Biggest mortgage mistakes for home buyers to avoid

A mortgage is the biggest debt most of us will ever carry, and this is the reason why we should avoid making the biggest mortgage mistakes many make.

By: Phoenix Lee

A home is the most expensive purchase we will ever make, which is why it is so important to avoid biggest mortgage mistakes that cause you to pay more than you should.

Most home buyers make the biggest mortgage mistakes because they are daunted by the unfamiliarity and enormity of taking out a home loan.

People make smart choices every day, and one of it should involve making a budget to see what they can afford, before getting the best home loans with great interest rates, low fees and predictable, fixed monthly payments. Avoiding making these biggest mortgage mistakes will be a big step toward making home ownership a joy, not a burden, and put home buyers on the path to long-term financial security.

The first thing one should do to avoid making the biggest mortgage mistakes is to compare mortgage rates.

biggest mortgage mistakesDid you know that there is such a thing as making yourself as house-poor? Committing too much of your monthly income to housing-related costs means that you have little or no money left over for anything else, including saving for retirement, building a college fund for your children, or even buying that furniture and renovating. All this may make home buying one of your greatest mistakes you make, which you will regret almost every day.

As a general rule, home buyers should spend no more than 30 per cent of their monthly gross income on housing. This 30 per cent includes home-ownership costs like mortgage interest, property taxes, maintenance, and also utilities. Those who spend more than 30 percent of their income on housing have historically been said to be “cost burdened.” Those who spend 50 percent or more are considered “severely cost burdened.”

If you earn $75,000 a year, one of the biggest mortgage mistakes you could make is to devote more than $1,875 a month to mortgage payments, insurance premiums and maintenance fees.

Where you live, how much you make and other unique circumstances can make a big difference in how much of your income you can — and must — commit to housing. What kind of house you can afford requires you to have a detailed look at how much you can and should spend.

The second biggest mistake one can make is to ignore the true cost of home ownership. Owning your own home comes with new expenses that surprise many first-time home buyers. Home owners should budget 1 – 2 per cent of their home’s purchase price for routine maintenance. If your home costs $1,000,000, expect to spend $10,000 annually on unglamorous purchases like buying a new water heater, or having your oven and air-con serviced.

Some years you’ll spend less. When that happens, set the money aside for pricier items like painting your home. Generally, the older your home and the larger it is, the more you’ll spend in its upkeep.

Property taxes also add to the cost of home ownership each year. This is why you have to learn about your property tax liabilities to see what the current rates are, when taxes can increase and by how much.

Not shopping around for the best loan, could be the third biggest mortgage mistake home buyers could make. Do you check prices with several airlines before buying a plane ticket? Do you compare grocery store coupons to see which supermarket has the best offer? If you do all that and do very little to devote a little time to finding the best possible mortgage for your dream home, then you are potentially throwing tens of thousands of dollars in fees and interest over the life of the loan.

But it could be very intimidating to talk to all the lenders, be overwhelmed by all the paperwork, and tedious to compare the different mortgage loans you are eligible for. This is where the mortgage broker comes in. The mortgage broker is typically an experienced professional who is familiar with the loan approval process, and having worked with different banks, they know their criteria and what makes the cut.

Mortgage brokers like the professionals at iCompareLoan are independent, and so will be able to tell you which lender offers the most suitable loan package rather than selling the loan package from the financial institution they represent.

How to Secure a Home Loan Quickly

Are you planning to on buying a new private home but unsure of funding? Don’t worry because iCompareLoan mortgage broker can set you up on a path that can get you a home loan in a quick and seamless manner.

Our brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. Find out money saving tips here.

Our Affordability Tools help you make better property buying decisions. iCompareLoan Calculators help you ascertain the fair value of a property and find properties below market value in Singapore.

Whether you are looking for a new home loan or to refinance, the Mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us.

For advice on a new home loan.

For refinancing advice.

Written by Ravi Philemon


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