MORTGAGE BUYING TIPS


1- Don't take the first mortgage you're offered
There are big differences in the deals you can get amounting to many thousands of dollars.
So make sure you've made comparisons with others.

2- Shop around
There's a lot of competition between the mortgage providers.
Like supermarkets they'll use techniques like offering "loss leaders" to lure more customers (Their pay off is that later on you're not likely to go elsewhere because of "consumer inertia" - which we've all got black belts in when it comes to financial products).

3- Look for a mortgage lender who is offering a "loss leader"
Provided there's no overhanging lock in you could shop around for another good deal at the end of it and save thousands.
In other words buy with a view to get a new mortgage deal every 2 years or so.

4- Don't be taken in by a low sounding initial interest rate
This is known as the headline rate. Very low rates usually come with cunning long term "tie ins".
What will happen at the end of the low interest rate term? Do you have to stay with the same mortgage lender who is suddenly only offering you a very uncompetitive rate unless you pay a big penalty to leave?

5- Beware Redemption Penalties
When you take out a mortgage you have an agreement with the lender. This covers the amount you repay and is set for a particular period.

For example you may have a mortgage for a three year fixed interest rate of 5%.

If you want to get out of this deal before the three years is up you'd probably have to pay a redemption penalty. This is a charge which supposedly compensates the mortgage lender for the time and expense of your leaving.

Some lenders may try to hide the redemption penalties in the small print.

Simply ask your prospective lender what the exit / redemption penalties are. If you're not sure what they mean ask them to spell it out. If you still don't understand you can take it that there's something they might be trying to hide so walk away.

6- "Overhanging lock-ins"
This is a penalty for leaving a lender AFTER a special deal interest rate has come to an end (ie not DURING the agreed timescale of the deal).

So, using the same example as above, if you got a mortgage with a three year fixed interest rate of 5% the mortgage lender could charge you a penalty if you left after the three years was up, say in year four.