Learning from my mistakes can help you avoid ending up with the wrong home loan.
- When I took out a mortgage for my first home, I didn’t know much about borrowing.
- I didn’t shop around for different lenders.
- I also didn’t pay a large enough deposit.
When I bought my first home, I didn’t have much financial experience and made some major mistakes when getting my mortgage. Unfortunately, these mistakes made the loan more expensive than it otherwise would have been.
Luckily, I was able to make the required payments and ended up selling the house for more than I paid, so it didn’t turn into a financial disaster. Still, the mistakes were regrettable and hopefully other future borrowers can learn from the mistakes I made so they don’t cost themselves money like I did.
Here are three big mistakes I made that others can potentially avoid in the future.
One of the biggest mistakes I made when I got my first mortgage was to just go with the bank recommended by my real estate agent. I did not receive multiple quotes from different lenders, but simply contacted the lender referred to me and accepted the mortgage loan offered to me.
By making this choice, I deprived myself of the opportunity to ensure that I had the lowest possible rate and charged a reasonable fee. To this day, I have no idea if I overpaid for this loan or if I could have gotten a better rate or not – but I suspect I paid more interest than I did. should have, because the rate was not very competitive compared to national averages at that time and I was a fairly well-qualified borrower.
2. Make a small deposit
I was really looking forward to buying my first house because I hated renting. As a result, I jumped into the purchase even though I only had a 10% down payment. Since I was putting less than 20% down, I had to pay for private mortgage insurance. This increased my monthly costs while protecting my lender and giving me no direct benefit.
Every month I paid PMI I was wasting money and the payments amounted to several hundred dollars. I could have waited a few more months, saved a little more for a 20% deposit and avoided this unnecessary expense.
Of course, that doesn’t mean it’s always a mistake to buy a home with less than 20% down. But in my case, my first house was very affordable compared to my income at the time and I had very few expenses. It wouldn’t have taken long to save more, so I wouldn’t have missed out on property appreciation or a long time to build equity if I had just been a little more patient.
3. Choose an adjustable rate mortgage
Eventually, I opted for an adjustable rate mortgage on my first loan because the rate was a bit lower than on a fixed rate mortgage, and I was considering moving or refinancing before the rate went down. begins to adjust. Although it ended up happening, it might not have been. I regret taking such a big risk and getting a loan with rates that could go up instead of protecting myself by making sure I knew what my total costs would be over time.
Fortunately, I now know better and have been smarter with subsequent mortgages. And I hope others can learn from my mistakes and avoid making similar mistakes when buying their first home.
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