Fundit.co.nz

Mortgage Traps

Fundit's transparent process helps you avoid possible mortgage traps. Lenders' bids include all costs involved with setting up your mortgage so there are no unexpected or hidden costs.

If you're searching for a mortgage outside the Fundit process, do your research and avoid some common traps.

Overcharging

When you take out a mortgage you're likely to face a number of unavoidable fees. It's in your best interest to question all fees, including monthly transaction fees on your everyday bank accounts. Fee options can vary greatly from lender to lender, so make sure a lender's bank account options and charges will work for you. Most lenders won't charge you fees for making lump sum repayments or redrawing against a floating rate loan. Read the fine print before signing anything and remember, most loan fees are discretionary.

Early repayment penalties

These are incurred when you repay some or all of a fixed interest rate mortgage before the fixed loan period has expired. Some floating rate loans can also have early repayment penalties. These fees can be substantial, so it's wise to read your mortgage paperwork closely before you take out a new loan or make a decision to repay or refinance your current loan. See Break costs

Pressure from outside sources

Don't let outside parties such as real estate agents force you into using a certain lender as they may be doing this purely for their own benefit. They may know the lender personally or are getting something in return for recommending them. You can accept suggestions but always do your own research.

Insurance

All lenders will require house insurance as a condition of loan approval - either their own insurance product or from another approved insurer. The lender is noted as coinsured party and mortgagee on the policy. Lenders may also require you to purchase lenders mortgage insurance or mortgage repayment insurance. These policies protect the lender if you can't repay the loan. Insurance prices and conditions vary so shop around.

Bait and switch

Lenders may run ads offering exceptionally low interest rates that seem too good to be true. They may reel you in and then at the last minute advise that the rate is not available to you. You don't need to accept this even if you are well into the application process. You can still decline their offer and go elsewhere.