Bite-sized basics: Top 5 common mortgage mistakes

With around 97 banking companies offering hundreds and hundreds of different mortgage products, it’s no wonder it makes you dizzy trying to find an ideal solution to fit all your needs. Every day the lender’s marketing departments swing into action, bombarding your brain with incentives – be it low advertised mortgage rates, seemingly huge discounts, or the current trend of ‘cash-back’ offers. With so much happening, it is natural to feel stressed out and confused. The fact is when many Australians try and navigate the mortgage maze too many make some critical errors.  

1: Research

Savvy choices are made by researching different types of lenders, their loan types, and the range of features available and applicable to your situation. Plus, there is knowing what documentation you will need to apply for a loan, what paperwork is involved, and any legal implications. To do all of that analysis effectively you’ll basically need to be qualified in finance, but the great thing is you don’t have to be if you have a trusty mortgage broker on your side. That’s exactly why these lovely hard working, paperwork-loving people are in your life. There’s an old saying “don’t keep a dog and bark yourself”.

2: Not making a budget

Sounds simple but without a budget, how will you know if you can stick to one once you actually have a mortgage? A budget helps you monitor spending and will determine the mortgage repayments you can service. A good budget can help you when it comes time to apply for a home loan. Banks love borrowers who can show they have genuine savings and can easily service their mortgage repayments. Take a look at the article ‘The real struggle to save a deposit’ if you need some help on a fabulous budget for beginners.

3: Know your numbers

Getting yourself ready for a loan pre-approval, which generally lasts for three to six months, provides assurance as to what you can borrow before you go property hunting. It is a terrible feeling to have your heart set on a property and find out you can’t borrow enough money to buy it. Pre-approvals also help at auction for those that are going shopping for your owner-occupier home.

4: Getting sucked into a honeymoon rate:

So many people fail to look past the honeymoon (introductory) period, which is when the interest rate on their mortgage is lower than it will be for the remaining loan term. If it hasn’t been budgeted for, you could be in for a shock. If you do take up a loan with an intro rate, a smart move is to make mortgage repayments as if the honeymoon period doesn’t exist, so you’re prepared for its completion and ahead on your payments.

5: Paying for bells and whistles you just don’t need

Have you ever sat at a Sunday afternoon BBQ and had a friend of a friend tell you all about the home loan features you “absolutely must have?” You are not alone. A lot of borrowers will choose a mortgage because of the features it boasts and because its marketing campaign convinces them it’s a feature they must have. Most of the time these additional mortgage features will come at an additional cost. Either with a higher mortgage rate or a monthly or annual fee. Just remember every borrower’s situation is different, so what may work for that friend of a friend, may not work for you.

With so much happening, it is natural to feel stressed out and confused. You are not alone, don’t put it off, and sit down with your mortgage broker as early as you can.


Knowledge is Power

Owun is the Senior Education Specialist at the Blue Wealth Property Academy and hosts The Clever Investor podcast. He has worked in finance and property for well over 20 years and is known for his ability to explain the complex world of wealth creation in an easy-to-understand way.

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