How To Avoid Common Home Loan Mistakes

How To Avoid Common Home Loan Mistakes
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The changing credit landscape in Australia is creating additional uncertainty for homeowners.

Online mortgage broker uno Home Loans has found a few key barriers are holding people back from getting their best deal as they navigate the home loan process.

How To Avoid Common Home Loan Mistakes

Brought to you by uno, an online mortgage broker which finds the right home loan for you through smart technology and a team of experts. uno’s technology sorts through thousands of home loans to find the best options for your situation. Plus, their team of experts is available seven days a week and in the evenings via phone, text, email and chat.

Loyalty to your childhood bank can cost you

Parents often set up their children’s first bank account decades before they look at getting a home loan. According to research by uno, 24 per cent of Australians have a mortgage with their childhood bank or the same bank their parents use.

While staying with a familiar bank could offer a sense of security, that doesn’t necessarily equate to getting the best deal.

uno’s research showed that customers who opted for the familiarity of a childhood bank or their parents’ bank actually paid an average of 20 basis points more on their home loan.

This loyalty could cost $1,272 per year for an average-priced Sydney home or $1,188 in Melbourne, $600 in Brisbane, $600 in Perth and $564 in Adelaide, according to uno’s modelling.

Smaller lenders are starting to take off

There are many different types of lenders – banks, credit unions and building societies – but people can be hesitant to borrow from less familiar names. In Australia, around 80 percent of home loans still go to the big four banks.

By comparison, around two-thirds of customers who use uno’s comparison platform choose non-major lenders — a major reversal of the established behaviour.

It reflects the power of information in consumers’ hands. By giving customers the ability to compare the spectrum of options based on their individual situation, platforms like uno enable people to make better choices.

A long history of fees and charges still haunts borrowers

Banks used to charge hefty fees to refinance loans but, over the last decade, many of these fees have been reduced or removed entirely for borrowers on variable rates.

The changes to fees have allowed borrowers to change lenders more easily. But, despite the changes, uno found more than 59 per cent of people who haven’t switched loans are still being deterred by exit fees.

Refinancing to a cheaper rate could save an average of $1,092 per year on a $500,000 mortgage or $32,760 over a 30-year loan. When the savings could be in the tens of thousands over the life of the loan, a break fee of a couple of hundred dollars could be seen as a small investment.

Home loans aren’t a once in a lifetime thing

Once they’ve successfully arranged their loan, many homeowners coast along thinking their work is done. uno found that 35 per cent of Australians never compare their home loan to other options on the market.

The simple act of comparing your home loan annually can show you within minutes if you could save thousands and take years off the life of your mortgage.

In a period where household budgets are under pressure from the rising cost of essentials like utility bills, online platforms like uno’s offer homeowners a chance to hold the cards and see if there are better deals out there, and take better charge of their financial destiny.

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