Mortgages Mistakes for Kiwi Homeowners to avoid

No one wants to pay more for anything than they need to. For most people your mortgage is your biggest financial commitment, this can be a place where you lose money or pay more than you must. You can stop this from happening by being proactive and having regular reviews with me as I work in the mortgage market every day, I can help you avoid making these common mortgage mistakes.

Dropping Repayments when interest rate fall

When interest rates drop, banks will automatically give you the option to lower your mortgage repayment.

By doing this the loan remains at the original team, and you pay more interest over the life of the loan to the bank.

Keep your repayments at the higher rate if your budget allows. This extra cash goes straight towards reducing your principle balance, shaving years off the mortgage.

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.

However, are the rates quoted the best in the market? What fixed term should you pick?

Contact me, I will advise you if there are better rates available and what fixed interest rate term may be best for you given your personal circumstances and current economic conditions.

Ignoring Revolving credit or Offset Facilities

Many kiwis default to standard fixed rate terms, leaving their regular earnings and savings accounts sitting idle.

Doing this you pay interest on the full balance of your mortgage while your savings earn minimal interest after tax.

You can keep a small portion of your mortgage floating via an offset mortgage or revolving credit facility. This allows your everyday income and your savings to actively reduce the interest bearing principle balance saving interest over the life of your mortgage.

Focusing on Interest Rates

Interest rates are a big part of your mortgage discussions, but they aren’t the only part.

Simply selecting the provider with the best interest rate can cut off other opportunities. You need to consider other things such as structure, term and lender flexibility.

Some banks allow you to increase your repayments or make lump sum repayments without penalty, others may offer a cash contribution or simply have more favourable terms for your situation. I can investigate all these options and advise you accordingly.

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. Depending on what financial markets are doing this can limit your options and can expose you to risks.

If interest rates peak right when your entire loan is up for refix can you handle the increased repayments? If for what every reason you need to sell the property, having everything fixed for the same period may result in a higher break fee.

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 if rates have increased.

Taking Cashback Offers without reading the fine print.

New Zealand banks frequently entice new customers by offering cashbacks.

However, these cash backs come with strict clawbacks clauses. If you break your mortgage contract, sell the property, or refinance you will be forced to repay some or all the cashback.

Do your due diligence to understand what the conditions are. Never switch lenders or refinance purely for a low short-term rate. Calculate if the refinancing savings outweigh the clawback penalty.

Ignoring Financial Stress Indicators

There are many things that might cause stress on your finances. Change or loss of a job, having a baby, caring for elderly family members, or an unexpected medical event are just a few of them.

Trying to struggle through can be challenging at the best of times. Waiting until you are behind on your mortgage repayment to ask for help is too late and will limit your options.

If you are finding yourself experiencing financial stress, contact me. 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!

Relying on Artificial Intelligence for Advice

Asking AI for financial advice on what to do regarding your mortgage. This option for many areas of our life has become convenient and more common.

However, AI responses can and often do contain errors, whilst it is a handy tool to gather information about a given topic any responses need to be checked for accuracy considering what is happening in the market today, your personal circumstance and plain common sense.

This is where getting good professional advice is important.