Your mortgage will be one of the biggest costs that you will face when it comes to making one of life’s important purchases. Being able to stay on top of your payments is possible, but it requires proper financial planning and dedication. But be careful of shooting yourself in the foot when it comes to effectively paying off your mortgage with these five common financial mistakes.
Having too much home
Choosing a house that you will one day call a home needs time and careful consideration. Being caught up in the ‘dream home’ can have its pitfalls when you purchase a household that costs you more than 30% of your household’s post-tax income. This is a perfect recipe to cause mortgage stress which 1 in 4 Australians households experience and start a debt spiral. Speaking to a financial advisor will help you purchase a home that is within your financial means and make your mortgage repayments easier.
Choosing a rate that is not suitable for you
When it comes to choosing a home loan it is vital that you choose features that are suitable for your financial situation. This means looking at the fees, charges, interest and comparison rate. Choosing between a fixed and variable rate will be one of the decisions that can also make or break the way you meet your mortgage repayments. Most Australians tend to go with a fixed rate loan which makes it easier for people to factor into their budget without ever see-sawing back to a high rate. Always keep in mind to compare your options before settling on a loan.
Not thinking about the long-term
It pays to think about the resale value of a house. Even if you are not planning on selling your home, it will come in handy to find a house that will increase in value instead of squeezing you for every dollar you have. Although thinking about the future can leave you unsure, it will help to have a 10 or 15-year plan for your house, especially if you are planning to extend your family. Choose a dream home that you will one day be able to market to potential buyers.
Skimping on the savings
Life can get pretty demanding and the older you get the more financial balls you will have to juggle to keep everything afloat. Savings might seem like quite a stretch for your finances, but it could be detrimental to your financial future.
According to a report by ASIC, 46% of Australians have a rainy-day savings fund dedicated to their homes, but this also means 54% of Aussies are left vulnerable when things head south. Having a savings account that can support you for 3-6 months can help you lower the stress of paying for those unexpected emergencies that tend to pop up. It will also keep you from taking out more loans that can affect your mortgage repayments.
Not doing your research
The T&C’s of getting a home may not be everyone’s cup of tea, but it is still essential to read up and research on this before signing the dotted line. What this means is that you need to read the fine print of your home loan agreement and it also means you need to ask questions until you are confident enough with the response.
Researching various incentives that are offered for first-time home buyers and advantages can help you save up in costs. It is also advisable that you consider the real costs that come with owning a home. In the end, an uninformed decision can have you losing thousands of dollars.