Mortgages are one of those things we don’t exactly get excited about!

They are just a necessary part of owning a home for many Kiwis. Because of that, we don’t always make them a priority.

Often, they are put in the monthly family budget and paid on autopilot.

The risk of this attitude is that your mortgage could become a burden or end up costing you more.

These are the top 7 mortgage mistakes we see occurring for Kiwi homeowners. Let’s look at how you can avoid them!

1: Automatically Accepting A Refix Offer

Banks make it super easy for you to just pick a new fixed-term rate when your current one is about to expire. You simply tap a few options in your banking app, and you’re locked in again.

Automatically accepting what they offer could be a mistake. Before you do, have a chat with your mortgage adviser to see if there is a better rate available. This is also the perfect time to adjust your repayments or your loan structure. There could be a better set-up for you, and automatically accepting a refix removes the chance to explore that option.

2: Borrowing As Much As You Can

The thing about borrowing is that you eventually have to pay the money back. With interest rates and bank fees, you could end up paying way more than the original sum you borrowed.

It is tempting to borrow as much as your bank will allow. But to avoid saddling yourself with more debt than necessary, you should only borrow what you need. That way, you won’t end up paying for a frivolous purchase for years and years to come.

3: Focusing On Interest Rates

Interest rates are a big part of your mortgage discussions, but they aren’t the only part. Your structure, term, and lending provider are also really vital things to consider.

Simply selecting the provider with the best interest rate can cut off other opportunities. Some banks will allow you to change your repayment amounts or make lump sum payments to reduce your principal. Some may offer a cashback, or some may simply have more favourable terms for your situation. Your mortgage adviser will be able to help you look at more than just interest rates so that you can select the most suitable mortgage option for your family.

4: Now Reviewing Regularly

Life evolves over time. Your job might change, your income could alter, you may add or lose family members. All of these things can impact your ability to pay your mortgage.

Reviewing your mortgage regularly will ensure you are maximising all the opportunities and creating a structure that suits your lifestyle. It will mean your repayments are manageable and that you don’t end up paying more interest than necessary. We recommend you review your mortgage every couple of years to ensure it remains in line with your current lifestyle.

5: Fixing Everything For The Same Term

If your entire mortgage is fixed for the same term, then it will all need to be refixed at the same time. This cuts down your options and exposes you to risk.

What if that awesome 4% rate that you are currently on shoots up to 8 or 9%? Would you be able to handle the increase in repayments this would create? Or what if you come into some money and you’d like to put it against your mortgage principal? You may not be able to do that without incurring break fees if your entire mortgage is on a long fixed term.

Spreading your risk by fixing different portions of your mortgage for varying terms can allow you to capitalise on good rates when they occur and won’t create too much of a nasty shock for your bank accounts if rates have increased.

6: Taking Cashback Offers Blindly

Cashback offers are great! They give you a little boost of cash at a really expensive time – moving day! But it is important to remember that all cashback offers come with conditions. Before accepting any cashback, do your due diligence to understand what those conditions are.

Often, the conditions will include you staying with a provider for a certain length of time. If you break that term or try to change banks within that window, your initial lender will expect you to pay the cashback amount back to them. Before you accept a cashback, compare the terms of the offer with your future plans to ensure you don’t end up with a big bill.

7: Ignoring Financial Stress Indicators

There are many things that might cause stress on your finances. Change or loss of job, having a baby, caring for elderly family members, or an unexpected medical event are just a few of them. Trying to struggle through at your current level can be challenging during these times.

If you find yourself experiencing financial stress, it’s time to talk to your mortgage adviser. There are plenty of options available to assist, such as changing your repayments, moving to interest-only options, or even mortgage holidays. But these all require a good repayment history in order to be approved by your bank.

So, if you fear that you won’t be able to meet your mortgage repayments, have that conversation with your adviser to see what options would suit your situation best.

Avoiding Mortgage Mistakes

No one wants to pay more for anything than they have to! As one of your biggest financial commitments, your mortgage can be a place where you lose money or pay more than you have to.

Stop that from happening by being proactive and staying on top of your mortgage management. The best way to do that is to be in regular contact with a trusted mortgage adviser. Working in the mortgage market every day, they can give honest and trusted advice about how you can avoid making common mortgage mistakes.

At Mortgage Suite, we’d love the opportunity to help make your mortgage work for you. Reach out to our friendly team today for an obligation-free chat.