COMMON LOANING MISTAKES THAT PEOPLE MAKE

1. Looking for a house without a pre-approval.

If you fall in love with a house and do not have any finance arranged, make sure that if you do put in an offer, you sign a purchase contract with a 'subject to finance' clause. This clause covers you in case you are not able to obtain finance by the finance due date. This does not apply for auctions. Auctions are unconditional contracts in which case if you buy a house at auction, you are legally bound to purchase it. To save any problems, it is best to obtain a pre-approval so that you definitely know how much money you can borrow.

2. Choosing a loan because it has the lowest rate.

Many banks offer 'introductory rates' or 'honeymoon rates' which appear to be very low. After the introductory period (usually 6 or 12 months), you revert to the standard variable rate and may be locked into the loan for up to 3 years on a high interest rate. Another method banks use to win business is to offer low rates and charge higher monthly & establishment fees which ultimately works out to be more expensive than a higher rate with a lower fee structure. When selecting a home loan, you must also ensure that the product is specific to your requirements.

3. Using the finance that a Real Estate Agent recommends.

Many Real Estate Agents have affiliations with finance companies and are offered incentives to refer business to them. Be careful as, there may be a conflict of interest and sometimes recommendations are made to benefit the Real Estate Agents, not you.

4. Not leaving enough time

Sometimes there are unforseen circumstances that hold up the loan process. This can be factors such as availability of necessary documentation, which sometimes takes time and can hold up settlement. One way to avoid this is to obtain a pre-approval before looking for a house.

5. Refinancing with your current lender without shopping around

You may think that it would be cheaper to stay with your current lender. This is not always the case as there are many lenders who are all competing for your business. By dealing with a broker, you can utilise their experience and knowledge to find you the best deal, and it doesn't cost anything for the service.

6. Not providing documents ASAP

Many loans take weeks longer than they should while waiting for documents. The brokers and the banks try to process loans as quickly as they can but they need the cooperation of the client to provide them the necessary documents as quickly as possible to speed things along.

7. Not thinking of the future

Buying or refinancing a house is not the end of the journey; it's the beginning. Once you have some equity in the house, you can use that equity to purchase a investment property, or any other worthwhile investments. If you set up your loan correctly, accessing this money should be easy. When you structure your loan, think ahead about what you will want from your loan in the future, not just what you want now.

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Call me now on 1300 780 050 and ask for Sarah Redman or email me on sarahr@dreamloans.com.au or complete the application form and I will call you within 15 minutes on any business day to work out how much you can SAVE!

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