Nila Sweeney
Getting the right home loan isn’t always as simple as it looks, and if you make a mistake, the results can be costly.
 
If it hasn’t happened to you, then it’s likely that you know someone who has ended up stuck with a mortgage that didn’t suit their needs.
 
Like Zara, a property investor who accidentally ended up with a basic variable loan with no bells and whistles – when what she really wanted was a standard variable rate with a bunch of great features. Her bank informed her that she’d have to apply all over again to switch to the new loan product, at a cost of $600.
 
Then there’s Andrew, who’s mortgage broker locked him into a three-year fixed rate loan at 8.5%. Andrew had only meant for 25% of his loan to be fixed, so this little error has cost him more than $5,000 a year!
 
Odette Shahnazari, personal mortgage adviser with Smartline, says borrowers can easily sign on for loans that don’t suit their needs, or that cost too much, if they don’t know what to ask for. To make sure you don’t make a costly mistake, Shahnazari outlines the most common home loan traps to avoid:
 
  1. Enticing honeymoon rates that revert to high interest rate after 12 months. Even though you may save a little in the first year, it could win up cost you thousands of dollars for the remaining term of your loan.
 
  1. Selecting a lender that does not provide the convenience of internet banking or ATM availability. This should come as standard with every loan; you may not need internet banking or ATM access right now, but it’s important to consider the features you may need in the future.
 
  1. Complicated fix rate rules. Most lenders allow you to pay up to a certain amount into your fixed rate loan. It is important to know that in most cases this is per 'fixed year' and not per 'calendar year' – meaning paying extra may incur penalties.
 
  1. Selecting a small lender that offers slightly lower rates, but that charges high transaction and account keeping fees. The cost of the transaction fees may outweigh the savings, so make sure you compare apples with apples.
 
  1. Delayed processing. If applying through a small lender, ensure that your regular repayments get credited to your account immediately and not after a few days. You lose money for every day that the processing is delayed,and I have seen this take up to three days in some cases.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan