A home loan is the biggest financial commitment most Australians ever make. It’s important to avoid making common home loan mistakes.
1. Not checking your credit score before you apply
You might not realise it, but if you’ve borrowed money or taken out credit before (even for a mobile phone account or electricity), then you will have a credit score. Lenders will check your credit score as part of assessing your loan application.
You will have a good credit score if you’ve paid all your previous debts and credit on time. If you haven’t, you won’t. Records of missed or late payments can stay on your credit report for up to seven years. However, you can improve by catching up on any overdue repayments you have.
You will be more likely to have your home loan application approved if you have a good credit score.
You can check your credit score for free with credit reporting agencies like Equifax. You should do that before you apply for a loan so you know if there are any issues you need to fix.
2. Applying to multiple lenders and damaging your credit rating
If you find you have a bad credit score, avoid the temptation to apply for a home loan with multiple lenders in the hope that one of them will approve you. Every rejection will damage your credit score even further.
Instead, you should take steps to improve your credit score and then apply to a single lender. You should also talk to a mortgage broker. Borkers know which lender/s in the market will be more likely to approve your application.
3. Not factoring in all your upfront costs
The price of your home is not the only cost you need to consider when buying. There is also:
- transfer duty (though you may be eligible for a concession if you are a first home buyer and eligible for the First Home Buyer Assistance Scheme).
- lenders’ mortgage insurance if you don’t have a 20% deposit and you’re not eligible for the First Home Loan Deposit Scheme).
- legal and conveyancing costs to transfer the title of the property to you.
4. Not looking at the comparison home loan interest rate
The comparison interest rate includes the cost of any home loan fees as well as the interest rate. Always use the comparison rate when looking at loan products, not just the interest rate alone.
The comparison rate reflects the total cost of the loan, and even a 1% higher rate can cost you thousands of dollars over the 25 or 30-year life of an average home loan.
How we can help
If you’re looking to take out a home or investment property loan, our experienced and licensed brokers at Wisebuy Investment Group can help you to find the right loan for your needs. We can also help you with your loan application.
We service a diverse range of clients in the popular Newcastle, Lake Macquarie and Maitland areas, and we work with more than 60 lenders in the Australian market.