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5 Mortgage Mistakes & How To Avoid Them

We all make mistakes. Some can be tiny - like sending an email with a typo - but others can be more costly.

Making a mistake when borrowing money to invest in property can lead to potentially thousands of dollars in extra interest costs and other fees.

So, what are these mistakes and how can you avoid them?

1. Choosing a mortgage based on the headline rate alone

Mortgage rates are at record lows at the moment but just looking at the headline (advertised) rate doesn't give you the full picture. That's because the headline rate doesn't include things like honeymoon rates, discounts or ongoing fees. Instead, these are captured in the comparison rate, which lenders legally have to show alongside the headline rate.

The bottom line: only use the comparison rate when assessing mortgage rates across lenders.

2. Forgetting to check your credit rating

It always pays to double-check your credit rating before applying for a mortgage because it can decide its fate. Lenders use your credit rating to see how you have handled your finances in the past. They will be able to see how many credit cards you have had, whether you have made your repayments on time and other details about your finances.

If there are any mistakes then you can request that they be fixed before submitting your application. You can check your credit rating for free online through providers like Equifax or Illion.

The bottom line: check your credit rating before applying for a mortgage

3. Making monthly payments instead of weekly

We recommend paying weekly instead of monthly. Why? Well if you divide your monthly repayment in quarter, it means you will be making an extra payment each year (because there are 52 weeks but only 12 months, which is equivalent to only 48 weeks). A typical mortgage at current interest rates could be paid off roughly 4 years faster by adopting this approach.

The bottom line: pay weekly if possible to shorten the length of your mortgage

4. Depositing large amounts before application

As part of the mortgage application process, you will be asked for bank statements showing transactions in your savings and credit accounts. Sometimes the bank will ask questions if they notice unusual transactions, such as large deposits. Some investors think that this will show the bank that they have a large amount of savings. However, the reason for these transactions will need to be explained and so depositing large amounts could bring unnecessary questions.

The bottom line: avoid transferring large deposits if the purpose is to demonstrate your savings

5. Not reviewing your mortgage

Once you've picked the right mortgage, we recommend reviewing it yearly. It certainly pays to shop around - even if official interest rates aren't changing. As you pay off your mortgage and grow the equity in your home, you can unlock better interest rates with some lenders.

The bottom line: refinance if and when possible to lock in better rates

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