Industry professional outlines the most common mortgage mistakes that people should look out for
In a recent piece published on the network’s online portal, Dominion Lending Centres accredited mortgage professional Kiki Berg outlines the most widespread and costly mortgage mistakes that people tend to commit.
Not consolidating high-interest debt into low-interest mortgage
Berg argued that a major contributor to heavy debt loads is a lack of planning that leads to poor budgeting choices, and a vicious downward spiral in the worst-possible cases.
“There are many folks where monthly payment is the driving factor in their monthly budget. Making minimum payments can take you YEARS to pay off. Soon after people get mortgages, they are buying that new car at 0% interest and $600 month payments, then the roof or hot water tank goes and they put another $15,000 on credit, then someone gets laid off and boom…can’t make all the payments on all those debts that it took a 2 income family to make.”
Not looking at their long-term forecasts
A related issue to the lack of planning is Berg’s observation that many consumers tend to take 5-year terms without taking full stock of their financial security and capability, when 3- and 4-year rates might be better options for their circumstances.
“Many times the 2-4 year rates can be significantly lower than the 5 year rates. Remember, the bank wants money and the longer you take the term, the more they make.”
However, Berg hastened to add that it’s crucial to avoid the other extreme of analysis paralysis. “Worrying about where rates will be in 3-5 years from now should be a question, but not always the guiding factor in your ‘today budget’.”
A deeper analysis of other mortgage hazards to look out for can be viewed here.
Not consolidating high-interest debt into low-interest mortgage
Berg argued that a major contributor to heavy debt loads is a lack of planning that leads to poor budgeting choices, and a vicious downward spiral in the worst-possible cases.
“There are many folks where monthly payment is the driving factor in their monthly budget. Making minimum payments can take you YEARS to pay off. Soon after people get mortgages, they are buying that new car at 0% interest and $600 month payments, then the roof or hot water tank goes and they put another $15,000 on credit, then someone gets laid off and boom…can’t make all the payments on all those debts that it took a 2 income family to make.”
Not looking at their long-term forecasts
A related issue to the lack of planning is Berg’s observation that many consumers tend to take 5-year terms without taking full stock of their financial security and capability, when 3- and 4-year rates might be better options for their circumstances.
“Many times the 2-4 year rates can be significantly lower than the 5 year rates. Remember, the bank wants money and the longer you take the term, the more they make.”
However, Berg hastened to add that it’s crucial to avoid the other extreme of analysis paralysis. “Worrying about where rates will be in 3-5 years from now should be a question, but not always the guiding factor in your ‘today budget’.”
A deeper analysis of other mortgage hazards to look out for can be viewed here.
