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Spring is usually the time of year when the largest numbers of buyers start registering with estate agents to find their next home. And with two long school holiday periods on the horizon, Easter and Summer, family friendly locations like The Highlands and Moray, see a lot of property market activity.
A mortgage is one of the biggest financial commitments you’ll make throughout your life time. Despite this, there are still some major mortgage mistakes many people make every day. If you’re interested in purchasing a home, you should do your best to avoid these potential pitfalls. Your mortgage will probably be with you for the best part of your working life, and requires a significant investment of time to negotiate properly. When buying a home, these are the top mortgage mistakes to avoid.
1) Check your credit report
You should always check your credit report before you begin your pursuit of a home. Not checking your credit report is a mortgage mistake that many home buyers can easily avoid but don’t. You may have issues with your credit report that you didn’t expect, for example, late payments on accounts you forgot about. If you check your credit report early on, you’ll avoid nasty surprises further down the line. Some issues with your credit report can be resolved before you begin applying for your mortgage. You can check your credit report free of charge at www.experian.co.uk Keep in mind that mistakes on your credit report can have an effect on your score which ultimately will have some bearing on the rate your mortgage lender is willing to offer you.
2) Get proper independent financial advice.
Some home buyers underestimate the difference just a fraction of a percent can make on their mortgage payments. You should always shop around to try to find the most favourable terms possible for your mortgage. Simply going to the company you bank with can cost you thousands of pounds more over the lifetime of your mortgage. Your bank can only offer you their product and whilst you think may think that this is the easy option, it most likely is not the cheapest. Be careful too, not to search around too much, making multiple applications that will eventually lower your credit score making it harder and more expensive to get a mortgage. By far the best bit of advice I can give, is to go to an independent financial advisor. Not only will they be fully regulated and therefore careful of the advice they offer, but they will know which lenders will offer the best interest rate, to suit your situation. Most financial advisors will therefore be able to get you the best deal with very few searches on your credit file. Do not be put off by financial advisors that charge, quite often these are the better trained professionals and will work hardest to look after you. Remember, they rely on both your repeat business and your referrals and will do all they can to help in order to obtain these. If you don’t know a good financial advisor, don’t be afraid to ask for help, your estate agent or solicitor will have dealings with many professionals within the industry and will be only too happy to point you in the right direction.
3) Always get a ‘mortgage in principle’
A mortgage in principle is essential because it gives you a guide on what you can afford and have available to spend. It will also reveal any potential issues that could prevent you from getting a new home. It is important for you to understand that a ‘mortgage in principle’ is not the same as a guaranteed mortgage offer. Your financial advisor will be able to assist you in this essential part of the buying process. Not getting a ‘mortgage in principle’ is a relatively substantial mistake that could cost you the opportunity to get your dream home, especially if other buyers are making an offer at the same time.
4) Don’t apply for any new credit
Taking on new debts is one of the biggest mistakes that can affect a mortgage application. Mortgage lenders have to be sure of your ability to make the repayments, before they can lend you the money. If you go out and purchase a new car for example, on credit during the application process, many lenders will recalculate your ability to pay and may overturn your ‘mortgage in principle’. Applying for new credit can have a dramatic effect on your credit score. If you make a major purchase, your mortgage offer could fall through in the final stages. Many prospective buyers make the mistake of believing that their loan has already been guaranteed and that it will go through before the new credit hits their reports. However, delays can occur and your lender will check your credit report again before releasing funds. Even a single extra credit search on your report could potentially affect your score enough to change your interest rate, even if it doesn’t result in you taking out a loan. The mortgage industry has changed drastically over the last decade. As a result of the crash in 2008 and the subsequent credit crisis, lenders are now far more cautious of who they will lend to. The lender will be very thorough when assessing a new borrower. Don’t underestimate the scrutiny you will be under throughout the process. Making a major purchase is probably the number one mortgage mistake made during the home buying process.
5) Stay in your current job
Even if you’re moving to a job that has a higher rate of pay, changing jobs in the middle of making a mortgage application is almost never a good idea. Changing jobs can complicate the entire process, as your mortgage lender will need to re-evaluate the stability of your position. Moving to another employer ranks right up there as one of the biggest mortgage blunders while trying to buy a home.
6) Don’t underestimate the cost
During the buying process there are lots of costs and fees to take into consideration. These include legal fees, stamp duty, mortgage set up fees and estate agency fees if you are selling too and most of the prices quoted will be plus VAT (a further 20% at the time of writing). It is important to know the full cost involved so that you do not have to dip in to the money saved for a deposit. Remember, most mortgage rates are based on a loan to value ratio, so if you have to borrow more, this could result in an increase in the mortgage interest rate payable. Even once your mortgage is in place, your total housing cost doesn’t just consist of just your mortgage payment. Once you purchase your home, you’ll have to acquire home insurance, pay council tax and any factoring fees if applicable. It’s critical that you consider these costs too, as well as the repairs and maintenance you will have to do in your new home. If you have been renting, you may not have needed to pay gas or electric bills before, either. Regardless of the amount your lender approves you for, you should carefully go over your personal income and expenses to determine how much you can really afford. Many homeowners don’t allocate enough for these expenses, let alone those nasty surprises that have a habit of popping up out of the blue when we least expect them. Many first time home buyers don’t consider the full costs involved in purchasing and running a home. If you are not careful, you could easily find a drop in your living standard and your social life may suffer as a consequence.
7). Always read your documents carefully
Mistakes can happen. While your solicitor will do their best to protect you during the actual purchase of the property, what occurs with your mortgage will usually be entirely between you and your lender and or financial advisor. It’s not impossible for a mortgage lender to have inclusions within a loan that you hadn’t noticed or that hadn’t been adequately discussed and explained to you. When you sign your documents, you should carefully read each page, and you shouldn’t be afraid to ask questions. The terminology used in loans can be very confusing and you aren’t expected to understand everything right away. That is what the financial advisor is there for.
If you are thinking of selling your home and would like one of our local property experts to call round to offer more specific advice and a free valuation, pop your details here or give us a call.
☎️ 01463 641258
RE/MAX Elite, Lyle House, Fairways Business Park, Inverness. IV2 6AA
Tel: 01463 641258
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