortgage is probably the biggest debt you have. And let’s face it, having debt can cause unneeded stress. There are many things you can be doing to help reduce your mortgage stress and put you on the path to financial freedom. It’s also never too late to fix old mistakes.
Mistake #1: Sticking with the same lender until the end
Home loans can become uncompetitive in just a few short years. It pays to check that your current lender hasn’t increased your interest rate to a rate that is no longer competitive or comparable.
Increased market competition can improve loan features on offer and if you sit tight on your current loan you could be missing out on those benefits. We recommend revisiting your home loan every 18 – 24 months as a minimum.
Mistake #2: Focusing too much on the interest rate
The interest rate is just one factor that impacts the cost of your loan. Choosing the lender or bank with the best initial interest rate doesn’t necessarily mean you have the cheapest loan.
Other costs that can make a home loan more expensive increase the application fees, valuation fees, discharge fees, extra repayment fees and lenders mortgage insurance. Speak with your broker about what “hidden” fees you might not have realised were included when you start choosing a lender.
A great fixed rate with a horrible revert to rate can add thousands of dollars in interest over the remaining loan term
Mistake #3: Making yourself “house-poor”
Overcommitting your income to housing-related costs could mean you have little or no money left over for anything else. We know that paying off your home loan is important but so is saving for retirement, replacing that worn-out car or even buying new furniture for your home.
Start by working out your budget and make a commitment to a certain amount extra each pay for a home loan and stick with that until your situation changes or other bills decrease.
Mistake #4: Ignoring the cost of other costs associated with your home
With a house comes more responsibility. Things like your hot water system suddenly breaking, or perhaps you might want to invest in solar panels. All this puts pressure on your budget, so it pays to set about 1-2% of your budget to routine maintenance or ongoing home improvements.
Remember that improving your home can also increase its value, so in a way, it could also be an investment in your future.
Mistake #5: You went direct to the lender
Lenders love it when you walk into their doors and know they are the first person you have spoken too. They know they don’t have to offer you the best deal straight up as you haven’t spoken to anyone else.
If you decide to deal directly with a bank, you will waste the opportunity to compare a cross selection of mortgage options that could save you thousands of dollars.
The other fact that is not known, is that if your current lender is your best option for you a mortgage broker should tell you this and most times they will get you a better deal than you would be dealing directly with the bank. How Ironic is that!!!!