Are you considering buying your first home with a mortgage? Here are some key mistakes to steer clear of, with the help of your mortgage adviser.

Not checking your credit score

Your credit score is one of the factors that lenders consider when assessing your mortgage application. This number measures your ability to manage debt and repay credit. For example, if you’ve missed some loan or credit card payments in the past, your credit score may be on the lower side.

That’s why it’s important to check your score (and if necessary, improve it) before you apply for a mortgage. You can check your score free of charge once a year, via reporting agencies like Centrix, Equifax, and illion. And if your score needs a boost, there are steps you can take, like:

• Regularly pay your bills on time: If you’ve been inconsistent in the past, make sure you set reminders and use automatic payments to ensure you never miss a due date.
• Reduce outstanding debts: Having debt doesn’t automatically result in a poor credit score, but high levels of outstanding debt relative to your credit limit can negatively impact your rating. That’s why it’s crucial to pay down your existing balances.
• Avoid applying for new credit frequently: Each time you apply for credit, it can result in a ‘hard inquiry’ on your credit report. And too many inquiries in a short period can be seen as a sign of financial stress.
• Review your credit report for errors: Mistakes can and do happen. Check that all the information is accurate, and if you find discrepancies, report them immediately to the agency for correction.

These are just a few examples. The key thing is to be proactive, and start as early as possible. Get in touch to learn more.

Not getting a mortgage pre-approval

House hunting can be exciting, but make sure you don’t let that enthusiasm distract you from being financially prepared.

One of the key steps to take, even before starting your house hunt, is to get a mortgage pre-approval. This is a lender’s written confirmation that they are willing to loan you up to a certain amount, under specific terms and conditions; the approval is usually only valid for a specific period of time. Knowing how much you could borrow helps you understand your budget and, importantly, also shows vendors that you are a committed buyer.

Not quite sure where to start? Your mortgage adviser can walk you through the paperwork and help you apply for a mortgage pre-approval.  

Not including a finance condition in your offer

Enthusiasm can get the best of us, especially when we find a property that feels like home. But before you sign a sale-and-purchase agreement, don’t forget that buying a house is a big financial commitment.

That’s why it’s crucial to make your offer conditional on obtaining approved finance. This provides a safety net: if you’re unable to get a finance approval by the settlement date, you can withdraw your offer without penalties.

On the other hand, making an unconditional offer on a property without having already secured finance can lead to financial loss. Once you’re unconditional, you’re legally required to purchase the home. So, if you can’t get a loan approved by the settlement date, you could lose any deposit you have paid and be required to pay penalties if you can’t complete the settlement.

Not getting finance sorted before an auction

Property auctions are always unconditional and legally binding in New Zealand. This means that, if you’re the winning bidder, you’re committed to purchasing the property, whether your finances are ready or not.

Once again, to avoid legal ramifications and penalties, it’s essential to have your mortgage pre-approved ahead of time.

Not considering the possibility of rising mortgage rates

Even if you qualify for a loan at current rates, the lender also wants to know that you can manage repayments under less favourable conditions.

Lenders usually ‘stress test’ your ability to repay a mortgage by applying hypothetical higher interest rates – but make sure you also perform your own stress test on your budget. Current and future affordability should be at the centre of your decision on how to structure your mortgage so it’s suitable for your situation and objectives. At SHARE, we can walk you through various scenarios, illustrating how changing rates could impact your repayments.

Not considering additional costs

Your regular mortgage payments aren’t the only cost you’ll incur when buying a home. Many first-time buyers overlook financial obligations that come with owning a property, like house insurance, council rates, and maintenance costs. Before making an offer, make sure you take a holistic view of all costs involved in owning a property.

Like to talk?

We are here to guide you every step of the way, from checking your credit score to considering the implications of changing interest rates. So, reach out to us with all your mortgage-related queries, and let’s turn your homeownership dreams into reality.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.