According to Guardian, mortgage loans reached a new height in the beginning of 2013. In January 2013, the number of approved homebuyer mortgages reached 55,785 in comparison to 50,058 during the previous months. Mortgage lending increased by one billion pounds but there is still a gap between the money loaned and the amounts repaid.
Getting a mortgage is a necessary step for many families but this task is quite complicated. To get a mortgage, you will have to do some research and complete a number of preliminary steps. Many people commit grave mortgage mistakes that interfere with the repayment and make the family’s financial situation even more challenging.
Basic mistakes in the process lead to significant overcharging, a Daily Mail article reads. Some of these mistakes force individuals to pay a very high interest rate for as many, as 15 years. Customers are often confused by the fine print in the agreements, by opportunities to switch mortgage providers and by a decision to move houses, the article concludes. As a result, these people end up spending much more on the mortgage than they initially planned.
Some mortgage mistakes are quite common and the following list includes the biggest shortcomings. Learning how to deal with those is essential for successful and efficient money lending.
Failing to Fix Your Credit Score in Advance:
Credit history plays an important role in determining a person’s eligibility for a mortgage and for the interest rate.
Failing to fix one’s credit score in advance is probably one of the biggest mortgage-related mistakes. Attempting to improve the credit score months before applying for a mortgage is the only way to remedy the situation. Apart from leading to bad mortgage conditions, a poor credit history could also result in a rejection.
To deal with financial difficulties and to overcome problems in the credit report, families should consider working with professionals.
Applying for Credit and for Mortgage at the Same Time:
Some people commit the grave mistake of applying for a personal credit and for a mortgage at the same time.
Individuals that apply for a loan will be considered a greater credit risk. As a result, the mortgage conditions are going to be less attractive than expected and the interest rate could possibly be higher.
People applying for a mortgage need to keep in mind that a personal or a vehicle loan will affect their credit score, which will result in the first mistake.
Wrong Mortgage Budget Calculations:
A housing payment consists of several components. Failing to look at all of them will result in incorrect mortgage calculations.
The typical mortgage payment consists of several elements like principal payment, the interest rate, the taxation and the insurance. So many people forget about the taxes and they are in for unpleasant surprises after signing the documents. You may find mortgage calculator at Zillow quite intelligent with tax calculations and other advanced options.
Property taxes could sum up to a significant amount. People that want a mortgage should calculate the taxes before agreeing to anything, in order to figure out whether the conditions are acceptable.
Failure to Shop Around:
Desperate to get money immediately? You may feel tempted to accept the first possibility without thinking twice. Many other people will commit the same mistake, which means that they will be agreeing to less than perfect conditions.
Speaking to only one lender is probably the most common mistake. The majority of people will usually consider their bank or a financial institution that they have worked with in the past. The deal that the financial institution has to offer may be disadvantageous but you will have no way of knowing, unless you shop around.
Internet is an excellent way to get started with the research. You can easily compare lending options and the conditions that different financial institutions offer. Shopping around will take place in the comfort of your own home and you will simply have to visit the offices of the lenders that you like. Get your final questions answered and select the lending option that is most profitable.
Avoid Variable Rate and Interest-Only Mortgages:
Certain mortgage opportunities should be avoided because experts label them as “ticking time bombs.” Although the conditions may appear to be attractive at the time, such loans come with hidden dangers.
Variable rate mortgages are one of the types to stay away from. The mortgages lure home owners with low interest rates at the beginning. The interest rates, however, have the potential to increase significantly in the future. The variable rate mortgage is a very bad idea for a long-term borrower.
The financial crisis forced many people into giving variable rate mortgages a try but the problem is that lenders can increase the interest at any point of time. Fixing the problem is possible, even if you have taken this kind of mortgage. Switching to a fixed rate mortgage is a viable possibility.
The second trap involves interest-only mortgages. In the case of this lending option, you will accumulate no equity. According to a recent article by The Independent, many home buyers relied on interest-only mortgages before the financial crisis. This was their attempt to get the home of their dreams. As the financial crisis struck, many became incapable of repaying the mortgage. For mortgage fraud issues visit visit Forths forensic accountants, they’re the largest Forensic Accountancy boutique in the United Kingdom.
Is It a Bad Idea to Borrow Too Much?
Finally, some people will feel tempted to borrow a lot of money, which is a common and detrimental lending mistake.
People typically get a large loan, hoping that they income will increase in the future and that they will be capable of paying it off completely. The risk, however, is very significant and many find themselves incapable of repaying the loan. . Alexander Hall, John Charcol, and LCPLC are some of the reliable mortgage brokers you can rely on that offer mortgage on easy and flexible conditions.
Large mortgages are a major trap, especially when it comes to first-time home buyers. Such individuals have no idea how expensive the maintenance of a house can be. There would be property taxes, as well, and other types of expenditure that will make house ownership much more expensive than renting property. This is why the mortgage sum has to remain adequate and manageable in comparison to your current financial situation, rather than being based on some future possibility.
Being smart when taking a mortgage is essential. Some preliminary research and a consultation with a professional will help you escape the hidden traps. In order to feel comfortable with the loan, you have to pick the option that feels comfortable and that will be relatively easy to manage.