When buying your first home, it’s easy to get swept up in the excitement and make mistakes. Even if you’ve done your research and have a good understanding of the property market, there’s a lot to consider. Below, we look at some common first home buyer mistakes to avoid.
Not Getting Pre-Approval
Many first home buyers make the mistake of looking for property before they’ve even met with a mortgage broker or a lender to discuss a home loan. Before you fall in love with a property you may not be able to get, set yourself up for success by securing a mortgage pre-approval. Getting pre-approved sends a strong message to sellers that you’re a serious buyer and that your finances are in order. It also gives you a clear idea of how much you can afford to spend and the price range of properties to look at.
Not Choosing the Right Type of Loan
Make sure you understand what types of loans are available and which is most suitable for you depending on your circumstances and current market conditions.
- Fixed home loans have an interest rate that is fixed for a certain period of time, generally one, three or five years. Once this term is over, the loan will switch to the variable rate offered by the lender. Fixed rates are better for budgeting and security but can have break fees and you run the risk of missing out on a rate drop.
- Variable home loans have a rate that is adjusted by the lender to fluctuate in a similar fashion to the RBNZ interest rates. These loans tend to be more flexible with more features like a redraw facility and the ability to break, refinance and make extra payments. The trade off is uncertainty and higher costs when the rate hikes.
Many lenders offer the choice to split the loan, so you can keep part of it fixed and the rest on a variable rate. This allows you to strike a balance in managing the risks while still being able to access flexible loan options.
Not Shopping Around for Different Loan Options
Don’t just talk to your bank or one lender. This could cost you thousands in unnecessary costs and cause you to miss out on advantageous loan features. The more you shop around, the better your understanding of the options available to you and the more you can compare to ensure you get the best deal. It’s worthwhile comparing both bank and non-bank lenders by looking at rates, lenders fees and loan terms. A broker can help assess your current situation, shop around on your behalf and provide you with a selection of options that are ideal for you.
Not Calculating All the Costs
As a new home owner, it’s important you have a clear understanding of the extra expenses you’ll be responsible for. These could include lenders mortgage insurance, homeowners insurance, rates as well as repairs and maintenance of your new property. Make sure you’re aware of all the costs ahead of time and what you can do to manage them. To avoid paying lenders mortgage insurance, consider saving for a little longer in order to save a bigger deposit.
Contact Mortgage Masters – Independent Brokers in Auckland
Mortgage Masters are your independent mortgage brokers in Auckland, servicing the community in home loans since 1998 to find our clients the best deal on the market. If you need tailored financial advice or helping finding the right home loan for your needs, please get in touch with our team today.