The process of buying a house is simple you give some down payment and get a mortgage for the remaining amount. But the trickiest part of the process where most of the people make mistakes is getting the right type of mortgage at the right interest rate with the right features and for the correct tenure. Now these are the factors about mortgages that have the direct impact on the mortgage characteristics and will decide how easy or tough it will be for you to handle the mortgage. By avoiding certain mistakes and following these tips you can make sure that you will get the best deal available for yourself and will be able to manage the mortgage easily.
Not Checking Your Credit Score Early
Consider a situation where you have gathered entire information needed regarding the mortgage and have negotiated the best deal regarding the property that you want to purchase. But your mortgage request gets rejected due to your credit score. Just because of one mistake of not checking the credit score before applying you will lose the property and this rejection will also impact your future requests for the credit as a new inquiry impacts the credit score.
Solution
The solution to avoid this mortgage mistake is to be aware about your credit score before you even think about getting a mortgage. If your score is great than you can plan for other aspects of your mortgage, if your score is not great you still have time to resolve any discrepancies related to your score or even work on the factors to improve your credit score.
Failing to Save for a Sufficient Deposit
A large deposit will not only reduce the amount for which you will be getting the mortgage but will help you to get a better deal for your mortgage in terms of the interest on the amount you would be taking to mortgage. This mortgage mistake is more commonly seen in the first-time home buyers in the United Kingdom.
Solution
Planning in advance is the key here in avoiding this mistake. Try to go for saving at least 10-20% of the value of the property and you will observe much better deals in terms of the interest rate for the mortgage. People usually go for dedicated savings accounts or government schemes to plan for the down payment amount.
Overlooking Additional Costs
This mistake is made majorly by the new home owners in the United Kingdom. People who don’t have complete information about the costs that they would have to take care of in addition to the cost of the property usually end up getting unpleasant surprises when costs like stamp duty, legal fees, survey costs are accounted with property price. This mortgage mistake can increase the mortgage amount as it is obvious that you will not plan for what you will not usually expect to happen. Your deposit will come up short and you would have to increase the mortgage amount and hence you will end up paying more interest for missing details about the total expenses in buying a house.
Solution:
The art of detailed budgeting can avoid this mortgage mistake if done properly including every possible cost related to the property. Just by being updated with the current stamp duty rates and the other fees involved can save a lot of money and avoid a great deal of stress in dealing with these charges later.
Not Getting Pre-Approved for mortgage
It can be really annoying if you are able to find a house that has everything you need but you are not able to get approved for mortgage in time for the deal. Searching for a house without a pre-approved mortgage will leave a lot on the chance of your mortgage request to be approved.
Solution
Solution is really simple follow the basic common sense and start searching for your dream home only when you are pre-approved for the mortgage. As it will not only provide you a clear picture regarding the budget but will also convey your seriousness in buying the property to the selling party or broker.
Choosing the Wrong Mortgage Type
This mortgage mistake happens mainly due to lack of knowledge and awareness about mortgages. If the mortgage which you have selected is not a fit for your financial situation you will definitely face long term implications with respect to interest rates and compatibility with the payment criterion for the mortgage. Most people make this mistake because they have some predefined notion about the mortgage types and without doing complete research, they pick up the wrong mortgage and face financial implications. To make an informed decision one should know about the features of various mortgages types like fixed rate, variable rate, tracker mortgages etc.
Solution
To avoid this mistake a basic knowledge of various mortgage types and features is required. Once you have a basic understanding of mortgages and their features you will be able to analyse which mortgage is best for your financial situation. Taking guidance from the mortgage professional can be really beneficial in making an informed about selecting the best mortgage for you.
Not Reviewing Your Mortgage Offer
Not reading terms and conditions of your agreement carefully can lead you in a lot of trouble when it comes to your mortgage as you might end up agreeing to terms which are desirable and can create financial issues later on while repaying your mortgage.
Solution
The solution to this lethal mortgage mistake is also very simple. Reading the agreement completely and going through each aspect of your mortgage can save you from choosing the unfavourable terms and regretting later on. Coverage and deductibles can be confusing sometimes for the people who are not familiar with the basic mortgage terms. Customers must not assume anything if terms are not clear and must seek help of the mortgage advisor to get clear understanding about every aspect of your mortgage.
Failing to Secure Mortgage Protection Insurance
Taking any kind of credit without securing it with insurance can leave you unprotected in case of any kind of unfortunate event. Insurance is very important in case of mortgage as it will give protection in case of any unfortunate event for your property. People making this mistake are either completely unaware of the risk or are either too confident that nothing can happen to them. Taking mortgage without insurance is equivalent of putting your property for auction in case any unfortunate event.
Solution
Insurance for mortgage provides a cover for your property in case of any unexpected and unfortunate life event. Taking an insurance proves that you handle debt responsibly as it not only prevents your property but also protects your loved from facing repayments in case of an unfortunate event. So, mortgage tip here would be to be responsible and get insurance for your mortgage to protect your dream house in case of any unfortunate event.
Conclusion
It takes a lot of strategic planning and accurate decision making to pick the right mortgage. Keeping these mistakes in mind while deciding for the mortgage will not only enable you to avoid these mortgage pitfalls but will also help you in picking the mortgage that synchronizes completely with your current financial situation and future financial goals. If you are not familiar with technical terms regarding mortgage it is better to find a mortgage advisor. So keep on saving and remember taking care of few mistakes can help you greatly in getting an excellent mortgage for your dream house.
