Back to Inspire Home

Don't make these 8 common home loan mistakes

Calculate your monthly repayments

Find out what your monthly repayments might look like.

Calculate now

Many property owners dream of rising to the top of the real estate world, but only a handful of people are successful. If you’re planning on winning big in real estate, start by learning from the mistakes that even the most experienced property investors sometimes make. Here’s our rundown of the most common home loan mistakes and what you can do to avoid them.

Calculate your loan repayments

$
%
years

1. Not shopping around for the best interest rate

It’s common to only shop for a refinance, investment or new home loan with your current bank or lender under the assumption that since you already a customer with this bank, you might get a better deal on a home loan. This is one of the biggest mistakes you can make.

Shopping around for more competitive rates doesn’t take long and might save you thousands in the long run. You can save time by doing it all online, Lendi searches hundreds of loans from over 30 major and non-bank lenders around Australia to find the right option for your situation in just 30 seconds.

2. Forgetting to review your credit score

Before you apply for any loan, check your credit file. Obtain a free copy from a credit reporting agency and if your score is less than excellent, spend at least 3 months settling up your credit cards and paying any other debts on time. If your score doesn’t improve, some specialist lenders will consider borrowers with poor credit history.

Afraid you're not getting the best home loan?

Search over 30 major Australian lenders in seconds.

Find a better deal

3. Making decisions with your heart over your head

This is a common blunder that investors should avoid at all costs. Inexperienced investors will often let their emotions cloud their judgement and affect crucial financial decisions. Make analytical decisions and spend time reviewing the potential financially gain from each specific investment.

4. Overlooking the extra criteria for investment loans

Investment home loans can often require larger deposits and incur higher interest rates in comparison to owner-occupier home loans. It’s important to be aware of the criteria surrounding investment loans before you begin shopping for a property. As an investor, you’ll need to be financially prepared to meet these requirements so it’s a good idea to shop around as there are a number of competitive rates available.

Got a complex situation? Chat to a Lendi Home Loan Specialist for free expert advice.

woman-yelling

5. Choosing the wrong suburb

Familiarising yourself with the property market takes time. Before you make any commitments, thoroughly research the area not just the property you’re interested in buying, but the comparable sale prices of that suburb. Look into future planning developments and proximity to public amenities, as the property value of your future investment is dependent on these features.

6. Buying the wrong kind of property

Don’t be impulsive when purchasing your property. It is important to recognise your market and buy accordingly. For example, you wouldn’t purchase a tiny studio apartment in an area with a population of mainly families. Many investors choose to avoid investing in properties like student housing or serviced apartments as they often come with stricter lending criteria and pose more of a risk to a lender.

Try our debt consolidation calculator

Calculate how much you could save by rolling your loans into one.

Calculate savings

7. Overlooking suburb density

Have you got your eye on a unit in a suburb with a lot of development activity? Review the suburb carefully and look out for areas experiencing massive reconstruction. Lenders are often wary of these areas, some will cap lending in these suburbs and demand at least a 30% deposit from buyers.

High-density areas present a higher risk to lending institutes and buyers because of the potential supply over demand. Remember, if there are not enough tenants to occupy the residential buildings, the value of your investment property will decrease significantly.

8. Buying a property that's too small

Buying a studio in a sought after suburb may seem like a deal but some lenders may refuse to approve loans for properties smaller than 40 square metres. Due to their limited living space, lenders fear the properties won’t be as marketable as others or could potentially remain vacant for extended periods of time leaving the investor unable to make their repayments.

How much is your property worth?

Get a valuation for millions of properties across Australia.

Search a property

Chat to an expert today

Our Home Loan Specialists are always here to answer your home loan questions. Choose a time to chat with one of our experts.

Tags: rental history, investment, investment property, interest only, interest only period, principal and interest loan

Check today's low rates

Tell us what you are looking for and see if you can save.

Search rates

Check today's low rates

Tell us what you are looking for and see if you can save.

Search rates
How much is your home worth?

How much is your home worth?

Get a free online property valuation with local sale and suburb statistics.

Get your property report

Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856, Credit Representative 518849), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Made with love at Circular Quay in Sydney, Australia. © 2019. All rights reserved.