6 Home Loan Mistakes to Avoid

6 Home Loan Mistakes to Avoid

Home Loan Mistakes to Avoid…

Brendan Barker - Home Financing Specialist - Home Loans - Car Loans - Personal Loans

I was talking with a client Pam, she was telling me how when they first took out the home loan it was Interest Only for the first 5 years. It was a shock when her and her husband realised that after 5 years they still owed the bank the same amount as when they first took out their home loan. All those payments and they were no closer to owning their home outright.

Here are some of the most common home loan mistakes to avoid if you are purchasing a new home or refinancing an existing loan.

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6 Common Home Loan Mistakes to Avoid

  1. Setting and Forgetting – You need to perform a regular review of your home loan. You may find that your current loan no longer meets your needs, interest rates may have changed, the loan product may have been superseded with a better option, it may have features you no longer need or you could find that there are features that you now would like.
  2. Choosing solely on interest rates – While the interest rate is the biggest factor it’s not the only one you need to consider. What are the other costs associated with the loan, application fee’s, settlement fee’s, monthly charges or annual fee’s? Is there a cost to access the redraw facility? These all need to be taken into account. One to be particularly careful about is introductory or honeymoon rates. 1, 2 or 3 years down the track and that cheap interest rate has reverted into something a lot less attractive.
  3. Interest Only Loans – The whole point of taking out the home loan was so that you will own your home in time. To do this you have to be paying principle and interest. While there are times when Interest Only Loans are applicable you need to be very careful, particularly if it is the home you are living in.
  4. Overlooking the structure – Some home loans come with all the bells and whistles, offset accounts, credit cards, line of credits and redraw facilities. Some are simple and may only have a redraw facility. It is important to ensure that the home loan product and structure fit with your needs and goals.
  5. Breaking a fixed rate loan – Fixed rate loans are great, they allow you to know exactly what you will pay for the term of the fixed period. Breaking a fixed rate loan can cost you thousands of dollars, so it’s important to get all the facts before you fix any loan.
  6. Refinancing for no reason – Often borrowers will choose to refinance their loans without considering why. Refinancing isn’t free, while you may not have to pay the costs upfront they will be added to your loan. Possible costs include application fees, valuations, lenders’ mortgage insurance, mortgage registration fees and break costs, these fee’s add up and need to be repaid.

As I have said previously for most of us our home will be the most expensive purchase of our lives, you may not have made any of the mistakes outlined above, but if you don’t regularly review our home loan over the life of the loan you could well fall into the trap of having a huge debt that is not getting you to where you want to go.

Have you made one of the home loan mistakes to avoid? Have you had a difference experience?  Would you like some help to ensure that your home loan is suitable for your goals?  Give me a call on 07 3423 8730 or fill in the enquiry form here to set up a free and no-obligation chat to review your home finances.

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How to pay off your Home Loan quicker

How to pay off your Home Loan quicker

The Joys of Home Ownership and How to Pay Off Your Home Loan

I still remember the feeling when I bought my first home, an apartment in Townsville, the excitement and exhilaration of becoming a home owner combined with the dread over how much money I now owed the bank. For most of us this will be the most expensive purchase of our lives, and we cannot do it without getting help. Typically this help comes in the form of a 30 year home loan from our friendly bank.  What we don’t get is instructions on how to pay off your home loan quicker…..

Brendan Barker - Home Financing Specialist - Home Loans - Car Loans - Personal Loans

Townsville apartment – my first property purchase

This help from our friendly bank comes at a cost, interest on the loan (plus any number of fee’s if they can get away with it). That feeling of frustration when we look at how much we have paid, and how little the home loan balance has decreased. At times it feels like we will never get ahead.

Just another 24 years and I will……..

It doesn’t need to be this way, all it takes is a little time, home loan know-how and the commitment to managing your finances.  To put you on the right track to pay off your home loan.

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5 Steps to Pay Off Your Home Loan

How can we start cutting years off the term of your loan and pay off your home loan?

  1. Align the repayments with your income – If you get paid fortnightly, make your mortgage repayments fortnightly. It will make manging your finances easier and over the life of the loan will cut down on the interest payable, saving you money.
  2. Paying a little extra – Just paying an exrta $10 or $20 per week can have a significant impact over the life of your home loan. For example if you pay an extra $10 each week on a $350,000 home loan, you could save $15,900 in interest costs and cut one year and five months off your loan term based on an interest rate of 4.45% and loan term of 30 years.
  3. Park any lump sums in your home loan – Put the $1,500 tax refund, the end of year work bonus or the inheritance from Great Uncle Charlie onto your home loan. Lump sum payments can easily cut years off the home loan.
  4. Don’t lower your repayments – If interest rates fall, don’t reduce your payments to the minimum repayment required by the bank. As you are already paying this amount you won’t even notice, but your home loan will as you are effective paying a little extra each payment and potentially cutting months or years off the home loan.
  5. Perform Regular Reviews – Give your home loan a health check, preferably every year but at least every two years. You may find that your current loan no longer meets your needs, interest rates may have changed, the loan product may have been superseded with a better option, it may have features you no longer need or you could find that there are features that you now would like.

We all dream of owning our own home out right one day, with a massive mortgage to repay it can feel like that day will never come, however if you just implement one of the steps above you will be on the right path.

It will not happen overnight, but if you commit to managing your finances you will pay off your home loan.

Are you interested in seeing if you could be saving money and on you way to owning your home sooner?  Give me a call today on 07 3911 1190 or fill in the enquiry form here, to schedule your free and no-obligation “10-min” chat to discus how to pay off your home loan.

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