As a Doctor (Who fan), I am often asked what the biggest mistakes people make when they arrange their mortgages. Here’s a selection of some of my favourites.
- Trying to do it themselves.
I think that some people like to pride themselves that they don’t need help. They’ll spend hours staring at a screen, wandering up and down the High Street and taking their own advice as to what they should do. What a waste of time and resources! Why not contact a qualified professional, who will take you through the process with a comprehensive list of lenders that would find the best deal on the market for you. Not only that, but they’ll guide you through the whole process. Look, you may have to pay them a fee to do this, but they are professionals for goodness sake! With access to around 66 different lenders, and an average high street having three lenders every tenth of a mile, my high street is twelve miles long!
- Opting for the cheapest rate.
Sourcing a mortgage is not just about getting the cheapest rate, but also taking into account fees, service and lender’s criteria. When I source a mortgage for my clients, I hardly ever end up going to the cheapest rate, but I always go for the best deal. See item 1
- Not working out their budget
This is what I call my “Jurassic Park moment”! Jeff Goldblum’s sat in the dark after being attacked by a somethingasaurus and he says to someone “it’s not just a case of “can we do this?”, it’s more a case of “should we do this?”). In other words, go through your budget carefully and work out what’s comfortable for you, rather than just borrow as much as you can without giving it a second thought. How many times have I told you,
your home may be repossessed if you do not keep up repayments on your mortgage
See item 1
- Going for a 25 year mortgage
Ask your Mum and Dad. They always had a 25 year mortgage, and it didn’t hurt them! Mind you, they also probably had an endowment policy and listened to Jethro Tull, look what happened to them! I refer you to my last comment. It can be possible to tailor the term of the mortgage to fit your budget. Oh, item 1 too.
- Not taking protection
All this work getting the mortgage, which after all is the biggest financial commitment you’ll make, and then for the sake of a few quid you risk losing it all. We insure our cars, pets and phones and then quibble about insuring our finances. See item 1.
- Just taking Life Cover
Even then people think that life cover is all they need. There are so many other things that could happen like unemployment, long term sickness or even critical illnesses. These things can be financially protected aainst. You’d be amazed by the amount of people who stick their head in the sand in the foolish belief that it won’t happen to them. Don’t be one of them. There’s nothing wrong with wanting the best Sky package, but please…get your priorities right. See item 1.
- Just going to their bank.
Yep. The banks are completely on our side aren’t they? We all think that it’ll be so much easier to just walk into a branch and they’ll look after us won’t they? Don’t need to make sure that they’re the best option for us do we? See item 1.
- Looking on the comparison sites
Where do I start with this one? OK, years ago I used to get my business from lead generation companies. What happened was that some poor soul would go onto a comparison site, click that they were interested and the comparison site auctioned your details to an adviser who paid the most for that information. Then the adviser calls and says “sorry, that rate’s no longer available, but whilst I’ve got you…”
The stories I’ve heard can go on and on, including the damage that multiple credit-readings does, hidden biases, hidden excesses and unsuitable products. Deal with a human. See item 1.
- Taking a mortgage past their retirement age.
Most lenders are quite happy to take a mortgage term up to age 70 as a retirement age. This can affect the monthly payment and even the amount they lend, so it’s tempting to sign up for a long term mortgage and just say you’ll retire age 70. Don’t forget, this is a long-term financial commitment and please consider the ramifications of the potential of working right up to age 70. If you’re a roofer, do you really see yourself climbing up on roofs in your late 60’s? It’s far better to do it right, at the very beginning. See item 1.
- Paying the lenders’ variable rate.
Once your fixed rate comes to an end, you’ll automatically convert to the lender’s variable rate. Based on rates available at the moment, this can make a quite a hike in your monthly payment. However, people who have been on a higher fixed rate go down to a lower variable rate, breathe a sigh of relief without even realising that new fixed rates are even lower than that in most cases. Do yourself a favour, see item 1.
There are so many more mistakes that can be made, but hopefully as I have stressed, the biggest mistake is to not take proper professional advice.
By the way, I couldn’t not mention Star Trek’s 50th anniversary, so I thought I’d split an infinitive just to boldly celebrate!